sales pipeline

Sales Funnel 101 – What is a sales funnel and why it continues to be the best way to grow your sales

Monday, October 7th, 2013

If you’ve shared the workspace with sales managers (& sales people in general), you’d have probably heard this phrase a lot. How is your sales funnel moving? What’s the conversion rate? What’s the velocity? What is your revenue pipeline?

So here’s your initiation on the most commonly used sales jargon & terminology of the sales people.


What is a sales funnel?

Imagine you want to sell old cars and have 10 cars to sell. You have 4 BMWs and 6 Toyota Camry sedans. So you let your friends know and you also put out a listing on craigslist.

Almost immediately after you’ve done this, you start getting calls. 50 people call up out of which, 20 drop out because they were looking for a specific color or a lower price. The next 30 want to come and see the cars, maybe even take a test drive. After the inspections & the test drives, you are left with 10 customers who want to take it further. 5 of them start negotiating on the price while the other 5 just tell you that they’ll let you know if and when they decide.

You are reasonable in your negotiations but after all the negotiations, you end up selling 2 cars.

You go through the entire process again, only this time 30 people call, 10 come for a test drive, 2 negotiate and 1 buys.

What you’ve experienced is a classic sales funnel. Prospective buyers kept dropping out at every stage of the sales process and eventually a few funnelled down to closure.

A sales funnel elegantly captures this phenomenon where you need to go after a great number of prospective buyers to close even a single deal.


Why do (sales) people love the sales funnel so much?

Sales funnel is a simplistic metaphor to drive a sales process. It’s quickly relatable and understandable across the entire organisational hierarchy. So everybody from the CEO, to the tele-caller can understand the sales funnel and therefore relate to it.

It became the language in which the entire organisation communicates about sales. It also therefore helps companies drive down their sales objectives and goals.


Is the sales funnel suited for your business?

A sales funnel works if the selling spans a significant time-span

Selling over-the-counter doesn’t really require you to track your customer over the different stages of the sales funnel. If you running a food-kart or a retail store, you’d notice that customers come in, find or ask for what they need, pay for it and are out of the store. On the contrary, in the car deal, where there were delays in between the time they enquired and they came to try out, you’d need to track the prospects along the different stages

Oh and retail stores have their own sales funnels which is quite different.


It makes sense if you have multiple people involved

If you are selling to enterprises and corporates, chances are there’d be more than one person you’d be dealing with to take the sale forward.

When you are doing a demo of your product, you’d likely to engage with the direct users but when you’ve submitted a contract, its likely going to be with legal department. A sales-funnel takes such relationships into consideration.


What if you don’t have a sales funnel?

You probably do. If there is a repeatable sales process that you are following, you are using a sales funnel, whether you realise it or not. If you don’t and unless you have very few leads, I’d strongly recommend that you build one.

A sales funnel will give you great clarity and insights into how your business can grow. You can analyse the funnel and it’ll tell you where deals get stuck; who are selling; how are they selling and why aren’t others selling? It helps you measure current performance & forecast growth.

A sales funnel doesn’t just streamline your sales, it streamlines your entire business.