How To Know If You Have a Healthy Sales Funnel

What makes a healthy sales funnel?

To appreciate what makes a sales funnel healthy, it’s important to first fully understand the role of one.

The sales funnel is a marketing model that illustrates the different stages of the sales process. It allows you to focus your marketing and sales process to chase prospects effectively, turning quality leads into customers that convert.

The sales funnel provides both a visual and measurable guide for businesses to track their sales process, allowing for year-on-year analysis. It’s important to differentiate this from the sales pipeline. These terms are sometimes used interchangeably; however, they do have different purposes. Whilst metrics can also be attributed to the sales pipeline, the sales funnel has been specifically designed to do this

The visual design of the funnel lends itself to data analysis. The wide top of the funnel represents the number of leads coming in, and as this tightens into the next stage of the funnel, so do the valuable prospects. Targeting and refining as the funnel gets smaller enables a more focused approach, ultimately producing more sales. Each level provides the chance to see the attributed numbers, something the pipeline doesn’t offer.

A healthy sales funnel is a strategy that is returning both forecast and desired outcomes. An unhealthy sales funnel, on the other hand, may be causing great damage to your sales process without you realizing it.

The sales funnel broken down

To help you understand what your B2B sales funnel should be delivering as a strategy and for your business, take a look at the following model:

1. Awareness

The top of the funnel – awareness. The first stage is reserved for researching, setting project KPIs and prospecting.

2. Interest

The second stage of the funnel – interest. This is where prospects become leads through outreach.

3. Evaluation

The third stage of the funnel – evaluation. This stage is the time to really capture your lead and help them evaluate your offering through product demos or presentations, nurturing your relationship with them to remove any concerns or reservations.

4. Decision

The fourth stage – decision. This is often the most granular stage of them all. This is time to really engage with leads, driving them to convert.

5. Conversion

The final stage – conversion. The last stage of the funnel is where you should be aiming to finally convert your lead, securing the sale.

It’s important to note that the sales funnel will look different for varying businesses across different industries, and this is a simplified, overarching model. For example, eCommerce businesses have their own unique sales funnel that provides a more granular sales journey for the prospect. This would include very specific stages such as the prospect entering a checkout area of a website before committing to purchase.

When assessing the health of your own sales funnel, you should consider the unique challenges or circumstances of your business and the vertical you may be operating in, as this will have a direct effect on how you choose to go about your pipeline and funnel.

Sales Funnel Health Metrics (KPIs)

Now we’ve established what the sales funnel is, and how each stage contributes to effective conversions, it’s important to consider the health metrics of the sales funnel itself.

Data and reporting are vital when assessing the health of a sales funnel. The sales funnel shouldn’t be a one-and-done solution and should be continually assessed to ensure that you are gaining the desired results year on year. A healthy funnel one year may not provide you with the desired results the next. Applying metrics is the best way to keep on top of this.

The health of your sales funnel can be measured using key performance indicators, or KPIs. These will vary depending on your industry or specific business needs, and should always be tailored where possible,

Acquisition costs

Whilst this can be difficult to identify, acquisition costs usually involve the cost of all marketing and sales efforts spent when acquiring a new customer. This metric is extremely valuable in assessing whether your sales are saving or costing your business money.

Conversion rate

Ultimately, conversion rate will provide the most information on the overall health of the funnel. Conversion rate measures the percentage of leads who convert by the end of the sales process. This allows you to understand whether every stage in your sales funnel is providing effective results.

These metrics allow you to assess whether the sales funnel is providing the results you need and desire. It allows a step-by-step breakdown of each stage, providing trackable metrics to assess this.

Sales funnel troubleshooting

The sales funnel should be focused with strategic outcomes set, encouraging effective lead generation and high conversion rates. But you may discover a few common problems when analyzing your metrics, whether this is monthly, quarterly, or annually.

Poor lead-to-prospect conversion ratio

You may notice that you are returning a poor lead-to-prospect conversion ratio. This may highlight potential gaps in your lead generation, and that the leads you are identifying are simply not suited to your service. Ensuring your lead generation is highly effective will improve your lead to prospect ratio, helping to convert ideal leads to prospects and ensure the most effective use of resources.

Sale size is not what you want to achieve

You may also notice that your sale size is not what you set out to achieve. Whether this is undervalued sales or simply too small deals converting, then it may be that your lead generation once again needs addressing. Generating quality leads not only creates a strong foundation, but also ensures you are targeting the right size lead too.

Poor evaluation to decision conversion ratio

If you have noticed that your leads are simply not continuing down the sales funnel from the evaluation stage to the decision stage, then your evaluation stage may need revisiting. Perhaps you aren’t quite engaging well enough with the client, whether that be through a lack of product demonstration or simply not spending enough time to address any concerns. This stage may require more nurturing from an outsourced inside sales team.

Slow sales velocity

You may find that your sales velocity is far slower than you desire, slowing down the entire sales process, and thus securing fewer sales. Time is a key factor to consider in the sales process, and it may be that elements such as SDR performance, appointment setting or multilingual barriers, for example, are slowing you down. Taking the time to assess the pain points in your process is crucial for understanding how to remedy this.

Low conversion rate

If you are experiencing a low conversion rate of leads to final sale, or have noticed that year-on-year this number is dropping, then assessing points throughout the entire process may be necessary. Managing the entire pipeline from top to bottom may seem an overwhelming task, but taking the time to address each stage of the funnel will allow you to understand why a low conversion rate is occurring. Equally, you may need to review your sales team, whether it be at BDR, SDR or ISR level, to understand where the gaps and opportunities may be.