Sales Funnel Bible — Chapter 26

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 26: Gain an understanding of your ratios

In an earlier chapter I talked about the importance of metrics and tracking in your sales funnel. I also hinted that an important way to understand some of these metrics is to compare the numbers on two steps in a ratio or percentage.
Salespeople do this all the time by quoting their closing ratio. Savvy marketers also understand ratios (such as click-through percentages, for example).

In building your sales funnel, you should strive to get some rough numbers for each step and then compare them to the first step in your sales funnel, the last step in your sales funnel (i.e. the point where they become customers), to the previous step in your sales funnel and to the next step in your sales funnel. Yeah, that sounds like a lot but it’s not as bad as it sounds.

Let’s take a theoretical 5-step sales funnel with some really easy numbers to illustrate:

  • 10,000 people enter your sales funnel
  • 1,000 people progress from the above step to this step
  • 100 people progress from the above step to this step
  • 10 people progress from the above step to this step
  • 1 person becomes your customer

Using these numbers, you can make some observations:

  • In each step of our sales funnel, we move 10% of the people forward.
  • The ratio of initial people entering the sales funnels (often defined as leads) to people who become customers is 10,000:1.
  • The ratio of people in the second-last step of the sales funnel (often defined as prospects) to people who become customers is 10:1.

The numbers you find for your business will definitely be different. (Specifically, you might have very different rates from one step to the next instead of the over-simplified 10% that I’ve used as an example).

Knowing these numbers is helpful. It gives you a window into how people are moving through your sales funnel, and the effectiveness of each step. It helps you to accurately predict how your business will do in the coming days, weeks, and months. And when you monitor these numbers, you can quickly see if something moves off of the standard. I’ve already covered a lot of these concepts in an earlier chapter.

But what I really like about these numbers is that it can help you to direct your marketing.

Most business owners I meet are at a loss as to what they should do next in their marketing. There are an almost unlimited number of options for marketing and very little direction in how to use them. But smart business owners who focus first on their sales funnel can use the information they get from their sales funnel ratios to help them decide what kind of marketing channels to adopt, and then measure how those new channels work.

Rather than using any and every marketing channel to dump more people into your sales funnel, you should instead look at your marketing channel options and think about how you can use each one to improve the ratios in your sales funnel, thus sending more people through to the next step.

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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