Ah, the infamous sales funnel. So simple, so straightforward—in our dreams.

In reality, the funnel—a potentially powerful tool for generating business—can be complex. And unless companies take the necessary time to adapt the concept to their specific needs, it isn’t likely to generate all that much income. Most important, sales and marketing teams must collaborate on funnel development.
How do you create a funnel that meets your revenue goals? The key is not to start at the top. Instead, reverse engineer your funnel by starting at the bottom.

The Danger Zone

When it comes to sales funnels, companies can fall into some potential traps:

• No funnel. Let’s face it: Some companies simply haven’t gotten around to developing a funnel at all. In the famous words of Zig Ziglar, “You can’t hit a target you cannot see, and you cannot see a target you do not have.” According to the Refactored 2018 Sales Enablement Benchmarking Survey, 18% of firms fall into this category. If your organization is one of those, it’s time to get to work—fast.

• No alignment. You’ve designed a sales funnel—but it isn’t aligned across both sales and marketing. A truly high-performing funnel is one that meets the lead-generation and lead-nurturing needs of the sales team, but the marketing team is responsible for creating the content that sustains those goals. Our survey suggests that 66% of responding sales and marketing teams were only partially aligned or completely unaligned on their funnel goals. If you don’t have buy-in and complete comprehension from marketing, you don’t have a successful funnel.

• No segmentation. You have a funnel, you have alignment—what you’re lacking is enablement. Don’t just slice the funnel horizontally into buying segments: The best funnels are also segmented vertically by functional responsibility (e.g., marketing, business development, sales, channel).

So what’s the fastest way to develop a targeted, aligned, segmented sales funnel? You might think the answer is to start by determining how many leads you need to generate. But in our experience, the best method—after your sales and marketing teams agree on a few defined pieces of strategy—is to reverse engineer your funnel by starting at the bottom, with your revenue goals.

Get It Together

First things first: You need consensus across sales and marketing on your go-to-market strategy. Are you going to pursue account- or lead-based marketing (or some combination of the two)? Do you plan to focus on winning new logos (i.e., new customers) or on cross- and up-sales to existing customers?

Once you’ve determined these answers, it’s time to define your measurement strategy. Which stages will your leads fall into (e.g., Automation Qualified Leads, Teleprospecting Generated Leads, Sales Qualified Leads)? Price point, complexity of sale, whether your company is in the B2B or B2C space … these factors (and more) affect the ways in which you’ll measure qualifications.

We recommend using the SiriusDecisions Demand Waterfall as a starting point here.

Start at the Bottom

Now we get to the fun (and sometimes frightening) part. Instead of starting with a guess at how many leads you need to produce, start at the bottom, with your revenue goal. From there, apply your close and conversion metrics to work your way back up the funnel.

To reach your revenue goal, divide your target revenue by your typical win rate. That will determine many Sales Qualified Leads (SQLs) are needed. To understand how many Sales Accepted Leads (SALs) are needed, divide the SQL number by your normal SAL conversion rate, and so forth until you get to the number of required leads. Here’s an example for clarity:

You don’t know your conversion rates right now? We've been there too. If you can do some data mining in your CRM, you can probably get close on some of the rates and take a SWAG at the rest. You can always adjust later if things are out of balance for what you expect.

Note that you can apply this process using the number of leads or the value of the leads in a category. Your choice should be dictated by your situation. For example, if you are in a business that has a broad range of pricing options and one enterprise deal could skew your pipeline, we suggest using the number of leads at each stage. If the typical sale price is fairly consistent, stage value is more telling.

Next, Slice Your Funnel Vertically

At each of the stages you’ve now set up, which teams hold responsibility for a portion? For example, suppose your organization has four teams with responsibility for feeding the funnel: marketing, business development, direct sales, and a channel sales team. Marketing and business development share the most responsibility, at 35% each. Sales team members do their own prospecting and are expected to supply 20%, and channel will add 10%.

Now let’s say that you expect to convert 35% of your SALs to SQLs, converting $57 million in SAL value to $20 million in SQL value. At this stage, that means that your marketing and business development teams each need to hit revenue targets of $7 million. Sales needs to aim for $5 million, and channel for $2 million. This process can then be carried up the funnel so that everyone has complete visibility and accountability for delivering results.

Staying on Target

Once you’ve developed your super-powered funnel, you’ll need to stay on top of the numbers to keep the conversions flowing. Make sure your CRM/MAS capabilities support the type of tracking and reporting required to run these types of figures for each team and stage.

Then, schedule weekly alignment reviews to help your teams stay on track. Accountability at this point is a must—as is the willingness to adjust the targets if doing so makes sense.

Of course, other factors will come into play. Your customer personas and funnel must be considered as well as your brand goals. Nothing’s ever simple…but at least your sales funnel can be effective.

Looking for help developing a demand-generation strategy that really works for your organization?

Refactored has the expertise to help you see the best opportunities for driving a healthy pipeline. Let’s talk about what you need.