One of the most misunderstood fundamentals in selling is the funnel concept. The basic premise is simple: new prospects enter the sales cycle at the top of the funnel, and over time, these prospects turn into customers and closed sales. Your goal should be to analyze your funnel so that you can optimize your lead generation and qualification process and ultimately monetize your sales funnel in a predictable and profitable way.
Fundamental Funnel Dynamics
Sales success depends on achieving a balance between lead quality and lead quantity. Lead quality begins by answering the magic question, what is a sales-ready lead? Successful salespeople don't chase garbage trucks; they focus on money trucks. Your definition of a sales-ready lead will determine your personal effectiveness and professional success. If marketing is clueless about what a sales-ready lead is, chances are the leads generated by marketing are useless. If that's the case, don't whine; generate your own leads instead. Successful salespeople are like hound dogs – they have a good nose for business.
The more sales and marketing leaders are aligned and in sync with one another, the greater the chances that your marketing-generated leads are as good as gold.
How Many Sales-Ready Leads Are in Your Funnel?
Count the number of sales-ready leads in your funnel and do the math. How many leads can you qualify each month? If you qualify three leads a day, that would equal 60 leads a month. Let's say you have 180 qualified leads in your funnel; it would take you 3 months to qualify every lead. The good news is that new technology can dramatically accelerate the number of leads you can qualify in a day.
If you have too many qualified leads in your funnel, you will waste your company's sales potential. If you don't have enough leads, you won't meet your sales goal, and you will sabotage your earnings potential. Simple math will tell you what you can expect to close next month. How many sales-ready leads are in your funnel at this time?
The magic question: How many sales-ready leads do you need to qualify each month to meet your sales goal?
Technology that can accelerate the lead-qualification process: ConnectAndSell, InsideSales, Refractive Dialer
Technology that can dramatically enhance lead information (content and contact): Hoover's, InsideView, OneSource, ZoomInfo, D&B 360, Jigsaw
Technology to capture more leads on your Website: Genius, HubSpot
Marketing automation to improve lead generation, lead nurturing, lead distribution, and lead prioritization: Eloqua, Marketo, Pardot, Silverpop
Outsourcing companies that can offload or improve the task of lead generation or lead qualification: BAO, Green Leads, Frontline Selling.
How Many Opportunities Are in Your Funnel?
As you qualify each sales-ready lead, you realize that not every lead will turn into a sales opportunity. Let's assume that you plan on closing 10 sales per month and that your closing ratio is one in four. Simple math will tell you that you will need 40 opportunities in your funnel to reach your monthly sales goal.
As discussed earlier, if you qualified three leads a day, that would translate to 60 qualified leads a month. Let's assume that one in two of your qualified leads turned into an opportunity. This means that out of 60 leads, you'd end up with 30 opportunities in your sales funnel. Since your goal is 40 (you need 40 so you can close 10), you'd realize a shortfall of 10 opportunities. Surprising, isn't it? If you don't analyze your funnel and take corrective action, you will end up closing only seven sales that month, and you'll be 30 percent short of your goal.
And you wouldn't be the only one to fall short of your sales goals. Research by CSO Insights shows that only 59.4 percent of sales reps achieved their sales quota in 2010. Why? Salespeople are optimists by nature, and they don't enjoy analyzing their sales funnel. They think that's the sales manager's job. And sales managers think it's the salesperson's job. It's your choice: are you happy with a funnel that's a trash can, or do you want to turn your funnel into a treasure chest?
The magic question: What percentage of your leads will turn into qualified opportunities?
Technology that can help you improve pipeline visibility, targeting, and forecasting accuracy: Birst, Cloud9, Lattice Engines, Right90
Here's a poster for your sales office to remind your salespeople to develop their funnel strategy.