Your online sales funnel is a depiction of the various stages that all your website leads are in, at any given time. Each company has its own sales process, so qualified leads being chased down by your sales team are in different stages of the process. Knowing where these leads are tells you where your money is, how much you are going to get, and when.
Knowing all this makes it Predictable Revenue, and this is the key factor that drove Salesforce.com from 0 to $100 million. Aaron Ross, former Director of Corporate Sales, Salesforce.com, has written a bestseller (From Impossible To Inevitable: How Hyper-Growth Companies Create Predictable Revenue) that explains how their new team and sales process grew recurring revenues to $100 million.
You can likewise put your company’s sales on hyper-growth if you know your funnel, and this enables you to tweak the process to make it generate predictable revenue. How does it work? Start by knowing the stages and important metrics of every sales funnel.
Essential Components of Your Sales Funnel
First up, you need to know every stage of your entire sales process. You start by finding out the number of sales-qualified leads (SQLs) you have, followed by the number of leads that have received an initial response. Up to this point, it’s pretty much the same for most every business, although the time needed for lead response may vary.
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Then you need to know how many leads are in each of your follow-up stages (may vary as per your sales process), and how many are in a lead nurture track because your sales team decided they’re not ready to buy – yet. Lastly, you need to know how many are converted leads that are in the process of being signed up as paying customers.
It’s no good simply knowing how many leads are in what stage. To get to a point where you are generating predictable revenue, you need to accurately forecast how many leads in each stage in the cycle will move ahead to the next stage in how many days. In order to do this, you need to look at the historical data to figure out the average time it takes for leads in each stage to move forward.
So assume that you have 100 SQLs, and 95 of them take 5 days on average to move to the initial lead response stage. Let’s say it takes another 5 days for 50 of these leads to move from initial response to follow-up, and then another 20 days of follow-ups to convert 10 and put the rest into a nurture track.
When you see this funnel at any given time, you should know exactly how many sales and how much revenue you are going to get after one month. If that’s not enough to meet your sales target, then you can look at each stage to see which one is causing a bottleneck, and fix the problem.
There’s an easy way to get a quick snapshot of your sales funnel and the expected revenue, if you take the average metrics for the aforementioned components.
Essential Metrics of Your Sales Funnel
Now that you know your sales funnel inside out, it’s time to start tracking the metrics. Specifically, this is what you have to know:
– Total number of leads open in the funnel;
– Avg. size (value) of each deal open in the funnel;
– Avg. number (percentage) of leads that get closed by Sales; and
– Sales Velocity, which is the avg. time it takes to close a deal.
If you know your sales funnel and have these metrics, it means your revenue is going to be predictable, and you can plan your growth according to it. This is how companies like Salesforce.com have become phenomenally successful, and you can do it too.