The 5 steps to identify your sales funnel… This is the starting point of a more profitable business!

I frequently assert that your sales funnel is the most important asset in your business. It’s the structure around which you build your business, it’s the pathway that prospective buyers follow on their way to giving you money, and it’s a strategic tool you can use to grow your business.

The starting point for you to master your sales funnel and take control of your business is to draw out your sales funnel. Draw it out, add notes to yourself, and the document becomes the useful tool you can refer to daily in your business to help you make decisions and work on your business.

Here’s how to draw out your sales funnel…


You need a narrowly defined target market — one that is large enough to to market to, has enough money to pay you for your product or service, but small enough that you can establish yourself as an expert. (Note: “Everyone” is NOT your target market). Take some time to research your target market and learn about them. When researching, dig beyond the point where your target market’s needs intersect with your solution. Learn everything you can about your target market and you’ll uncover new ways to market to them and new opportunities to add value. To get you started, use this tool I created: 55 questions to answer when defining your sales funnel’s target market.


People buy a product or service to solve a problem or fulfill a need. They never rush out and buy the very first solution the millisecond they discover their problem or need. There’s a progression in their thinking:

  1. At first they discover their problem or need.
  2. Then they realize they have to do something about it.
  3. Then they seek out some solutions.
  4. Then they weigh those their solution options.
  5. Then they decide whether the solutions are worth the cost.
  6. Then they buy.

Those steps I’ve just outlined are an over-simplification of the “evolution of mindsets” that people go through before buying from you. For small purchases (like an impulse item in a grocery store check-out line), these evolutions are measured in seconds. For major purchases (like a house), these evolutions are measured in weeks, months, or sometimes even years. After researching your target market, write out the mindset evolutions that they are most likely going through. (Use the list above as a starting point but then make adjustments according to your knowledge of your target market).


Once you know what your target market is thinking on their way to buying from you, you can craft marketing and sales messages around those thought processes with the goal of moving them from one step to the next. Activities are comprised of two things: The message you want to communicate and the action you want your target market to take.

Pro tip: Don’t try to get your target market to move from their current mindset to the point of sale. Just get them to move to the next mindset in their mindset evolution.


Once you know who your target market is, you know where they like to spend their time and attention. Once you know what mindsets they have, you know what it takes to sell to them. Now you can use this information to put your sales funnel to work. Create marketing and sales messages (see Outline the Activities, above), and then put those messages in the channels (media) where your target market will notice them.


Your entire sales funnel “points” to a sale. And that can look very different from one business to another. Some businesses charge up-front and then deliver the product or service; some businesses deliver first and then charge. And there are other paygate/delivery configurations as well. (Check out my blog post Sales funnel paygates for more information and for a list of other blog posts on this topic). Select a paygate and delivery model that will encourage the most purchases from your customers but will also ensure consistent cash flow and manageable accounts receivables for you.


This really simple step-by-step method to crafting your sales funnel is useful for new and existing businesses that need to optimize performance and improve profitability. It’s also just a starting point. Check out some of my other blog posts about sales funnels.

Small business strategy question: How do you define a customer?

In a previous blog post I listed 100 small business strategy questions that entrepreneurs need to ask and answer to grow their businesses. Then I’ve been occasionally examining each question and providing tips and advice on how to answer that question and then apply the answer to your business.

The small business strategy question I’m looking at today is: How do you define a customer?

The first part of the answer to this question has to do with the synonym you use in place of the word “customer”. I use the word “customer” to refer to anyone who buys when you’re selling but not every business uses the word “customer”. They might use words like “client”, “buyer”, “subscriber”, “patient”, “member”… or something even more specific (like “seller” for real estate clients who sell their homes or “insured” for someone who has purchased insurance). But for my purposes in this blog post, I’m going to use the word “customer” to refer to the group of people you sell to, regardless of what you call them in your day-to-day business.

That’s not the only way we define a customer. We also define a customer based on what commitments they make. Someone who subscribes to our free newsletter might not be a customer. But they are a subscriber. To some businesses, a subscriber is a customer; to other businesses, a subscriber is not a customer.

And, we define a customer based on when they become customers in your sales funnel will help you define your customer. For example, they might be a prospect until they commit to buying from you, even if they don’t pay until after they’ve received service. But that’s not the case for every business. Some businesses don’t have customers until that customer hands over cash.

It’s kind of a fuzzy line: When someone goes to McDonald’s, are they a customer when they drive into the parking lot or when they walk in the door or when they stand in line or when they order or when they pay their money or when they get their food?


You might be wondering why it matters how you define a customer, and why you should go through all this trouble for something that is apparently a very fuzzy definition.

There are a few reasons why it matters: Knowing who your customers are (and when they become customers)…

  • … helps you to market more effectively by shaping your marketing and sales efforts toward the value that the paying customer will receive (as opposed to some general value that people can get for free from you). This protects you from doing all that work to drive people to your blog or email newsletter only to have them think that you have given away everything of value and there is nothing worth paying for.
  • … helps you to work toward one specific goal in your sales funnel. (And, if you have other people on your team, you can align that goal so you’re all working together toward the same thing).
  • … helps you to measure your marketing and sales success so you can test the effectiveness of your marketing and sales efforts and improve for greater profitability.
  • … helps you provide better customer service by helping people who are actually customers (versus those who might be committed to your business but not a paying customer.
  • … helps you to innovate with simple things in your sales funnel like adjusting your paygate or delivery times

All businesses have customers but businesses define those customers differently. How do you define yours?

Weekly Sales Funnel Challenge: Wrap-up

This week, I challenged you to think about where you placed your paygates in your business. Usually you’ll ask for money before, during, or after delivery of your product or service and I suggested that you experiment with a different placement of the paygate.

How did you do? This one is a risky one and I wouldn’t be surprised if far fewer readers did this challenge. But I hope you did participate because it can be helpful. I recently tried this exact thing and found I reduced my accounts receivables by asking for some money up-front and some throughout the service delivery, in stages.

Even if you don’t completely switch over your paygates to a different method, I’m sure you’ll have found this exercise helpful to know why you are using your specific paygates.

Weekly Sales Funnel Challenge: Experiment with paygates

The Weekly Sales Funnel Challenge is a week-long challenge for business owners to focus on a specific aspect of their sales funnel for one week. It’s a fun way to keep you focused on one of the most important parts of your business. A new Weekly Sales Funnel Challenge is published every Monday and a wrap-up post is published every Friday.
Weekly Sales Funnel Challenge

A paygate is where you place the transaction part of your sale. A paygate might fall before you deliver your product or service, after you deliver your product or service, or while you deliver your product or service (or some combination of those three).

Right now, you have at least one paygate style that has worked for you. But do you know why you chose that particular paygate? Why do you require money before handing over your products? Why do you deliver service before asking for money? What risks does each one create?

For this week’s challenge, I’d like you to experiment with a different paygate. Maybe ask for money after you deliver the product. Or ask for money before you deliver the service. You don’t have to do it for every customer, but try it for a couple of customers and see what happens.

Good luck!

Just read: ‘The Newsonomics of The New York Times’ pay fence’ at Nieman Journalism Lab

Newspapers are struggling to survive in an age where free and rapid information-sharing threatens the value newspapers once had. Many people (myself included) wonder why we should pay for local news delivered the day after it happens when we can get far more current (and varied) views as it happens.

This self-identity crisis is even more apparent because newspapers charge money for a subscription to have the news delivered to your house the next day… but they post it for free online for everyone to see as it gets written. In other words, the newspaper industry is an industry where people pay to get inferior service compared to those who don’t pay!

Recently, the New York Times introduced (more accurately: re-introduced) a paygate where internet users can view up to 20 articles per month for free but will have to pay after that. Read the Nieman Journalism Lab article about it here: The Newsonomics of The New York Times’ pay fence » Nieman Journalism Lab » Pushing to the Future of Journalism. In particular, pay attention to the seven tests that the writer outlines, which will determine the success of this paygate attempt and will guide the way for the NYT to survive (and even thrive) in the future.

You might want to also read a blog post I wrote last year about my thoughts on how newspapers can survive in today’s marketplace.