Picture this scenario.
You’re a Sales VP, meeting with your CEO for your quarterly sales team review. You’re feeling pretty good about your team’s performance this past quarter. Your Bookings report indicates that results over the past few months are all up and to the right. Your pipeline is steadily growing, your average sales cycle has decreased and you are confidently handling every probing inquisitive question that your CEO is throwing at you. Until this curveball:
“So, what are your sales funnel conversions at each stage?”
Crickets. A deafening silence. Your face is flushed with embarrassment, as you stutter and stammer through a non-answer. You can’t even imagine what your CEO must think about your inadequate sales funnel management. Has the floor opened up and swallowed you whole yet?
Meeting with your CEO to talk sales funnel stages and conversion rates doesn’t have to be this embarrassing. In fact, this should be a prime opportunity for you to demonstrate your data-driven mindset and your analytical sales management efforts. All you have to do is track your conversion rates between sales funnel stages and come to meetings with your CEO armed with that data and information.
What do sales funnel conversion rates mean?
Conversion rates between stages tell you what percentage of opportunities your reps are progressing from one stage to the next down the funnel. These rates are calculated based on the historical performances of your reps. While past performance is no guarantee of future results, it can provide a pretty accurate indicator. In the sales funnel report screenshot below, of the 314 opportunities in the technical fit stage, 247 convert to closing, for a conversion rate of 79%.
This information is valuable for several reasons. For starters, having as much historical data and information as possible leads to more accurate sales forecasts. If a Sales VP is trying to discern the likelihood of an opportunity in Stage 3 closing, he or she can simply refer to their historical conversion rates. Additionally, a quick glance at the sales funnel, with consistent indents and a well-maintained funnel stage, can provide an overview of whether the selling process is working or not.
Most importantly, knowing the conversion rates between sales funnel stages is critical for successful sales coaching. Looking at this report gives sales managers salient coaching points about a rep’s strengths and weaknesses at specific stages of the selling process.
Once managers have ascertained the stages where they are losing the most opportunities, they can go to work fixing those stages, or plugging leaks in the sales funnel. For example, if the team as a whole struggles to convert from the demo to trial stage, this should set off several warning signals in a manager’s head. Are reps struggling in their demo presentations? Are they not qualifying the right opportunities stringently enough in the first place? Answering the questions asked by this sales funnel report could lead to dramatically improved sales performances.
So don’t be caught off-guard by your CEO again. Next time he or she asks you about your sales funnel conversion rates, be prepared to give him not only the conversion percentages at each stage, but an explanation of why those results occurred and what you plan to do to increase those conversion rates. Your CEO will appreciate your analytical preparedness, and you will appreciate not being embarrassed in front of your boss.[contentblock id=18 img=html.png]