Sales Funnel Bible — Chapter 24

Sales funnels are the most important part of your business. Get an early glimpse into how they can help your business by reading this early draft excerpted from my Sales Funnel Bible book.

Early draft of Aaron Hoos' book Sales Funnel Bible

Chapter 24. How proper measurement in your sales funnel solves your inventory problem

It doesn’t matter whether you sell products or services, you have an inventory. If you sell products, your inventory is your product, of course. If you sell services, your inventory is (usually) your time.

An inventory is a limited quantity of something that you sell. Businesses need to maintain their inventory at optimum levels. Carry too much inventory and you won’t have enough cash flow to support that amount of inventory. Carry too little inventory and you risk angering your customers by running out.

There is an optimum level of inventory for each business. Unfortunately, many businesses (especially new businesses, small businesses, and businesses that sell services) struggle with finding the right levels of inventory. There are a few reasons for this:

  • The business lacks the history that would inform them of buying trends
  • The business owner doesn’t understand the importance of proper inventory management
  • The business owner perceives inventory management as a time-consuming task that should be subordinate to marketing and sales activities
  • The service-providing business doesn’t perceive their time as a type of inventory
  • This is the biggest reason: There is a conceptual disconnect between the sales funnel and the inventory

Fortunately, if you master your sales funnel, you master your inventory as well. That’s because a well-built sales funnel can inform you of your inventory needs well ahead of when you need it.

Every sales funnel has its own tempo or rhythm – the average amount of time a typical person takes to move through the sales funnel. They might be a day on one step or a couple minutes on another step or a few weeks on another step. The total amount of time that these people spend in your sales funnel is the duration of your sales funnel. And you’ll notice that each step will have its own duration as well.

Knowing this information helps you to manage your inventory – you’ll have a better idea of how many people will be purchasing from you in the future if you are paying attention to the number of people at each step.

Here’s an example from my own business: When I was a freelance writer, I would sometimes have more work than I could handle and I would sometimes have no work at all. It was a boom/bust business, which isn’t that unusual for freelance service providers. Sometimes I was scrambling to work 24 hours a day to get through all my work; other times I was scrambling to find work! But then I started tracking the people in my sales funnel, paying attention to how long it took them to go through my funnel. Here are some of my findings. (If you’re a service provider like I was, don’t just pull over these numbers because they might not apply for you. I’m just providing them as an example in my own business, and these numbers are now a few years old).

  • I submitted proposals on a lot of projects that were posted online (at a freelance job board I used). I found that my most promising prospects were those who had posted their project within the past week. In fact, the closer I bid to their “posting” day, the more likely I got the job.
  • I also found that it took an average of 1 week from the day I submitted the proposal to hear back from the potential client. This time lessened if I posted closer to the posting day, and it lessened further if I followed-up with a friendly email. Usually the next step was to arrange a phone call so we could chat in-depth about their project and they would make the decision then whether or not to hire me.
  • It usually took 1-3 days to work out a time to call. The sooner the call, the better.
  • If I could close the deal on the phone, I could usually start the project within the week and, depending on the project, finish it anywhere from a day to a month later.
  • Final payment usually followed up a week after the project was finished and, by the time the payment was processed (by Paypal or my bank) it was another week by the time the cash would be in my hands.

So my sales funnel – from initial meeting to final payment – was about 2.5 to 3.5 weeks long for smaller projects and about a month and a half for larger projects.

This was very helpful to my business: I could ramp up smaller or larger projects, depending on my availability, and I could safely schedule projects for when I wanted to work. If I knew a week-long vacation was coming up, I could submit several proposals, knowing that I would probably have some responses by the time I returned from my vacation a week later. If I knew I would be really busy for a few weeks, I would ease up on filling my funnel but as soon as I was about a week or two away from running out of work, I could ramp up my marketing again.

What was true in my service-based business is true for all businesses, whether you sell products or services. The average time it takes for your typical target market to move through your sales funnel gives you “triggers” that alert you to inventory needs. A spike in new people “2 weeks away” in your sales funnel means that you need to have more inventory two weeks from now. A drop in new people “3 weeks away” means that you don’t need to stock up on inventory as much as you have been.

This chapter is excerpted from an early draft of my book. Comments and constructive criticisms are welcome. Please be aware that the chapter content and chapter order may change by publication.

Published by Aaron Hoos

Aaron Hoos is a writer, strategist, and investor who builds and optimizes profitable sales funnels. He is the author of The Sales Funnel Bible and other books.

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