((atloud))

In my first post I wrote about the 6 Steps Sales Plan. With the 6 Steps Sales Plan, you follow the steps to

1. Generate Lead (Preparation and Planning)
2. Do Initial Qualification by making the first contact (Approach)
3. Do detailed discovery (Fact Finding)
4. Make solution definition (Proving Value)
5. Make a proposal (Recommendation)
6. Do negotiation and make a closure (Close)

and how many you have in each stage defines the Sales Funnel or Sales Pipeline.

Normally, the healthy funnel shape should be like the one above. i.e. You need to invest a lot of time to generate a lot of sales leads (opportunities) but at the end you’ll see that not most of the leads you generated will convert to sales or in other words be closed.

Also the shape of the funnel will not be like the one above if you do not convert between stages as necessary. I mean, there will be times when you’ll make a lot of meetings with customers or a lot of proposals and negotiations and the closure will not happen. So the shape at stages 4 and 5 will be larger than it should be and you’ll start thinking of how you can convert the customer to the next stage. Conversion Ratio is another topic and I’m leaving it to some other post for now.

What I want to discuss here is how to quantify the sales funnel and why to do it. Why is easy… It is just for you to be able to forecast what you’ll generate this month, next month or the following months.

Say that you have opportunities of quantity and amount shown at the table below. At this example we see that you have 200 opportunities at stage 1 at which most probably you don’t know its worth since you didn’t get in touch with the potential customer yet. And 150 opportunities worth $ 500.000, etc.

The probability of closure of the sales for the first stage should be 0%. For stage 2 onwards the probabilities may change depending on the nature of the business you’re running.

The definition of the sales probabilities should be clearly defined depending on the actions at each step of the sales process. Forexample you can say that we’re selling something that can be sold at the phone though not easy. We can put 10% for the telephone call to the customer who’s saying “I’m interested at buying your services”. We can put 20% for the field visit to the customer at which there’s face to face interaction. 40% for the stage that customer says “I understand your point of how you can help me, and I need some time to think about it”. 60% if you send the offer to the customer and 80% for the negotiation stages.

As stated earlier, the actions that define the probability of sales depends on the nature of the business and the product you are selling. Besides there’s time dependency that customer informs you (customer can say that “I’ll buy for sure but not this month” and that is pipeline of the month customer stated).

PS: One important thing you can say is that “how can you know the amount at just 10% probability stage?”.. It’s salesman’s suggestion only, feeling, gut feeling. You cannot exactly determine it but more or less the salesman has that opinion thru experience.

With these information in hand you can easily multiply probability with the amount and sum it up to find that months’ forecast ($ 270.000 in this example).

To be able to track your Sales Funnel or Sales Pipeline, you need to have a CRM application at which your salesmen will enter the leads they generate and a rewarding program for salesmen to enter data . This is the point I think where CRM differs from that of Contact Management applications.

As the days go by, you’ll be able to recognise these revenues and generating new opportunities everyday and will have a clear picture of what revenue you’ll generate in month 1, 2, 3 etc.

The size of the pipeline is as important as how healthy the shape is… It’s a different discussion for a different post…

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