You are in business to make money, and sales feed the business engine. The goal is to generate enough sales to cover your expenses and make a profit. If you do not have an understanding of how many leads you need to generate and turn into sales, this can become a cash flow issue very quickly.
As a business owner, it is essential that you understand where your leads are coming from and what the potential is for the leads to close. Also, those that do not close you will want to have an understanding of why they didn’t close? Hopefully, this article will provide you with some insight into how to create and track your sales pipeline for your business so that you can keep an eye on your profitability.
Develop Your Sales Process
Whether you document a sales process or not, every business has one. Typically there will be similarities within industries, but in most cases, a sales process can be different for every business. So you ask, what is a sales process exactly?
A sales process consists of the steps that you follow to take a cold lead to close whether that sale is won or lost. There is no right or wrong process; it is about the steps that you find that work the best for you and your salespeople in being able to “win the sale.” It is also essential to understand that not every sale will go through every step of your sales process, and others will require that you follow each step. You may also have several sales processes within your business, depending on the type of product/service you are selling or based on the target customer.
Example: Company A has a product that can be sold to the following:
An end customer
A retail store
A restaurant or bar
In this case, there may be a different sales process followed for each of the target customers. There could even be different sales channels within your organization who are selling to each target.
Developing Your Sales Funnel
Once your process steps are defined, you will want to assign percentages of probability to close to each process step. This will provide you with a view of the progression of the sales and their potential for closing. This step may take you some time, especially if you are starting or are not currently tracking the progress of your sales today. The idea is about understanding how many leads you need to make the sales you have forecasted for your business; along with the progression through the funnel to become a closed sale. The further the lead progresses in the sales cycle, the better the chance you have of it closing.
Over time you will be able to gain a clear picture of your sales probabilities and closure ratio. If you have 100 leads and 30 turn into sales, then you have a 30% sales closure ratio.
The calculation to determine the amount of revenue potential in your sales funnel will be:
$Amount * Probability Percentage
Example: Sales Process with Probability Percentages
Depending on the business, some will build their sales process, probability percentages, and funnel based on what they feel are qualified leads. Others start at the lead phase because there is some qualification done prior. This could include a filled-in web form which collects qualification information or previous cold calls from a telemarketing firm you hired.
Tracking & Reporting
If you are performing the sales function or you only have one person responsible for sales within your business, this could be as easy as creating Excel spreadsheets to keep track of the information needed:
Where the Lead Came From ( Web, Referral, Advertisement)
Deal information ( Sales Process / Probability Percentages)
Activities of the Sales Rep (Calls, Other Steps Not in Process)
Reasons for Winning/ Losing Sale
If you have several people responsible for sales within your organization, you need to invest in a CRM (Customer Relationship Management System). There are many systems out there to choose from, depending on the level of functionality you require. There are a few that have a free version for two licenses and others that offer limited functionality. Here is a list of three, which I would recommend for smaller businesses that only have one or two sales personnel.
Zoho CRM (free version up to 10 with limited functionality)
Insightly (free version for 2 with limited functionality)
HubSpot CRM (free version with limited functionality, but no limits on licenses)
As your business grows, it is crucial that you have a handle on sales within your business to understand how your business is performing and if you are generating the expected sales that you need for your business. If you are not tracking your sales, then you do not have a good handle on your business, and this is when many companies end up in financial trouble.
There are other side benefits of tracking your sales processes, probability percentages, and pipelines that will help you run your business as well. Here are just a few.
If you are following leads through to opportunities (deals) and to generating a customer and you can tell as well how your marketing efforts are working. If you are tracking each lead by marketing program, you will know which ones are producing sales and which ones are not.
If you are setting forecasts and then setting quotas for your sales reps, you can track how individual sales reps are performing against your forecast and their quota.
If you find that your salespeople are always losing sales and this is happening at certain points along the process, this might give you some insight to investigate. There might be issues with the process, and additional steps need to be added, or there might even be a problem of the need for additional sales training or a possible performance issue with a particular rep.
If you do not require tracking of information on your leads, prospects, opportunities, and customers by those in your organization, you could find that this information could walk out the door with an employee when they leave, and your investment could be lost.
This article focuses on sales but is just one area where it is vital to understand the workflow, processes, and measurements that need to be in place to know the pulse of your business. Generating revenue is the most important task within any business because, without revenue, there is not a business. Start setting up your sales processes, probability percentages, and tracking before you begin hiring salespeople into your organization. What you will find is that you will modify all of this over time as you uncover ways to increase your probability of closure.