Your business needs a steady flow of sales revenue--a pipeline--to meet your operating expenses, and to fund innovation and expansion. To understand the health of your pipeline, you need to understand your sales funnel, which depicts where your prospects are along their journey to becoming customers.
With a sales funnel, you know how many prospects you have, which stage they’re at, and the conversion rates for each stage. With this information, you know whether you have the right number of open sales opportunities, and whether certain opportunities are more important than others to helping you meet your targets. You can also determine how much business your sellers need to close in a given period of time--week, month, quarter, or year--and whether your sellers are on track to reach their quotas.
A typical sales funnel includes the following information:
- Number of deals in your funnel - your volume.
- Average deal size in your funnel.
- Average percentage of deals you win - your close ratio.
- Average lifetime of a deal before your win - your sales velocity.
By developing, tracking, managing, and analyzing your sales funnel, you can control your sales results to grow your business.
An effective way to create and track clients and prospects in the sales funnel is with a customer relationship management (CRM) database. With a CRM, you can measure sales revenue and predict close rates of potential sales identified by your sellers. By analyzing these results, you can enhance your sales pipeline.
But how do you know if you’re managing your funnel or if it’s managing you? Here are a few things to consider:
- Too much administration, not enough opportunity advancement
Your business relies on a healthy pipeline full of prospects. Spending too much time administering your funnel will keep you from focusing on what you do best--progressing and closing business.
- Your opportunities loiter for too long
To progress business, you have to follow up with your prospects. Always schedule your next meeting or next action before you close your current meeting. Nurture your opportunities by staying in touch.
- Understand your open opportunities
Prioritize your open opportunities so you can focus on your most promising prospects.
- Know the decision makers
Figure out who has the authority and budget to make the buying decision; otherwise, you can waste time contacting the wrong people and presenting them with the wrong benefits.
- Understand your prospects’ goals, challenges, and timeline
Listen to your prospects. What are their quantifiable goals? Which challenges are holding them back? How does your product or service address these challenges? What’s their timeline?
- Capture the details of every interaction
Record the details of every prospect interaction in a central database, typically a CRM, to build institutional knowledge of your relationship. This will help if a sales rep leaves the company or if a prospect talks with someone new to the opportunity.
- Measure and analyze your results
By analyzing your pipeline, you’ll understand your close rate and pipeline volume and velocity. With this information, you’ll know where and how to accelerate the sales cycle to optimize resource planning and cash flow.