Calculating Your Sales Funnel

What's in your pipeline?

The importance of knowing your numbers when it comes to your sales funnel cannot be underscored enough.

Funnel math shows the likely progression of deals through the various stages of your sales process based on your historical experience, combined with input from industry averages.

By being able to critically assess the number and dollar value of deals in your sales pipeline in each stage, you are setting yourself and your team up for success in hitting your targets.

One major issue many sales teams suffer from is focusing too much time and effort on bottom of the funnel activities (i.e. closing deals) while neglecting the top of the funnel.  This issue won’t impact the number of closed deals immediately, but it will eventually lead to a situation where your sales team is scrambling for leads with no new deals on the immediate horizon.

When calculating your funnel math, we offer the following words of guidance to ensure accuracy:

Reverse Engineer

Start from the end of your process (a closed deal) and walk backwards in your process.  Most companies are quite aware of their win/loss percentages and metrics revolving around the latter stages of the process far more than they might be able to pinpoint demand generation figures.

Remove the Outliers

You may have some very small and some very large customers that don’t represent a typical customer for your business.  Remove these outliers from your calculations in order to obtain a more accurate assessment of how a typical deal flows through the process.  Leaving in these outliers can drastically skew your numbers.

Be Conservative

When in doubt, BE CONSERVATIVE when preparing your sales funnel math.  If you think your close ratio for prospect proposals is around 1 in 3 or 1 in 4, use the 1 in 4 number to err on the conservative side.  If you end up closing at a higher rate, everyone will be pleased!

We don’t recommend you ‘sandbag’, but be conservative initially and you can always course correct later on when the data starts rolling in.

Funnel Math is Not Static

Your goal as a sales leader in preparing your funnel math should be to have it as accurate as possible to allow proper forecasting and resource planning.  The only way to achieve accuracy over the long term is constantly monitor and adjust your figures based on your actual experience.