In the recently released book, The Funnel Principle, I make a case for putting a new focus and attention on the sales funnel. What's the rationale behind this?
Let's start with the most important reason: achieving quota.
More than anything else, achieving quota is what will define your success this year. Your performance evaluation might include 'soft' measures, but the one that matters most is achieving quota. Your commission depends on it. Your bonus depends on it. Your income depends on it. Your boss or your people depend on it. Your credibility depends on it.
Quota is all about net new sales opportunities, right? And guess what else is all about net new sales opportunities? The funnel. Let's look at quota first.
You're going to have to win new business to hit quota. Because your quota likely includes business that recurs from last year, business you don't really have to win again, let's focus on new sales you'll have to produce to hit that quota. For example, if your territory did $1M last year and this year your quota is $1.1M, then you've got to find another $100,000 in net new sales.
But wait – you'll likely have to find more. What's the chance that all of the $1M you sold last year will also be sales this year? Let's say 25% of last year's business turns over this year. There's another $250,000 of net new sales opportunities you've got to find and close. Now we're up to $350,000 of new business to hit this year's $1.1M quota. If your sales turnover is more than 25%, then the delta is even bigger and you've got some serious funnel work to do.
How's the funnel all about quota? It's a funnel
of net new
sales opportunities and therefore it's tied to achieving quota in the strongest way. If you've got to find and close another $350,000 to achieve quota then the first place you should look for your ability and the plan to achieve that is your funnel.
Which leads me to the second reason you should Rethink the Funnel. Your funnel provides leading indicator information that helps you answer the funnel's ability question. Unlike sales, a lagging indicator, funnel data is information you can still do something about - as long as you're not too far into the year.
Let's say your funnel's ability to close enough business to achieve your quota is weak. What do you do? You find more sales opportunities to chase. If your funnel has a 1:1 ratio of sales opportunities to GAP (GAP is what you have left to close to achieve quota), then you'd better have a 100% hit rate. If that makes you nervous (it shows you have a pulse) then you should immediately plan to increase your funnel value to something more than a one to one ratio to your GAP. Otherwise, it could be a long off season.
And here's reason number three: the funnel is a behavioral tool. Meaning, it tells you what you should do next when you're working an opportunity. How? The funnel's stages tell you where the opportunity is in the process, which then suggests what you should do next.
Now, here's the catch. To be most effective as a behavioral tool, your funnel has to be designed the right way – the BuyCycle Funnel™ way. This funnel design is based on the customer's buying process, not on selling activities (like a traditional funnel). The BuyCycle Funnel makes you think of what the customer's commitment should be before you decide what you're going to commit to. For example, for some given opportunity should you prepare the proposal next? Or should you have the customer give you more information first? For another opportunity should you give some person a sample to use? Or should you first get a commitment for when and how that sample's going to be used? For some other opportunity should you buy the plane ticket and make the sales call? Or should you first make sure that the right people are going to be there and know why you're there?
If you're a sales manager and you want to develop and help your salespeople succeed, think of how effective your coaching could be using a tool that gets your salespeople to focus on the customer's buying process. You're using the funnel to facilitate a conversation with them, a richer, more meaningful conversation, says John Hoskins, co-founder of Advantage Performance Group (APG). This funnel dialogue helps you challenge assumptions that your salespeople are making. It helps them be much more productive and improves the quality of the funnel data you're looking at.
While the funnel has value as a quantitative measure, we can't let the funnel be misperceived as just a source for quantitative information. Metrics and probabilities can be important, but the real leverage points are in improving the integrity of funnel data, one conversation and one sales opportunity at a time. Better funnel data is what makes the metrics and probabilities valuable at all. This is done through a BuyCycle Funnel™ design and an ongoing dialogue between salespeople and managers.
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