I had the following conversation with a sales team I was training a few days ago. The team was behind in sales, revenue, and margin goals year-to-date.
Our conversation started with, “What’s the goal?” They asked, “The sales goal?” I nodded. They quickly and rather smugly announced the year’s sales’ goals by channel. Each channel was represented in the room by one or two salespeople – capital equipment sales in two markets and aftermarket sales. I wrote their answers on a flip chart.
I then asked, “What are the year’s sales-to-date by channel?” Without hesitation, they responded with the numbers – their confidence growing with every answer. I continued to write.
(Impressive. This was unusual. Most sales teams do not know their team goal or their year-to-date progress toward its achievement. Even more telling, most salespeople do not have goals, but that’s a story for another time.)
I then looked at them and asked, “How many quotes are pending (the number and $ amount), and one more stage up in your sales funnel how many prospects do you have – not yet quoted (the number and $ amount)?” Silence. Confusion.
I explained, “I want to know the number of quotes still viable and awaiting a decision and how much revenue they represent.” “Do you know these numbers at this stage in your sales funnel?” Silence. “Then, I want to know how many qualified prospect deals you are chasing for an opportunity to quote and the estimated revenue they represent.”
“Do you know these numbers?” Silence – more silence … and, some shook their heads no, while others formed and softly said the word aloud … “no.”
I continued, “Those numbers are just as important as sales-to-date – Why?” One salesman in the group ventured a guess, “Because knowing the number of quotes and pending prospects will tell us if we are finding and working enough potential deals to achieve our goals by the end of the year.” I reinforced his answer, “Yes, and if you know how much is presently in your funnel, you also know, if in the time remaining, you have a prayer of achieving goal!” At this point in the training, everyone was beginning to nod and a coaching “ah-ah” effect had entered the room.
Most sales managers do not help their salespeople manage a sales funnel – it’s strength and size, and the proper amount of prospected opportunities.
When they begin to do so, these benefits occur. They …
– Smooth out the valleys peaks and valleys of roller coaster sales
– Focus their people on qualified prospects and strategies to win sales-in-progress (quoted deals)
– 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 of which contribute to higher sales, lower selling expenses, and greater sales efficiencies.
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 three (3) stage sales funnel. Stage one, at the top, contains those leads or opportunities as yet undefined for funding, needs, or when the buyer want ownership to begin (installation schedule, purchase, etc.) For leads in what we will call the Opportunities (Stage One), a salesperson has not been in front of a buying influence with a first appointment – one in which the above items are discovered.
Stage Two, Prospects, contains those opportunities in which a first appointment has occurred with a decision maker AND a salesperson has learned about the needs, situation, funding, and schedule of the pending purchase. The rest of this stage contains subsequent appointments and advances that win the ability to quote and that occur before giving a final presentation and quote.
Stage Three, Quotes, contains all quoted deals still pending an estimated award date to you or your competition. A final presentation to a decision maker(s) usually advances a prospect into this quoted stage.
A few notes to remember …
1. Make the stage description work with your business. We have customized these for hundreds of companies.
2. Teach everyone the stage descriptions.
3. Be aware that the amount of time that a lead flows through every stage of the funnel ranges from 5 minutes to 5 years.
4. Understand that the opportunity ratio is the ratio of leads to qualified prospects. if this ratio is excessive, there might be lead generation strategies to change.
5. Discover your closing ratio – ratio of quotes to sales. It’s another area for improvement, training, or strategic change.
6. Calculate selling expenses from lead to sale to help you with important decisions regarding people resources and expenditures.
Finally, remember that managing a sales funnel means that you have a well-defined sales process. And, this provides you and your salespeople with a better focus for improving sales goal achievement. Now, put your funnel together and learn to better manage and coach sales activity levels and strategies. You can do this. Lance.