Driving growth with an effective sales funnel
Using the sales funnel to ensure your sales activity delivers your sales growth
It’s one thing to have an aspirational target for the turnover of your business. It’s quite another to understand and execute the sales activity required to achieve that.
What is your sales funnel?
This is where a sales funnel comes in. This calculates and tracks the level of sales activity you need and the quality of actions you take in order to realise your target revenue. Whether from existing clients, new prospects or lapsed customers.
If you already use CRM, your actual ratios within this funnel should be easy to extract from that data (If you’re keeping it up to date with every opportunity and action you take)
Do note however that the sales activity funnel works in reverse to a CRM system. CRM tracks the actual movement of your sales leads down through your sales process to a sale.
This activity funnel is about understanding the ratios and activity needed to generate sufficient opportunities in the first place. The same measures but in reverse.
How effective is your sales funnel?
Your sales funnel is leaky. If it wasn’t, every single conversation you had with a new opportunity would result in you winning new work and new revenue. But of course, that’s not the case.
Oh, that it was!
At every stage within your sales process, it’s unlikely that you successfully advance every opportunity onto the next stage. Not everyone you meet at a networking event or gain access to via a marketing campaign will either have a need for your product or service or be interested in speaking with you.
Not everyone you meet one-to-one will ask you for more information or a quote. And not every quote you submit will be greeted with a ‘yes please’.
Many owners and salespeople completely underestimate the amount of work and sales activity required to actually achieve their targets.
How well do you understand your sales funnel?
If you don’t already know the percentage of opportunities that move from one stage to another down through your sales funnel, then until you begin tracking it all, working out how much sales activity you need to undertake will be impossible.
Because understanding your sales funnel allows you to make some choices about how you manage your sales activity and ensure you achieve your sales targets.
Do you know your ratios?
Imagine your business received 100 brand new enquiries.
Of those 100 you managed to have conversations with 75 of them to establish what they are looking for and whether they have a budget. A 75% success rate (You reach 75 of the 100)
Of those 75 conversations, you go on to book a demonstration with 40, having qualified them as being realistic sales opportunities. Your conversion rate for this stage is 53%.
All of the demonstrations are successfully delivered, and from those, you are asked for 25 proposals. Your conversion rate for this stage is 63%.
And from those 25 proposals, you win 5 new clients. A conversion rate of 20% for this stage.
However, from the original 100 enquiries you received, it’s a 5% successful conversion.
Read more about the importance of sales funnel metrics.
How does this drive your business growth?
You have some choices about how you go about achieving increased sales revenues.
You can work to generate a greater volume of opportunities into the top of your sales funnel. As they progress down through it, the same percentage of opportunities continue to leak out at each stage. However, a greater actual number of opportunities will make it through to a successful sale.
Double the 100 enquiries to 200 but apply the same percentage success rate to the conversations you have and that becomes 150 rather than 75.
This will have an impact on your marketing spend, or campaign targeting or on the time you spend generating new leads.
And new leads always cost more to find and convert.
Or, your existing 100 enquiries continue to arrive into your business, but you work on the quality and impact of your sales actions to ensure a higher percentage of them move down through each stage and result in a higher level of sales success. You plug the leaks!
Are you focusing on skills?
This may also incur costs if additional training is required – and that’s a one-off event with the skills remaining in your business. In addition, your awareness of your current percentages and your stronger focus on each step in the funnel should improve your ratios without further expenditure.
No longer will proposals be sent out to clients and left unattended for two weeks hoping the prospective client remembers to say yes. Expressions of interest or direct enquiries will receive speedy responses and personalised follow up; and over time the leaks are plugged.
If every step in the example above improved by 5% the number of new clients would increase to almost 8.
You may find that there’s room for improvement in a few of your stages; or you may identify one stage that’s really out of kilter with the rest. Your own ratios will tell you this.
In an ideal world, your networking, marketing and engagement of lapsed clients and prospects would create an increased number of opportunities AND you’d reduce the leaks in your funnel – resulting in an even higher rate of opportunities converting to sales.
How does your pricing affect this?
Also remember that an increase in the average value of each sale you make contributes to you achieving higher revenues. Selling more per transaction, or putting your prices up.
How’s your sales funnel performing now?
Begin by thinking about your existing clients. How much of your existing business do you expect to retain this year? Is this reasonable and representative of how you are performing or how they are trading?
What additional services or products can you sell to them? Are there other departments or divisions or even sister companies who would be interested in your offering and that your current buyers will help you reach?
Any new business that can be gained from existing business is ‘warmer’ (Because you’re a known entity and have a proven track record) and less costly to achieve.
Always start here when you’re looking for sales growth.
How much brand new business do you need?
What’s left after this calculation is what you need to achieve from finding brand new clients.
Divide this figure by your average sales order value, and that’s how many new orders you need.
Work backwards from your ‘won business’ ratio and calculate all the way back up to the top of your sales funnel what this equates to for new enquiries being generated and new sales conversations being had.
A word of caution
Don’t be disheartened if the number of new contacts you need is a very large number.
Often when working with a sales funnel in this way, the incremental sales revenue you want to achieve may look realistic and feel entirely do-able at first glance.
Only when you translate this into the number of new orders, new leads or new clients required, does the reality of what this means in terms of sales activity hit home.
What’s important is that you understand your own funnel as it is shaped right now.
That gives you choices in how to improve it.
Seven ways to improve your sales funnel
- Is the split between what you expect from Existing clients and New Business valid?
- What could you do to leverage your existing buying contacts to greater effect?
- How might you ask for introductions and recommendations more overtly?
- How many of your lapsed clients can you re-awaken with a personal approach?
- Which of your ratios throughout your funnel are having the greatest impact on your revenues?
- What’s causing this? A lack of skill, confidence, adherence to process or something else?
- What could you do to increase your average order value without jeopardising the number of opportunities you generate?
Food for thought
The percentage of contacts initially made that convert into a sales appointment is generally low (usually in low single figures) This can prove a costly ratio for you to improve unless you really tighten your focus on marketing personas or have direct access to the target groups of clients you are targeting.
You can increase the percentage of sales appointments that result in a proposal by enhancing the quality of your sales meeting, your questioning skills, and how much listening you do.
How many of your proposals are accepted can also be increased by how and when you’re using them. How you present them and how well you demonstrate the value of what you’re offering all impact success at this key stage of the sale.
Oh, and then please remember to ask for the sale once you’ve submitted the proposal.
It makes a monumental difference!
Are you struggling to untangle the complexities of your sales process?
Take the Untangle Your Sales scorecard today and unlock the potential for sales success.