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Performance Management Friday — Funnel Balance

by David Brock on September 1st, 2011

On previous Friday’s, I’ve written about Ideal Pipeline Volume, Flow/Velocity, and Sales Cycle.  All are important to making sure you will make your numbers and perform as well as possible.  Another related area to assess is Funnel Balance.

Simply, Funnel Balance is having an appropriate distribution of opportunities at all stages of the sales cycle.  Another way people may look at Funnel Balance is when they refer to the shape of the funnel.  Funnel Balance enables us to balance the short term, tactical, with the longer term.

As sales people, we are focused on making our numbers–today, this week, this month, this quarter.  We tend to spend a lot of our time on opportunities that are nearing closing–and they probably demand a lot of our time.  The problem is if we spend our time exclusively on those opportunities, pretty soon they are all won or lost, then we look and our funnel or pipeline is empty.

To have a sustained flow of business, we have to invest time in all stages of the funnel/pipeline.  We have to continually be prospecting—even though we are busy closing today’s opportunities, we can’t forget to be looking for tomorrow’s.  We have to qualify those, move them into discovery, make sure they are moving appropriately through the funnel—this is what we spoke about when we examined funnel flow/velocity.

Without paying attention to funnel balance, we will go through constant states of boom and bust.  We find ourselves working on closing deals, our pipelines empty, then we spend all our time prospecting, finding new deals, then we repeat the same cycles again.  During those times of boom and bust, we may find during the boom times, we are heroes to our managers and organizations, then we move to be the problem performer–perhaps even on probation.

Great sales performers make sure they have balanced funnels.  They invest time in all phases of the sales cycle, continuing to prospect, continuing to qualify, and so forth.  In our discussion of Flow/Velocity, we spoke of “stuck deals,”  recognizing that things are stuck when they are at a certain stage much longer than normal.  We can, likewise, determine the number of opportunities we should have at each stage of the funnel–how many we typically should be prospecting, how many in qualifying, how many in discovery and so on. 

Typically there is leakage in the funnel–that’s why it’s shaped as a funnel.  We may start with a certain number of qualified opportunities–but through the selling process, we choose to abandon certain deals, or they abandon us.  We can determine conversion rates (these are similar to win rates).  We can look at the percent of prospects we ultimately qualify, those that we qualify that we move into discovery, those that we further move into proposal.  Once we determine the conversion rates (or leakage rates), we can then calculate the ideal number of opportunities we need at each level to have a balanced funnel–the process is the same as how we calculated ideal pipeline volume, but using stage to stage conversion rates, rather than winning rate.  This will tell you the ideal number of deals in qualification, the ideal number in discovery, and so forth.

There are a couple of other dimensions to funnel balance.  We may want to look at the types of opportunities that we are pursuing, having a balance of the types of opportunities we pursue.  For example, we may want to look at the mix of opportunities from brand new customers and repeat business from current customers.  Many sales people have a goal for new customer acquisition–so this mix in the funnel is critical to track.

Sometimes we have multiple product lines we are responsible to sell, and our managers measure us on balanced performance across the product line.  We could be in trouble if we are making our numbers, but doing it all in one product area, rather than having success across multiple product areas.  So we may want to look at mix of opportunities based on product/opportunity types.  Likewise, we may want to look at balance across our territories—we can’t just focus on one part of our territory, ignoring the others.

Funnel balance is important.  It has many dimensions, the best sales professionals look at maintaining balanced and healthy funnels as much as possible.  They avoid tunnel visions–whether it’s on just closing deals, selling one type of customer, focusing on one product line, or whatever.  They know they have to spread the business around, so they actively seek opportunities of all types to have a balanced approach to their pipelines and in managing their territories.

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