You are in business in order to make money, and sales feeds 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 important that you understand where your leads are coming from and what the potential is for them closing. In addition, those that do not close you will want to have an understanding of why they didn’t close? Hopefully, this article will provide you some insight into how to create and track your sales pipeline for your business so that you are able to keep an eye on your profitability.
Develop Your Sales Process
Whether you document this or not, every business has a sales process. Typically there will be similarities within industries, but in many 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 in order to take a cold lead either to close whether that sale is won or lost. There is no right or wrong process; it is about what steps you find work the best for you and your sales people in being able to “win the sale.”. It is also important 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.
Developing Your Sales Funnel
Once your process steps are defined, you will want to assign percentages of probablity to close to each process step. This will provide you with 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 just starting out or are not currently tracking the progression of your sales today. The idea is about understanding how many leads you need to make the sales you have forecasted for your business and 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 get 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:
Depending on the business, some will build their sales process, probability percentages, and funnel based on what they feel are qualified leads, and others start at the lead phase because there is some qualification done prior such as web form which collects qualification information.
Tracking & Reporting
If you are performing the sales function or you only have 1 person responsible for sales within your business, this could be as easy as creating Excel spreadsheets to keep track of the information needed:
If you have several people responsible for sales within your organization, it is highly suggested that you 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 2 licenses and others that offer limited functionality. Here is a list of three which I would recommend for small businesses that only have one or two people looking after sales.
As your business grows, it is important 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 really have a good handle on your business, and this is when many businesses 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.
This article focuses on sales but is just one area where it is important 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 and need to add more steps in your sales process to in order to do this.
RK Fischer & Associates