I'll tell you what a sales funnel is not.
It is not a place for salespeople to put their hopes and dreams and fantasies.
A marketing definition will describe the sales funnel as "each step that someone has to take to become your customer". But for me, unfortunately, this definition is passive, it doesn't suggest that a salesperson has any real control over the process of selling itself, but that this is something entirely determined by the prospect.
I prefer something along the lines of the sales funnel is a tool for tracking the progress of individual deals through a defined sales process that supports accurate forecasting within the organisation. The critical gateways in your process should ideally have been identified clearly by all stakeholders.
What is a sales funnel?
A strong funnel accurately reports revenue for a given period with that be weekly monthly quarterly or annually.
When the funnel is accurate, it is an excellent tool for senior management, as it supports communication with internal and external stakeholders. External agencies such as the stock market would never receive any surprises as your funnel would predict what will happen early in the period leading up to a reporting date.
An effective sales funnel doesn't stop with financial reporting though; it informs pretty much every part of your business.
It informs production.
When you can forecast the number of widgets that will sell in the next reporting period, production will know how many to manufacture — the number of parts needed in stock and when to fulfil this demand. If there are raw materials, these can be ordered well in advance of when they are required.
It informs management.
The obvious thing reports as revenue, but also reports on issues around individual performance, who are struggling and who are excelling in their role, it informs about sales management, is top sales talent identified, trained and coached within the business?
It informs marketing.
Is marketing communication effective in the current period? Is marketing taking into account current trends affecting markets? We can establish whether we have used our marketing budget effectively and that it is delivering a constant flow of leads to our sales force.
An accurate funnel also informs the finance function.
Because it is a reliable predictor of unit demand, production only needs to make the required units to satisfy customer demand. We can realise cash flow improvements by avoiding unnecessary inventory; instead, the business is free to invest its free cash in internal and external projects that can further strengthen the organisation's position and deliver an additional return on investment.
At the core of accurate revenue-reporting is the sales funnel. We can see it as both a reporting tool, that supports performance evaluation and monitoring and also as a management tool that helps us established the potential need for training and coaching.
In 2015 the Harvard Business Review reported on a study by Vantage Point. They concluded that companies managing the pipeline funnel enjoyed a 15% higher revenue growth rate than those that didn't. They also identified that organisations that were highly effective in three aspects of funnel management had revenue growth rates 28% higher than those that were ineffective.
The three key areas they identified were as follows;
First, your organisation should have adequately defined its sales process and all of the steps involved. The aim is to highlight critical gateways and identify the behavioural activities needed to achieve them. Identifying measurable behaviours is the first step in improving funnel accuracy. Behaviours are observable and quantifiable; as a result, effective management, training and coaching are possible. With a focus on these, we can improve sales performance and deliver predictable results.
Vantage Point went on to say that managers must invest a minimum of three hours per month, actively managing the pipeline. Many sales managers believe that they are reviewing the pipeline when, in reality, they spend much time creating forecasts.
Active pipeline management is much more than merely talking numbers; it should focus on individual deals, issues and problems. As a manager, we can then help create an actionable gameplan that will remove barriers or deliver actions that will move a specific deal forward.
The final dimension vantage point identified was that sales managers should have specific training regarding pipeline management. They need to understand both the sales process but also how to train and coach their people to overcome obstacles that present themselves at each stage. They also need to know how to structure a meeting so that it facilitates coaching rather than measuring.
For me, sales managers have many additional roles in maintaining the accuracy of their organisations' pipeline.
Managers need to practice consistency in the use of the sales funnel with all staff (without exception) at all times.
They need to be fostering accountability within their team; an individual should have agreed behaviour plan that they will conduct for the coming four weeks. Once developed, it must be reviewed weekly for both execution and effectiveness.
There needs to be realism in budget setting. Ideally, the budget should be formulated from the bottom up, reflecting current market conditions and avoiding any assumptions wherever possible.
Sales professionals must feel free to be open and honest, to share problems, issues and roadblocks while be protected from criticism or censure if there are deviations from expected outcomes.
Revolutionise the funnel
In order start improving the quality of the sales funnel I'd undertake the following steps;
1. given free rein, I would benchmark all my people, mainly if I inherited them and hadn't had an active role in their recruitment. The purpose is to identify any current sales team members that don't belong in a sales role. My objective would be to move or replace anyone who lacks the dedication and "coach-ability" to become a high performer.
2. I would go through an individual review of all deals. Here I am looking to test for reality, any sales opportunities that look like they are works of fantasy get removed immediately from the pipeline. I would verify that each sales opportunity has objective evidence that the sales professional knows;
why the customer is investing,
what the clear next steps are,
has a budget been agreed or is it available?
And other measurable and specific details that we should know about the deal at any particular point in the sales process. Any sales opportunity deal where the feedback comes from "I think…", "I feel…", "I guess…", or "I hope…" should be revisited by the sales professional. They should question the prospect until tangible evidence of engagement is evident.
3. if not already done I would map my process and the key gates. I'd advise doing this with the team as they are in front of prospects daily. The mapping process should include specific behaviours that contribute to forward momentum in each stage, but should ideally identify 3 to 5 critical and non-negotiable elements that indicate a deal has reached a particular gateway.
With the process mapped and behaviours identified, I would initiate individual meetings. The purpose would be to help them put together a "cookbook" of actions that they believe will allow them to achieve their sales goals in terms of prospecting and deal management. We want the individual to identify the behaviours because this allows them more control and promotes their buy-in in delivering the expected performance. The manager must be able to hold a structured review of actions every week and hold the individual accountable for their part in achieving them.
4. the sales managers aim should be to monitor these identifiable behaviours at agreed intervals; the funnel review meeting should be a non-negotiable in both the manager and the individuals' calendar. Weekly meetings should only take approximately five minutes on a Monday and Friday. Although we want to identify coaching points, the funnel review call is not the time to implement training or coaching; it is a performance review exercise. Training and coaching should be specific events that are organised within the rest of the working week so that they can be both efficient and effective.