The Single New Year’s Resolution You Must Keep!
This is time of the year where people either make their New Year’s resolutions, or not…
Regardless, if you are growth oriented, here is one that you MUST make and keep:
Get up close and personal with your sales funnel.
Why is this important? What’s in it for you? In a nutshell, when you comprehensively understand your funnel, it becomes the engine room of your company’s growth. As I’ll explain, it boils down to simple math.
If you want to close a certain amount of revenue this coming year, there are a certain number of Leads with whom you need to contact in order to reach it. If you don’t understand the “Funnel Math” of your business your chances of achieving your goal revenue are slim to none.
As a refresher, the sales funnel tracks the journey of your sales prospects from Raw Lead all the way through to a Closed Sale. Of course, not all leads actually result in a sale, so you need more (normally far more) leads at the top of the funnel. Prospects will fall out of the funnel as you progress through the stages of the sales cycle.
Here is a diagram of a standard sales funnel:
Some percentage of Prospects will move from one stage to the next (for example, Leads to Contacted, or Contacted to 1st meeting). From each stage to the next there is a Conversion Ratio – the percentage of leads that actually progress from one stage to the next.
The conversion ratios differ at each stage. If you are trying to start conversations through cold emails and calling, you might only actually get a conversation started with five of every hundred leads, for a conversion ratio of 5%. But as you move a lead through the sales process, you might have a situation where once you’re underway and the prospect understands your proposition, you actually close a high percentage of the prospects that reach the Proposal stage.
The most important thing is: you have to know what the conversion ratio is at each stage of the buying process.
Once you know that, you work backwards from your objective. So let’s say you have a goal of $2 million in revenue. Your average deal size is $25 thousand, so you need to close 80 deals to reach your revenue objective. How many prospects do you need to talk to at the beginning of the sales process (a.k.a. The “Top” of the sales funnel”) in order to generate those 80 closed deals? Once you know the conversion ratios from each stage to the next, it’s just math.
The big ah-hah moment for our clients is when they realize that (in many businesses) only 2-5% of the conversations they start with a prospect will actually result in a closed sale. And so if they aren’t out every day, every week, every month doing the legwork to generate those initial conversations, they will not reach their revenue objective. No amount of hope or wishing will make the simple math turn out differently.
This is the time of year to get real about growth. To do that, you have to get up close and personal with your sales funnel.