What the heck is a Sales Funnel?

| Categories: Business Coaching , Business Tips , Future Financial Planning , KPIs , Sales

Blog by Fuel Accountants


Funnel cakes, funnel clouds, sales funnels, there are funnels all around us…

You’ve probably been hearing this term used a lot lately, along with a sales pipeline. There are many confusing definitions surrounding this area. A sales funnel and a sales pipeline are really two things describing one thing:

So let’s land the plane here and make it simple. 

A funnel in real life is a mechanism consisting of a wide open top with an open narrow open bottom. It is a concentrating device that takes in a lot at the wide top, but only allows a small amount to come out at the bottom. In between the top and the bottom there are holes through which whatever is being funneled escapes.

In marketing speak, a funnel is designed to take a pool of possible customers and help ensure that your ideal customer goes from unknown to customer as they move their way down the funnel.  Part of the sales process typically involves creating touch points with the prospects in order to maintain "top-of-mind awareness" to you. So you might employ automated follow-up, newsletters, up-selling, and more.

Now that I’ve described the metaphor, let's see how this applies to your business.

Level 1: Marketing opportunities enter into the top of the funnel. That is exactly when the sales process begins. The salesperson begins working the opportunity and either converts it into a qualified lead, or dismisses the opportunity. That is the first exit point for a sales opportunity. It exits the sales funnel, and no further energy is expended on an unqualified opportunity. After all, why should you chase something not viable? 

Level 2, 3, and Beyond: Additional levels are designed in the funnel that follow the sales process. As opportunities progress downward in the funnel through each layer, some exit the funnel completely because they don’t meet the criteria for a successful outcome at the next level in the funnel.

Bottom of the funnel: Everything that makes it through the funnel exits through the bottom and becomes a completed sale.

Sales funnels should be designed to follow a specific sales process, and they should determine how well your salespeople consistently work their sales opportunities. They also minimize what I call “Roller Coaster Sales Syndrom,” where you experience lots of peaks and valleys, ups and downs, in your actual sales.

The critical KPIs (key process indicators) that should be measured in a sale funnel are:

  • How many opportunities are in the funnel (and their potential revenue value).
  • The speed or rate at which the opportunities travel through the funnel.

These two factors are needed to monitor your sales goals. They determine your sales cycle, and also make your sales more predictable. 

What if an opportunity gets stuck in the funnel?

Yes, it happens. Some opportunities move through the funnel, but get stuck at a certain place. Here are some of the reasons:

  • The prospect disappears, or becomes hard to get hold of
  • Critical info is missing, so the sales process becomes stalled
  • A prospect’s financial setbacks stop the progress
  • Other business priorities take precedence over this one
  • Competition presents a viable alternative to yours
  • The prospect does not have a good decision making process

When these kinds of things occur, the sales process grinds to a halt for that particular opportunity. At some point, a decision needs to be made.

Ok, so now what?

Hmmmm… that is what separates great salespeople from the others. Great sales people refuse to lose. They are driven individuals that figure out a way to either close a deal, or they move on to the next opportunity. 

When opportunities become stale in the funnel, it might be time to move on. If you can’t get them to say yes, then get them to say no. Remember, you do not need to close 100% of every opportunity in the marketplace.

Eternal sales prospects might be really nice people that you like to hang out with. But if they are not progressing through the sales funnel, it might be time to cut your losses and move on. It’s totally acceptable to “just say no” in this case.

Be Optimistic!!

If you lose an opportunity, it’s not the end of the world. There is always another opportunity to replace it. If not, then you have a marketing problem, and I’ll refer you to our advertising article below about how to fix that.

All world class companies (and when it comes to being world class, size does NOT matter), watch their sales funnel (pipeline) like a hawk. Why? Because it becomes the measurement device that determines the overall direction of the company.

How do I create a funnel management system?

Hey, that’s a great question! Glad you asked it!! Ok, I’ll tell you. Use technology. Get a good CRM (Customer Relationship Management) program, set up your sales funnel process within it, and USE IT. Many times I’ve seen clients go through all the hassle of setting up the CRM, but then it doesn't get used or maintained. What a tragedy…

Final Funnel Thoughts…

Why wouldn’t you want to stop the “Sales Roller Coaster?” Set up and use the funnel process and I’m absolutely certain it will help your business achieve its growth goals. Yes, it takes some work to do it. But the results are simply magic!

Give us a call if you need some help in this area…

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