Four Ways to Plug Leaks in Your Sales Funnel and Improve Sales Performance
Selling time and resources are always at a premium. Selling to me is like pouring water down a leaky funnel. You pour water into the top of the funnel, but the only useful water is that which reaches the spout.
To extend the metaphor, this fact of gravity gives you some major challenges: getting water in and managing leakages. The water that gets poured into the top of the sales funnel are prospects, and the leakage starts during the qualifying stage and continues throughout the sales process. The key is to minimize the leakage, especially at the bottom of the funnel when so much time, resources and effort takes place. The job of sales management is to manage the funnel and try to determine, with accuracy, how much will come out at the bottom.
The act of forecasting raising some key questions:
Why are accurate forecasts so important to your business?
What is required to forecast in your environment today?
Who develops your forecast?
How, where and with what frequency are your forecasts tracked?
How accurate are your forecasts?
Scott Edinger, the contributor to Forbes article “Four Principles for Great Sales Forecasts,” says,
“To say that forecasting is the bane of existence of most sales managers and leaders is a bit of an understatement. For most representatives, the choice between working on the forecast and getting a root canal would lead to a trip to the dentist. And yet, most organizations rely heavily on the ‘data’ that is produced in forecasts to make decisions on everything from budgets to bonuses. I use quotes around the term data, because while the term is appropriate, many a forecast is “wish-cast.” That is, the data is based on too much hope of what will happen and not enough empirical evidence to be accurate.”
If you want to produce better sales forecasts, then it is incumbent upon sales leaders to take a different approach. Simply providing routine inspections of the numbers reported up the chain of command and making adjustments based on gut feel is not enough.
Whether or not you’re happy with your sales forecast, you want to be accurate. In fact, revenue is four times greater when a company has a trusted forecast. It remains a struggle for most sales teams to get it right. Creating an accurate forecast has long been a hefty burden for sales leaders.
In 2016, it is time to treat forecasting like the critical process it is. In the 2015 CSO Insight Sales Performance Optimization Study, 24 percent of deals wound up in the “No Decision” category. Furthermore, CSO Insights found that 54 percent of deals forecasted by reps never close. In roughly a quarter of forecasted opportunities, prospects apparently felt no urgency to make a decision.
The primary focus of sales leaders has been on the results of the forecast and not on the process used to create the forecast. To produce a more reliable forecast, sales leaders need to pay attention to the following principles:
1. Understand the Customer/Client Buying Process
Do your salespeople really understand the customer/client buying process? A Win/Loss analysis can be a great way to find out. After accounts are both won and lost, ask your salespeople to interview multiple contacts to understand the activities and behaviors (e.g. decision makers, criteria for making the decision, buyer’s concept or solution image) that drove their buying process. Save this information for future reference and include it as part of your sales playbook. It will help drive the right behaviors for your entire team in the future.
To me, this is one of the biggest causes for inaccurate forecasts, not understanding the customer/client’s buying process, and not having a sales process that is aligned with how customer/clients buy. Top sales organizations have shown that it is possible to do far better─by aligning their pipeline stages with the key phases in their prospects’ buying decision process, by insisting on the achievement of key milestones before opportunities advanced, and by implementing key metrics.
Therefore, your sales process needs to be equipped with action steps that are aligned with how your prospects buy. To increase the accuracy of your sales funnel your sales process must establish reasonable customer/client commitments (action steps) at each step in the sales cycle.
As an example, on the front end, by simply establishing a second meeting with additional decision makers, you will move the opportunity down the funnel and show that the prospect has an interest in moving the buying process forward. As the customer/client moves through the funnel, the commitments get greater, like doing a site visit, a demo or involving others in a working session, or reviewing contracts.
Most of us think of managing our sales pipeline through a series of sales stages. But this approach presents the real danger of confusing sales activity with genuine progress in the prospect’s buying decision-making process.
There are compelling reasons why sales pipelines should track the key steps in the buying decision process, and why sales managers should insist on observable evidence of the prospect’s progress before allowing opportunities to advance to the next stage. If you adopt this approach, you can expect your pipeline values and revenue forecasts to reflect better the reality of your actual situation, as well as shortening sales cycles, increasing sales win rates, and improving overall sales performance.
2. Coach Salespeople to Improve Funnel Accuracy
Most sales managers do not help their salespeople manage a sales funnel, its strength and size, and the proper amount of prospected opportunities. CSO Insights research reveals that the percentage of salespeople making quota is down from 63 percent to 58 percent. One of the most effective ways to turn these numbers around, according to this same research, is coaching. We know it works because world-class organizations outperform all others.
But sales managers are hard-pressed for time to give salespeople coaching, and recent statistics bear this out:
74% of managers spend less than 60 minutes per week coaching to specific deals or opportunities.
81% spend less than 60 minutes per week coaching to specific skills or knowledge.
Only 24% of organizations utilize a formal coaching process.
The case for focusing attention on coaching is strong: When managers do formal coaching, the win rates of deals for their reps improves 20 percent. In organizations with a formalized sales process and coaching methodology versus lagging organizations with an immature sales process and no coaching process or methodology, accountability is a key differentiator: 91 percent vs. 45 percent agree that sales managers are held accountable for sales forecast accuracy.
3. Is Your Sales Funnel the Wrong Shape?
When you think of a sales pipeline, what shape begins to emerge in your mind? For most of us, you see a funnel. The conventional funnel-shaped pipeline has a large opening on one end where potential leads pour into the sales cycle and a gradually tapering funnel that ends with closed business. The idea of the sales funnel is to squeeze out candidates that are not a fit along the way and to minimize leakage.
This cone-shaped image is very familiar to most sales managers, however, the gradually tapering funnel results in a significant amount of wasted effort on deals that will never make it to the final stage of the pipeline. The longer unqualified deals stay in the pipeline; the more resources your salespeople waste on deals that will never come to fruition.
Funnel shapes can assist managers in developing coaching and training strategies to improve the quality of prospects in the funnel and to squeeze out those that don’t fit. When these funnel shapes begin to do so, these benefits accrue to sales managers. They:
smooth out the peaks and valleys of roller coaster sales.
focus their people on qualified prospects and strategies to win sales in progress.
learn to produce more accurate forecasts.
make better strategic prospecting adjustments earlier in the goal achievement period.
keep new lead generation at an appropriate level.
All these benefits contribute to higher sales, lower selling expenses, and greater efficiencies. To achieve your goals and objectives, develop coaching strategies that focus salespeople on “the right” sales opportunities in the funnel.
Managing a sales funnel begins with defining its stages and with getting everyone on the same page with terminology. Here’s a rather standard description of a four (4) stage sales funnel:
The Sales Funnel
Source: MHI Global
4. Defining the Stages in the Sales Funnel
One of the biggest blockers for sales and marketing alignment is the very different views each team holds about the sales funnel. For example, they might disagree about the number of stages a lead passes through before becoming a customer/client. Furthermore, they often use different terminology to describe those stages. But to adopt an effective sales funnel strategy, sales and marketing must have a unified picture of the funnel and standard definitions of each stage in the process and key action steps that must take place. Here is an example of a four stage process.
Stage One, at the top, contains those leads or opportunities for needs or concept for a solution, as yet undefined. For leads in what we will call the Universe, a salesperson has not been in front of a buying influence with a first appointment─one in which the above items are discovered. At this stage, sales and marketing are working closely, doing research and are establishing a “valid business reason,” in the eyes of the prospect, for setting up an initial meeting. The approach used will depend on the origin of the generated; that is, inbound marketing, referral, former customer or direct approach. Having a valid business reason will make the initial prospect contact a higher priority than simply another cold call.
Stage Two, Above the Funnel, contains those opportunities in which a first appointment has occurred with a decision maker, and a salesperson has learned about the needs, situation, buyer’s concept and decision-making process for a solution, and is qualifying the prospect against the company’s ideal customer/client profile.
The rest of this stage contains subsequent appointments and advances, spending time qualifying the prospect and understanding their business issues. In my experience salespeople have a tendency to be pushing their solution too soon. In this phase, salespeople should not be having product discussions. In fact, the company would save a lot in resources if the salesperson, through the qualification and defining concept stage, made the decision to lose unqualified prospects fast.
If the salesperson’s funnel is shaped somewhat like a martini glass, wide at the top, they may be too reactive to all perceived opportunities─good and bad. If your salespeople are not clear about what defines a good sales lead for your company, undesirable deals will infiltrate and clog your pipeline. With this problem, salespeople need coaching on qualifying leads, opening up the new opportunity and training on how to have effective conversations with prospects to determine their needs and concept for a solution.
Stage Three, In the Funnel, is where all the work and strategies begin. Too many salespeople have advanced to this stage without really qualifying the prospect and understanding the issues they want to fix, accomplish or avoid. At this stage, the salesperson should have a good idea of their sales objective (what are they trying to sell, how much, by when). They should be identifying the various decision makers as well as identifying a coach or someone who can champion their recommendations.
If the salesperson’s funnel is a little clogged here and looking like the Pillsbury Doughboy, chances are he hasn’t fully understood the prospect’s decision-making process, his concept for a solution, let alone defined the closing activities well. This is why, according to Sales Benchmark Index, 60 percent of the time spent on qualified pipeline opportunities, there are only two reasons why prospects don’t buy: They don’t believe their problem is significant enough to take action, if they recognize any problem at all; or they do not believe the solution you are proposing will work. Sales managers have an opportunity to coach salespeople through important action steps to help move the prospect trough this stage.
Stage Four is, Best Few. The salesperson should expect to close this sale within the next 90 days or so. It’s on the short list. With all the bases covered; key decision makers have been identified as well as their concept or vision for a solution. The decision makers have committed to and acted on key action step milestones.
A Few Good Leads
Unfortunately, opportunities do not go through the funnel systematically. A lot of opportunities leak out of the funnel, many because of a lack of clear understanding of the prospect’s objectives, and few make it to this stage without being fully qualified to be here.
Very few opportunities get the focus needed; while In the Funnel, salespeople seem to be jumping from one opportunity to the next neglecting other parts of the funnel, especially in the initial stages of qualifying. In these stages, the salesperson and team must have a clear focus and a strategy for closing the opportunity.
Sales leaders can play a significant role in directing salespeople, in the early stages, away from undesirable deals, to improve the quality of our Best Few and increase the chances of closing. By this stage, many important decisions, such as whether or not the deal is even worth pursuing, have been already made. By establishing early-stage opportunity reviews, sales managers can help make critical decisions early in the process that will prevent unqualified deals from entering the pipeline.
The key to the whole pipeline process is to make sure you have milestones set for each phase. Too many sales people advance a prospect to the Best Few stage before they are ready. By the time the prospect reaches Best Few, they have followed through on your action commitments and helped to advance the sales process with you. All key decision makers and their concepts for a solution have been covered.
Win Fast or Lose Fast─Get Rid of Unwanted Opportunities
Letting go of an unwinnable new opportunity can be a challenge for sales managers and salespeople alike. Sales professionals tend to have an optimistic “can do” attitude, and letting go of an unwinnable deal is akin to admitting defeat. Yet letting go is exactly what salespeople and their managers must do to streamline their pipeline. Even if there is still a small chance that a deal is winnable, it may be enough to justify the amount of time and effort required to pursue the deal when more viable deals exist. Unwinnable deals may come from:
Trying to take over from an incumbent who has had the business for many years, and the prospect shows no signs of dissatisfaction;
Having dissension among key decision makers regarding the need for your company’s solution;
- Having the buyer’s discussion focus solely on price, when you’re a value added provider.
If you see a quickly tapering shape in your sales pipeline, congratulation. You are on your way to more effective prospecting, improved close rates, and more accurate forecasting. However, if you look at the value of the deals in your pipeline, and the number doesn’t change from week to week, you are staring down the barrel of a loaded gun.
If you test these opportunities by walking through whatever method you use to qualify only to find they fail your tests, you are looking at a bleak future. I have found one of the most important tests to whether an opportunity is qualified or not is whether your ideal customer/client agrees to explore change, makes the commitment to change, and accepts your action steps.
Top of the funnel problems are easy to identify, however, when we get into the middle (In the Funnel), it’s a little more difficult. If the middle of the funnel is empty, you have a top of the funnel problem in creating new opportunities. This means you are not qualifying real opportunities, or you aren’t establishing the initial meetings under favorable conditions.
Most middle of the funnel problems I see show up as stalled opportunities. This development occurs when salespeople skip stages of the sales process. Almost always what’s skipped over is a difficult-to gain-action-commitment, one that if it had been gained would have moved the opportunity forward.
Deals also die In the Funnel when salespeople try to forego the necessary consensus-building or sell their solution too soon before the prospect has recognized a need to change, and can clearly see the problem, and a possible solution. Without these elements, the status quo wins.
Bottom of the funnel, or Best Few, get stuck when salespeople miss consensus, haven’t created enough value, haven’t effectively addressed risk, when new stakeholders (like purchasing or legal) enter the process, and when salespeople fail to outline and gain agreement on what steps will be taken next.
By this stage, without a compelling reason to change, deals get stuck at the bottom. Without resolving you ideal customer/client’s fears, the risk can keep him from moving forward.
“Sales are contingent upon the attitude of the salesman─not the attitude of the prospect.”
─W. Clement Stone
So get busy and plug those leaks. Happy selling.
See you on the upside,
For more information on how to simplify the complex sale, go to www.pleinairestrategies.com
Or call William L. MacDonald in San Diego at PleinAire Strategies LLC at 858.759.8637 or 213.598.4700