I was speaking with an executive the other day who repeated the concerns of her management team that their existing market was too small to sustain their growth.

Expanding into new markets may look enticing, but there are large risks and costs associated with this strategy. As it turned out in this case I was able to show the company that their market was large enough to provide growth opportunities for the next 3 years.

A little back of the envelope math indicated a bleak picture at first. Considering the size of their available market and their current conversion metrics for demand generation they simply couldn’t reach their revenue target. They were burning through too many prospective buyers and before long every prospective customer in the market will have been contacted and perhaps even placed into their sales funnel.

Their conversion rates were respectable, too. Only incremental improvement could be expected. It was when I asked about buyer recycling (lead recycling) that the answer started to emerge.

Many marketers and salespeople put all their energies into generating leads and working to progress these buyers through the funnel. But, a percentage of buyers always leak from the funnel at every stage. If your conversion rate at one stage in the funnel is 40%, this means 60% have leaked–they haven’t progressed. For whatever reason they weren’t willing or able to move to the next stage in the funnel at that time. Later a portion of these leaked buyers will be ready to re-engage with you (if you let them).

Sadly these buyers who leak for whatever reason are frequently forgotten by marketing and sales.

The company I was speaking to wasn’t actually ignoring their leaked buyers, but had a procedure in place to follow up with leaked buyers every 6 months. Ah-ha!

Using a sales funnel calculator from MathMarketing (click for lite version of this calculator) I was able to show the company that by recycling their leaked buyers at every stage after 4 weeks rather and after 24 weeks they’d need 7,000 fewer fresh names over a three year period.

This meant the market was large enough if they could execute effective marketing and sales strategies for recycling the leaked buyers back into the funnel–certainly a much easier and less risky proposition than expanding into new markets.

This article can also be viewed at Chuck Besondy’s blog, The Sales Funnel Fanatic.

Photo by steved

The revenue funnel isn’t the sole domain of sales or marketing. CFO’s should be as familiar with their company’s funnel structure and metrics as any sales executive or marketing executive. Here’s why.

1. Funnel modeling tools provide the best way for marketing, finance, and sales to talk the same language during planning and reporting.

2. The variables of the funnel make up the actual metrics of the revenue engine. These variables are the levers and dials over which management has control.

3. The funnel, over time, enables the sales forecast to be made with higher and higher degrees of accuracy.

4. Requests for more resources from Marketing and Sales can in part be justified or refused based on funnel economics

CFO’s should be trained in the use of sophisticated funnel modeling tools right along side their marketing and sales colleagues.

An excellent source of this training is the FunnelAcademy(tm), which includes comprehensive training on sizing a funnel and measuring progress. It also includes the most robust funnel modeling tool I’ve ever had the pleasure to use.

Chuck Besondy is a principal at One Accord Partners and is co-author of Leadership on Demand: How Smart CEO’s Tap Interim Management to Drive Revenue. You can read more about Interim Sales and Marketing Management by Chuck Besondy at his blog The Sales Funnel Fanatic.

In case you didn’t notice your customers are buying differently today than they did last year. The differences could be subtle or obvious, but if you observe closely you’ll see that the process they follow to make a buying decision–the buyers’ journey’–has changed.

If your selling process and sales funnel structure haven’t adapted to the buyers’ journey the efficiency of your sales and marketing efforts will be down and so will the accuracy of your revenue forecast. This is what I call the new “Funnel Economics”.

Here are the major variables in a sales funnel (which I am now going to refer to as the revenue funnel because it should be co-owned by marketing and sales).

1. Stages of the buyers’ journey
2. Lag time between stages
3. Leakage rate at each stage
4. Advancement rate at each stage
5. Number of meetings required in each stage
6. Number of meetings that each sales person can expertly handle in a week
7. Number of available sales people
8. Average revenue per order

Any change to any of these variables has an impact on how many deals get closed in a period of time. The marketing and sales effort required to generate a level of revenue last year is very different from what it takes this year.

If you’re still trying to plan and forecast based on last year’s funnel structure, you’re not just flying blind you’re flying with the wrong instruments.

Reset your revenue funnel by analyzing and observing the customer’s current buying process and behaviors. Dial in the new metrics into your revenue funnel and monitor carefully over the next several months. The accuracy of your revenue projections will improve. What’s more, you’ll have a more realistic preview of what type and level of activities are necessary to achieve a certain revenue outcome.

Chuck Besondy is a principal at One Accord Partners and is co-author of Leadership on Demand: How Smart CEO’s Tap Interim Management to Drive Revenue. You can read more about Interim Sales and Marketing Management by Chuck Besondy at his blog The Sales Funnel Fanatic.

Photo by Jake Rome

Here are five fundamental questions that too few B2B sales or marketing execs can answer and as a result they are flying blind.

1. What is your average (or mean) deal size expected to be in 2009?
2. How many deals-contracts-orders do you need to win to achieve your revenue objective?
3. How many weeks does it take to convert a name into a deal?
4. What percentage of your names leave the sales funnel during this period (leakage)?
5. How many names do you need to put into the funnel, at what time, in order to achieve your revenue objective?

I’d say 80% of the companies I speak with cannot answer more than one of these questions. Such room for improvement.

Chuck Besondy, Principal, OneAccord
512.692.9642
chuck.besondy(at)oneaccordpartners.com ]]> http://interimsales.net/do-you-know-how-big-your-funnel-is/feed/ 0 http://interimsales.net/interim-sales-executive-question-how-to-grow-sales-if-you-cant-afford-marketing/ http://interimsales.net/interim-sales-executive-question-how-to-grow-sales-if-you-cant-afford-marketing/#comments Mon, 02 Feb 2009 08:45:58 +0000 OneAccord http://interimsales.net/?p=100 Question: What if your company is struggling and you need to grow sales but can’t afford to spend cash on marketing?

First thing I’d do is look very closely at the sales funnel. Are the stages of the sales funnel aligned with the buyer’s journey? Are the right tactics being used at different stages of the funnel to advance buyers? Are my conversion rates at certain points in the funnel higher than they should be? Can the lag time between stages be reduced in anyway? Do I know how many orders or deals I need within the financial period to reach my revenue target? What is the leakage rate at each stage and what tactics are being used to nurture those buyers so at some point they will re-enter the funnel?

In most cases a close examination and analysis of the sales funnel will uncover multiple opportunties for improvement that will result in higher rate of wins and more efficient use of sales and marketing resources.

Chuck Besondy, Principal, OneAccord.
512.692.9642
chuck.besondy(at)oneaccordpartners.com

When the going gets tough, the tough fine-tune their sales funnel processes for greater efficiency and effectiveness.

So many companies today find themselves trying desperately to succeed with fewer marketing and sales people and with less budget. I like to think of this situation as having to step into the OK Corral with only four bullets in my gun instead of six. Every bullet has to hit its mark. No room for waste or ineffectiveness.

Marketers and sales people realize this, but it does raise two questions:

1. What should we be doing more of?
2. What should we be doing less of?

If a company’s sales funnel has been designed around the buyers’ journey, and if both Sales and Marketing have aligned their strategies and tactics to this journey then they will find the answers to both questions in the metrics that result from a well managed sales funnel.

If there isn’t alignment around the buyers’ journey then sales and marketing are likely working at cross purposes to one another and there is an unacceptable level of trial and error in the tactics.

Research* has proven that companies who have aligned their marketing and sales activities to the buyer’s journey win 38% more of their proposals, lose 36% fewer customers each each year and grow 5.4 points of growth more than companies who aren’t aligned.

Not all sales funnel processes are equal. Most are too simplistic or are centered on the seller’s journey not the buyers’ journey. A rock-solid funnel model factors in lag, leakage, and recycling–there’s nothing “simple” about the dynamics of a funnel.

There is a way to mine the sales funnel expertise of major corporations around the world. You simply need to plug into the minds that developed the processes for these global brands and built the tools to support the processes. That is easy. The world’s leading authorities on sales funnel management and performance are at MathMarketing. They now offer black belt workshops that teach companies and marketers how to do this. Known as the Funnel Academy(tm), these workshops are now available in the U.S. CEO’s should make these programs mandatory for every B2B marketer and sales manager. For that matter the CEO’s should participate, too. This is the best B2B marketing training on the planet.

Contact me for additional information about Funnel Academy modules and schedule.

*Source: MathMarketing alignment benchmark study 2004/2005 : 1400 professionals : 84 countries

Chuck Besondy, Principal, OneAccord
512.692.9642
chuck.besondy(at)oneaccordpartners.com