Entries from January 2009 ↓

What is a sales funnel?

Sales Funnel

The Sales Funnel metaphor has its roots in the real world use of funnels. A large amount of liquid, or sales opportunities, can fit into the top wide portion of the funnel. However, as you move down toward the funnel neck, less and less opportunities can fit.

A sales funnel is constructed by stacking several layers together.  These layers include:

  1. New Opportunity
  2. Initial Communication
  3. Fact Finding
  4. Develop Solution
  5. Propose Solution
  6. Solution Evaluation
  7. Negotiation
  8. Purchase Order
  9. Account Maintenance

The key to surviving in sales is to make sure that each respective layer in your sales funnel never dries up – it really is that simple.  You should always know how many companies are in each layer.  New Opportunities are put in the top and worked through the funnel (via a documented sales process) until they either issue a purchase order, or become a disqualified lead.

Knowing that it can take weeks or months to walk prospects through the sales funnel process, you better have multiple prospects at all layer in your personal sales funnel.

So the bottom line is pretty straightforward.  Make sure that you have action at all levels in the sales funnel and you’ll never be desperate for a deal to close again.

Sales funnel tool released

Example sales funnel

Over the past two years, I’ve been developing an Excel based sales tool to automatically create sales funnels for my team and clients.  As we saw in the proceeding sales funnel example post, sales funnels can tell you a lot about your business.

This sales tool allows you to:

  • Focus your efforts and make more money
  • Better track your current and future customers
  • Identify and secure repeat orders from current customers
  • Never be desperate to close a deal again
  • Identify top performers in your sales organization
  • Determine which customers aren’t worth your time and effort
  • Provide more accurate and timely forecasts
  • Stop wasting time preparing sales quotations on loser sales accounts

After seeing many salespeople successfully use this in practice, I’ve decided to offer it for sale to our readers.  A quick look at the directions should help you decide if this would be useful to your sales efforts and how to properly make a sales funnel.

If you have any questions, please ask in the comments so that all can read the response.

Example sales funnel analysis

It seems an appropriate time to look at an actual example sales funnel that we recently analyzed. Let’s call our salesman Sam since Sam the Salesman has such a nice ring to it.

Example Sales Funnel

A quick glance at Sam’s funnel reveals several observations, some good, some not so good.

  • Sam’s New Opportunities layer stands strong at 15. So Sam either has a fantastic marketing department that is feeding him a lot of leads, or Sam is great at uncovering his own leads. What we don’t know yet is the quality of those leads.
  • There is a large step down from New Opportunities (15) to Initial Communication (3). Something doesn’t smell right here. We need to talk with Sam. He either needs retrained on how to get in touch with his prospects or we need to help him get better leads.
  • The relatively low values for Fact Finding through Purchase Orders continues to point to a problem of converting prospects into customers. Is it Sam’s fault? We can’t really tell without talking with him. But we sure can tell that something is wrong somewhere.
  • Ah, ha – look at the high Account Maintenance number (12), that’s downright fantastic! Right? Look closer. With the large number of current clients, why doesn’t Sam have much more repeat sales in the upper layers? We’ve hit on a problem. Even if his new leads are garbage, he should be able to churn his current clients back through the sales process at a much greater rate than he currently is. This is where his efforts need to be focused.

This is the type of process you should go through on a monthly basis to make sure you have deals at all levels in the funnel and you don’t go hungry. In practice, Sam would couple his funnel with a brief document detailing each company in his sales funnel.

New Year sale’s list

Happy sales new yearWelcome to 2009!  I’d like us all to start off the new year making a simple sales list.  This list should have two headings “What I did good” and “What I did bad”

Try to think of some sales tactics that you did which proved to win you business.  Maybe you sent a reminder email between phone calls and people were more likely to take your call, or perhaps you finally started recording sales call details in a CRM, or whatever.  The point is to think about what you did to help build your sales funnel or at least make your job easier.

Secondly, and this list should be easier, make a list of things that didn’t work.  Maybe you were offering discounts right off the bat and it didn’t help your close ratio, or you might have even tried to start at the bottom of an organization in your selling efforts, again, whatever.  The obvious statement here is not to do these things again, but more importantly try to understand why they didn’t work.  For instance, maybe you’re already very competitively priced and slashing prices won’t help close more deals – in fact it might make your offering look like a cheap alternative, and that’s never good.

So make your lists, check them twice and put them in your drawer.  Pull them out once a month and review and add to it.

Best of luck in 2009 as we start off our sales efforts.