What is a Sales Funnel and Why do I Need it to Grow My Business?

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1. Introduction

Whether you are a big company selling online or a local business man/woman you both share the same need: Your business must generate enough revenue to be sustainable and to grow. But how can you guarantee this revenue in an organized and systematic manner?

Its all about implementing repeated processes! These processes will assure that you can repeat successful sales over and over again. It will also fine-tune your sales process each time you make a new sale, boosting your sales success even further.

2. What is a Sales Funnel?

The best way to implement such a sales system is through what is called a Sales Funnel. A sales funnel is a series of steps through which your potential sales (leads) go through from start to sale. A good Sales Funnel should have the least the number of steps to be efficient but enough to make the process manageable and measurable.

A Sales Funnel is composed of at least 4 steps:

  • Awareness;

  • Interest;

  • Decision;

  • Action.

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Your potential customer has a need and thinks that you may have the solution


You have got your potential customer's attention. Now its time to shine and show him / her that you have the best solution for their needs


Your potential customer needs information to make a decision and take action. You need to give him or her simple but enough information to convince him or her to take action. Always try to use simple language and facts to justify why your are the best solution


Don't lean back just because a potential customer told you they are ready to make a purchase. You need to follow them through the process and ensure that all goes well. After the sale is complete you should contact them to get their feedback and try to start a new sale (repeating sales or cross-selling)

A simple Sales Funnel could be composed of these 7 steps:

  • To Contact / To Qualify;

  • Contacted / Qualified;

  • Customer Interested;

  • Quotation Sent;

  • Renegotiation;

  • Sale;

  • Post-Sale check.

Your Leads / Opportunities should go through these steps, not necessarily in this order or go though every step.

Lastly, a Sales Funnel is called a funnel because it gathers a lot of leads on top but only a few of them convert to a sale (KPI). You can know more about KPIs here: What is a KPI and Why is it SO important?.

3. What is a Lead? What is the difference between Lead and Opportunity?

Every time you contact a potential customer or you are contacted by a potential customer, that contact is called a Lead. A lead is a record containing enough information for you to start a conversation with a potential customer.

When you dig into the customer's info and needs you enter a process called Lead Qualifying. If all goes well you can confirm the customer's interest in a service or product that you sale and generate an Opportunity. This Opportunity will contain all of your sales information regarding that potential sale and will be driven trough your sales process (Sales Funnel) using a workflow with steps like the Sales Funnel example above.

Lets try a practical example:

  • A potential customer checks your website and is interested in knowing more about a product or service you sale. He or she fills in the contact form with their contact information such as name, e-mail and subject;

  • This contact form generates a lead on the top of your sales process (Sales Funnel). It starts in the "To Contact" step of your workflow we defined above;

  • When you open your Sales Funnel you check that there is a new Lead in the "To Contact" step of your sales process. You click on it and check out its information;

  • You start the qualification process by investigating further about that potential customer. A simple check might be to see is there is a website with the same e-mail domain as the customer's contact. For example a customer with an email john@businesspros.net may mean that he works at a company called Business Pros and its website is http://businesspros.net or http://www.businesspros.net. Why is this digging into a potential customer's data so important? Because you need to find arguments that make your potential customer connect with you in a way that motivates him or her to know more about you and/or your business and, if possible, make a purchase. This is also called Engagement;

  • When you gathered enough information, you contact the potential customer and start your Sales Script conversation to know more about what interested your potential customer in your product or service and how can you engage him or her further. After you made the first contact you move the Opportunity from the "To Contact" step to the "Contacted" step or, if the potential customer shows interest in what you are selling, directly to the "Interested" step. After this contact you should have a qualified Lead. A Qualified Lead is called an Opportunity. After this step you no longer refer to this Lead as a Lead but as an Opportunity;

  • The "Interested" step works like a TO-DO list. When you finish your quotation you can send it to your potential customer and move its Opportunity to the next step: "Quotation Sent";

  • The next step should be either a Sale (customer liked your quotation and bought it), Renegotiation (customer is interested but needs some changes to make the quotation more suitable to his or her needs) or Lost Sale (customer isn't interested in buying). If the sale is lost then you should ask why: Why did the customer show interest in receiving a quotation but did not buy it? Maybe the price was to high? Or the quotation was not well explained? This reason will aid you in future sales, fine-tuning your sales process;

  • The last step "Post-Sale Check" is also very important because depending on your business model you should try to convince your customer to repeat his or her buy. Repeating customers are an excellent way to sustain your business. Please keep in mind that post-sale is the next sale's pre-sale!

4. Conversion Rate

Conversion Rate is the measure that tells you how many of your Leads converted into Sales. It is one of the most important KPI (Key Performance Indicators) that you need to efficiently manage your business.

There are several conversion rates. The most usual are:

  • 30 days;

  • 60 days;

  • 90 days;

  • 180 days.

Each of these metrics give you a clear view of how your business is doing.

You will need at least some of them depending on what you are selling. For example if you have a website that sells goods and accessories you should look at all 4 KPIs. If you are selling management software solutions (ERP) you may need the 90 and 180 days KPI only as you probably don't have customers deciding in the first 30 or 60 days. They will first require a demo, referrals, tailored features, custom quotation with different scenarios, etc.

Don't forget, you can only know how your business is doing if you can measure its success.

5. Brand Cheer-Leaders / Ambassadors

Most sales funnels stop at the Sale stage. Although this is the main goal of a sales funnel you can drive your business further by adding an additional step. This step is the one where you really impress your new customer and convert him or her into a promoter of your brand and products.

One happy customer is worth more than a thousand paid advertisements. Why? Because when they talk to anyone about you, they do it with earnest, sincere and self arguments. This is the best way by far to get new Leads and they will come to you almost pre-formatted to purchase whatever you are selling.

So please don't forget to nurture your customers so that they feel motivated to get you new leads and, potentially, new customers!

Customers talking about you also give you a very valuable asset: Brand Good Will. This is what makes people tick when it is time to decide to make a purchase. They want to be with companies that others trust and talk about.

6. Benefits of using a Dynamic Sales Funnel

Since a Sales Funnel is a representation of the business' sales process, it makes sense that just like the sales process evolves, so must the Sales Funnel. This means that the Sales Funnel must be easy to change to accommodate the sales process' changes.

7. Marketing Optimization

One of the main benefits of using an organized and integrated Sales Funnel is the marketing information that you can gather, based on facts, to better target your marketing campaigns. This gives you focus on your sales performance and helps direct your sales team towards your goals, inprooving your marketing strategy.

It is very important to know where a potential customer came from and where did he or she hear about you. That is why when registering any new Lead you should always ask your potential customer where he or she came from and heard about you.

This information allows you to find out which marketing channels are more effective, and which are not. With that factual information you can redirect your marketing budget to the channels that give you better performance. You can increase your sales while maintaining the same budget cost. Without this information you would be shooting in the dark. That is why this information is so important.

8. Conclusion

A good Sales Funnel is a requirement for any successful business. Without it it would be very hard to make the business grow. A Sales Funnel gives you factual data with which you can make informed decisions and therefor move your business forward in a managed and safe way.

There are many tools that manage Sales Funnels but most of them are oriented only on the Lead/Opportunity management when they should be focused in the gathering of factual information like the marketing information (where the customer came from, which channel came from, ...), customer qualification like interests (what the customer may want in the future, not only in the current potential sale), etc.

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