Sales Pipeline Conversion Rate

Are your sales processes helping you acquire new customers? If you want to examine the health of your sales pipeline/sales funnel and stop any leaks from occurring, it's important to track the sales pipeline conversion rate. This article will clear all your doubts about this crucial sales KPI. In the following sections, we'll explain how tracking the sales conversion rate can be useful for improving your overall sales performance.

What is Sales Pipeline Conversion Rate?

If you want to understand better how your potential customers are flowing through your sales pipeline, then you need to track this sales pipeline metric. The sales pipeline/funnel conversion rate gives you the rate at which qualified leads enter the sales pipeline and leave from the other side in a specific period of time after completing some action. This action can be anything, like –

  • Sign-ups for subscription
  • Website visitors turning into leads
  • Completed inbound marketing forms
  • Upselling successes
  • Downloads of marketing content

In simple words, sales pipeline conversion rate is the rate at which your new leads turn into paying customers.

Why is Sales Pipeline Conversion Rate an important metric to track?

Sales pipeline conversion rate is an important metric for evaluating your sales strategy's effectiveness (and marketing strategy). It gives you the measure of success you've had in converting closed-won opportunities in the sales cycle.

With the knowledge of this pipeline conversion rate, you can re-assess and optimize your sales processes and marketing campaigns to achieve a higher conversion rate, higher win rate, and enhanced sales velocity. As your sales team applies new outreach and follow-up strategies, you might see a marked improvement in lead generation and a greater number of closed deals.

The formula for Sales Pipeline Conversion Rate

The formula for Sales Pipeline Conversion is fairly simple.

Sales Pipeline Conversion Rate = (Total number of opportunities converted / Total leads that entered the sales pipeline) x 100 

How to calculate Sales Pipeline Conversion Rate?

Now that you know the formula, let's take you through the method of calculating the Sales Pipeline Conversion Rate. Start off by setting a period. It could be a month, a quarter, 6 months, a year, or even more. Now, find out the total number of customers that entered the sales pipeline in that period. Also, find out the number of converted leads (total number of sales). Now that you have all the values substitute them in the formula to make the calculation.

Let's assume that the total number of leads that entered the sales pipeline in a month was 80, while the number of leads that converted was 20. So your calculation would be something like this –

Sales Pipeline Conversion Rate = (20/80) x 100 = 25%

So, the conversion rate comes to 25%. The sales managers can then use this data to devise strategies for making the most of all the sales opportunities that come their way.

Industry Benchmarks

There are no set benchmarks for Sales Pipeline Conversion Rate, as it varies based on industry and product. The sales pipeline conversion rate for businesses selling SaaS products stands at around 7%, while the average conversion rate for eCommerce businesses ranges from 0.6-5.5%. Generally, you should aim for a sales pipeline conversion rate of 3% to 7%. But then again, it all boils down to what you sell, how you sell, and whom you sell it to.