You walk into the office on a Tuesday morning and the boss calls you into a meeting to ask you about your upcoming sales opportunities. You have always prided yourself on being a free spirit—a “seat of your pants” kind of sales professional who goes out and makes things happen. When your boss asks you for a list of the things you are working on, you have nothing to offer. Your boss is not happy and now your entire week is probably ruined.
This happens to a lot of young sales professionals who close a few big deals and think that they own the world. In the sales profession, the honeymoon with a rep who closes a big deal is over as soon as the commission is paid out. Your boss (and their boss) wants to know exactly what you are working on and how you will make that magic happen again. That's difficult to accomplish without using a proper sales funnel.
You can reliably track your leads and move them toward a sale with a sales funnel. It's not magic; it's a simple process. You can set up your sales funnel as an easy to use spreadsheet, work with it as a reference, and report progress from it.
In this tutorial, you'll learn how to set up your sales funnel and work your opportunities through it.
What Is a Sales Funnel?
You may have heard the sales funnel referred to as a sales pipeline, but a pipeline can be a misleading name for two reasons.
- For one thing, a pipeline insinuates that you have a steady flow of opportunities that will all close at some point. In reality, you will close anywhere between 10 to 20 percent of your opportunities. A funnel narrows down its contents as they reach the opening, much in the same way you will narrow down your opportunities until some start closing.
- Another problem with the term “pipeline” is that it indicates a torrential flow of opportunities that seem to come from no specific point. Every sales professional makes their own opportunities. In the same way that you pour materials into a funnel from a fixed source, you will also fill your sales funnel with opportunities that you create from your own hard work.
In an ideal world, your sales funnel is an ongoing reporting of the sales opportunities you are working on. You separate these opportunities based on the likelihood that they will close, and then you arrange each category by the date that they will close.
In the real world, the sales funnel winds up being only those opportunities that you feel confident will close. Most sales people leave out the softer opportunities because they do not want to have to explain those to the boss every month. This is a bad idea because until you start really working with an opportunity, you have no idea of its true potential. When you first put it in your sales funnel, you are taking an educated guess on whether it will close or not. The more opportunities you are working with, the broader your chances of closing more sales.
Let’s take a look at a visual representation of a sales funnel:
As you work with opportunities, you begin to narrow them down to the ones that will close. As you discard opportunities that are not going to close, you are left with solid chances at generating revenue. This is a sales funnel and it should be the absolute focus of your sales career.
Organizing Your Sales Funnel
The purpose of this tutorial is to show you how simple, yet useful, a sales funnel can be. There are a lot of computer programs available to help you maintain your sales funnel, but it can be tough to use them if they are not tied into your company’s customer database. In the end, you need to keep all of your data in a centralized location so you can access it whenever you want.
Companies are now allowing sales professionals to access corporate databases through mobile apps and a variety of other mobile tools. So there really isn’t a need to invest a lot of money in a piece of sales funnel software you will probably never be able to use. An alternative is to keep it simple and use a spreadsheet program like Excel or Google Sheets to organize your sales funnel.
Here is a sample sales funnel spreadsheet:
You can download this sales funnel spreadsheet and customize it to meet your needs.
Let’s take a look at the first section of this sales funnel spreadsheet:
It's important to understand the highlighted terms (shown above) for working with this spreadsheet:
- Probability – This is the probability that the opportunity will close. You can break this down however you want. In the example we have zero, 25, 50, and 75 percent probability designations. If you want to create a different path for each of your opportunities, then go right ahead.
- Revenue – This is how much revenue the opportunity is worth. This is usually a ballpark figure and should be updated frequently.
- Date – This is the date that you estimate the opportunity will close. It is acceptable to use just the month and year, unless you know the exact date the opportunity will close.
Most sales jobs require sales funnel reports be made at least once a month. Some sales managers may even require bi-monthly updates. When you create an effective spreadsheet, you can just send that to your manager to make reading your report easier.
Your sales funnel is a personal tool that you use to expand your customer base and grow your revenue. Unless your company has strict rules on how it wants your funnel set up, then make it as simple to use as possible. The more organized you are, the more effective you will be.
Qualifying a Cold Call Lead
A good sales professional spends a lot of time collecting and qualifying leads to put them in the proper place in their sales funnel. Of course, every lead starts at the top of the funnel and is either discarded, or works its way down to the end. But how are you supposed to know whether a lead will close or not?
When you work a sales funnel, every opportunity should be set at zero percent until you talk to a decision maker. You will make a half dozen or so phone calls and do a lot of research about a company until you finally get through to a decision maker. Even after you do all of that work, the opportunity still sits at zero percent until the decision maker actually picks up the phone and gives just a moment of their time.
Every sales funnel is based on the personal preference of the sales professional, but you better be able to back up your assertions with facts:
- If the decision maker hangs up on you, then discard that opportunity.
- If the decision maker indicates an interest in getting some information and scheduling a follow-up call, then put that opportunity at 25 percent.
- If you are granted a meeting with the decision maker, then put that opportunity at 50 percent. When you are granted a sales meeting, you have at least a 50/50 chance of closing the sale.
Some sales professionals have an elaborate method for qualifying cold call leads. That is acceptable, as long as you are able to explain your system quickly to your manager.
If you want to be efficient, then make your system easy to explain, easy to follow, and use it to separate your opportunities into categories you can work with.
Assigning a Closing Date to a Lead
Do you know the average sales cycle for your products, or are you just guessing? Sales cycles can range from one hour to a year or more. Every sales professional needs to know their sales cycle before they can assign prospective closing dates to sales funnel leads.
Once you know your sales cycle, assigning a prospective closing date to each lead is simple. If the sales cycle is one month and your closing probability is 50 percent, then set a closing date that is two weeks away. If your closing probability is currently zero percent because you just started working with the lead, then your prospective closing date would be one month away. It is that easy.
Your sales funnel is your sales to-do list, but it is always going to be an estimate. When you move an opportunity to a 75 percent probability, then you are just waiting on the purchase order. Sometimes that wait can be weeks, or even months. The sales cycle is an average, but it is all you have when you are estimating prospective closing dates.
Improving Your Revenue Chances
This is a tutorial about the sales funnel, so we won’t get too deep into sales technique. But if you want to move an opportunity from a zero percent probability to 75 percent probability, then you need to work those leads and be persistent.
A sales funnel is effective because it maps out your goals very simply. Your objective should be to move as many zero percent opportunities into the 75 percent column as possible. You should load up the zero percent column and then work to move your opportunities over until they close.
Your sales projections will be based on the revenue numbers found in the 50 and 75 percent columns. A good sales funnel makes it easier to create a path for success and report that path to the people who sign your paychecks.
Removing Opportunities From Your Funnel
The most difficult thing for any sales professional to do is to admit that they are beaten. Many rookie sales professionals will keep working at zero percent opportunities for months before they finally give up. The only thing that does is prevent you from going out there and finding new opportunities that could bring in real revenue.
If your sales cycle is one month, then each opportunity should be given one week to move from one column to the next. If you cannot upgrade the opportunity in a week, then discard it. When an opportunity reaches the 75 percent column, then you are in the final stages of closing and waiting on a purchase order. It is common for a sales professional to leave these kinds of opportunities in their sales funnels for months. After all, a sale is a sale. But unless you are told directly that the purchase order is not coming, then it is acceptable to keep following up until the purchase order arrives.
At some point, a sales professional has to remove dead opportunities from their funnel. You cannot look at it as a sign of defeat because that would imply that you can close 100 percent of your opportunities. That is not realistic. Move the dead opportunities out of your way and move on to more promising leads.
Right and Wrong of Sales Funnels
- Do put every opportunity you are working on in your funnel. Your sales funnel should be your guide on which opportunities you are working on. If it is not in your funnel, then you will not be working on it.
- Do treat your sales funnel with respect. If you do not keep an accurate and reliable sales funnel, then you cannot succeed as a sales professional.
- Do create a sales funnel that you can share with others. Your sales manager and some of your teammates may need to refer to your sales funnel while you are away from the office or for other reasons. Make your funnel easy to read and make sure the information is easy to follow.
- Don’t move opportunities back. If you have an opportunity at 25 percent and you are thinking of moving it back to zero percent, then drop it from your sales funnel. Always follow the 12 commandments of closing a sale as you move your opportunities through the funnel. If you do that, then you will not need to move opportunities backwards. You will either drop them, or close them.
- Don’t force opportunities into your sales funnel. The reason your sales funnel looks bare is because you are not doing your job of collecting opportunities. Don’t make up opportunities just to make your funnel look more robust. You will be cheating yourself and your company if you do that.
- Don’t neglect your sales funnel. It can be difficult for a young sales professional to get into the habit of updating a sales funnel each and every time there is contact with a client, but it is a necessary part of sales success. If you take care of your sales funnel, then your sales funnel will take care of you.