What Is A Sales Funnel?

The concept of a Sales Funnel is a visual metaphor representing the stages in a sales process.  It is wide at the top to allow for a large number of potential opportunities.  It narrows as it moves to the bottom because opportunities drop away at each stage of a sales process.

At the top of the funnel there are unqualified prospects.  These are the many suspects who might need the product or service, At the bottom of the funnel, multiple sales steps later, are the people ready to purchase and receive delivery of the product or service.

A predictable sales funnel is something every company needs to make effective business decisions. Unfortunately, predictability proves to be extremely elusive and hard to achieve. What sales people say they’re going to close, and what they actually close is sometimes a pleasant surprise or it can result in an uncomfortable discussion.

An accurate picture of your business helps Sales Executives run a business more effectively. It is in your best interest to standardize on a set of best practices, metrics, and an effective repeatable process.

A sales funnel can help:

• Better manage prospective business
• Manage current customers and opportunities
• Forecast more accurately
• Identify business trends
• Focus activities across the most important opportunities

A sales funnel and a sales forecast are not the same thing. A sales funnel looks at the overall health of all the deals in the pipeline. The sales forecast maps customer’s buying cycle to specific business periods which helps predict what business will close in a specific window of time.

To achieve a required revenue target, the focus needs to be on a certain level and quality of deals. Sales funnel management helps estimate the probability that enough opportunities are moving towards closure to keep revenue flowing for a period of time. Sales funnel opportunity estimates are compared against sales target so companies have a reliable picture of the health of the business.

Some sales people are very good at managing their funnel while others are not accurate at all. This is why a good sales funnel management process is important. Without a proven process, sales projections become subjective and unpredictable.

And unfortunately, that subjectivity is usually amplified as it passes through each layer of the organization.

Accurate sales funnels help quantify the number of prospects at each stage of the sales process.  This provides an insight into expected current business, and potential for business in the future.

A robust sales funnel is a good leading indicator of medium to long-term health of your sales efforts and it dampens wild unpredicted gyrations in sales forecasting.

Click on this link for a complete discussion of a sales funnel.