Sales Funnel

Sales, Negotiating, and Decision-Making Booklet

by Tom Gray | on Aug 12, 2014 |  Comments

Selling, negotiating, and deciding are some of the hardest tasks for the small business owner. Now there’s a new 60 page PDF booklet with 16 articles covering

  • How to size your sales effort
  • Attract new distributors
  • Make and manage sales
  • Negotiate
  • Make a decision

What’s the Payoff?

Use this booklet to learn

  • How to use the Sales Funnel to “size” the sales effort
  • Distributor considerations in deciding to take on a supplier
  • A few sales techniques
  • Sales compensation techniques vs. behavior
  • Sales support techniques
  • Negotiating techniques
  • Decision-making techniques

Order the low-cost PDF download at Purchase Books | BUSINESS TECHNIQUES BOOKS

Get Some Training Too!

For many of us, the written word is not enough. We want to be shown, then practice, and then chat in person about how to do it better. To meet these needs, Tom Gray created Business Techniques Institute – Chicagoland, a group of 12 face-to-face half-day workshops, partnering with local organizations like Small Business Development Centers, SCORE, and local colleges.

Each workshop provides slides and a workbook to apply the techniques to your own business problem during the workshop, and uses one of the booklets as its text.

Small business owners and managers can attend one workshop or several, depending on the topics they want to explore and the problems they seek to solve. The first series begins in September at the College of DuPage Center for Entrepreneurship, 2525 Cabot Drive, Suite 201, Lisle, Illinois. The second series begins two weeks later at the Illinois SBDC at Governors State University, 1 University Parkway, Room C3300, University Park, Illinois.

The Sales, Negotiating, and Decision-Making workshop is scheduled for Wednesday, October 8 at COD, and Tuesday October 21 at GSU, 8:30 AM to 12:30 PM. To register, visit Business Techniques Institute | Get Better @ Business

Sample Session: Attend “Pricing Right” on August 20

Get a taste of Tom Gray’s small business techniques and his workshop style by attending “Pricing Right” on August 20 at the College of DuPage Center for Entrepreneurship, 2525 Cabot Drive, Lisle, Illinois. Register by calling the Center at 630-942-2600.

The session covers pricing principles, practical techniques for “thinking through” your price decisions, and some pricing techniques such as differentiated pricing, revenue models, shop rates, and promotions. Workbook practice is not provided in this one-hour session, but one-on-one follow-up sessions are available with Tom or the local Small Business Development Center staff.

Why Not Try It Out?

Want to grow your business? Do you know how? Is there something you could learn about forecasting the sales effort required, attract distributors, selling and managing sales, negotiating, and decision-making, or do you know all that already? Why not invest in a booklet and a workshop? For a few dollars and hours, your business could take off to a new level!

Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business, certified as a Turnaround Professional (CTP), Business Development Advisor, and SCORE Mentor. He can be reached at 630-512-0406 or tgray@tom-gray.com. See www.tom-gray.com.  For Tom’s new book Business Techniques for Growth: More Tools for Small Business Success, and its predecessor Business Techniques in Troubled Times: A Toolbox for Small Business Success, see http://www.businesstechniquesbooks.com/

 

 

Sales Funnel: A Realistic View of the Time and Effort in the Sales Process

by Tom Gray | on Feb 20, 2012 |  Comments

The “Sales Funnel” is a classic technique to understand the time and effort involved in making a sale. It’s a technique to do a “reality test” on your sales forecast, your estimate of revenue timing for the cash flow forecast, and your estimate of the number of salespeople required.

The sales funnel is a ladder of the steps involved in making a sale, from lead generation through the contact, the proposal, negotiation, and closing the sale. Like a funnel, its shape is an upside-down pyramid with the widest layer at the top.

The basic idea is that for each step you have a success rate less than 100% in moving the prospect on to the next step, so by the end of the funnel your sales are only a fraction of the number of leads you started out to qualify and contact.

For a good graphic of the funnel, see http://marketingartfully.com/2011/03/15/small-business-lead-generating-sales-funnel/

  • Leads are opportunities (100%)
    • Sales calls make contact (10% of above)
      • Follow-Up with Proposal (20% of sales calls)
        • Conversion overcomes obstacles (75% of proposals)
          • Sale contract (67% of conversions)

1. Using the Sales Funnel to Forecast Sales

Start by estimating the “success rate” from step to step. You can fine-tune using experience once you have some! For example,

  • 10% of leads are qualified and contacted;
  • 20% of those contacts receive a proposal (“follow-up”);
  • 50% of the proposals become closed sales.
  • The other 50% fall out during the conversion or negotiation step.

Second, estimate how many leads you expect in the time period. Then work the funnel percentages, and decide if the outcome is reasonable. If not, modify the leads or the percentages.

Finally, you estimate average revenue per sale. Now you can make a reasonable sales forecast – not just dollars, but a forecast based on behavior, so it is more realistic.

2. Using the Sales Funnel to Forecast Revenue Timing for Cash Flow

Cash flow is the life of a small business:  “Cash is King.” For many businesses, cash is not received until weeks after the sale is closed. In the meantime, you need extra cash, called “working capital,” to buy supplies, pay people, and otherwise run the business. If you lack this cash, your business can go under. So every business must make it a priority to understand its cash flow.

To figure revenue timing, a critical part of cash flow, you need to estimate the duration of the sales process from lead to close, and then the duration of the production/invoice/billing process.

For example, if it takes 2 months to make a sale, one month to produce, and 30 days to receive payment, you can expect cash to arrive 2 months after closing a sale, and 4 months after you start the selling process. See the next article for a sample.

3. Using the Sales Funnel to Estimate Sales Force Size

The third way to use the Sales Funnel is to forecast how much “people time” you need to actually make the sales you are forecasting.

Estimate  salesperson time required for each sales funnel activity:

  • time spent to qualify the average lead
  • time per contact attempt
  • number of contact attempts per lead
  • time spent in an actual contact (include travel)
  • time to create a proposal
  • time to negotiate terms
  • time to close the sale
  • follow-up time by salesperson to ensure customer is satisfied.

Then double this, because the literature shows that salespeople spend about half their time selling and half in administration.

Now you can see how much sales time you need to meet your sales target. Do you personally have that much time available for selling? If not, how many salespeople will be needed and what will they cost, or how can you change your estimates to match targets to resources? This is a crucial test of the realism in your business plan.

See the next article for some examples of using the Sales Funnel for sales and revenue forecasting, revenue timing for cash flow forecasting, and planning the size of your sales force.

Have you tried using the Sales Funnel? Was it helpful? Did you find other techniques to help our readers?


Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), a Certified Business Development Advisor, and a Certified SCORE Mentor. He can be reached at 630-512-0406 or tgray@tom-gray.com. See www.tom-gray.com


 

 

 


 

 

 

 

Using the Sales Funnel

by Tom Gray | on Feb 20, 2012 |  Comments

In the previous article we defined the Sales Funnel as a tool for forecasting sales and revenue, cash flow forecasting, and planning the size of your sales force. See Sales Funnel. This article provides some examples for practice.

Example One: Going up the pyramid to see if market is big enough and number of leads needed

 

  Year 1 Year 2
Revenue (Cash) Goal $50,000 $150,000
Average Sale $2,000 $2,000
Sales Needed 25 75
Success Proposal to Sale (50%) 50 150
Success Contact to Proposal (20%) 250 750
Success Lead to Contact (10%) (7500 vs. market size?) 2500 7500

 

Example 2: Sales/Cash cycle for first 25 sales

Sales Cycle: 3 mo. to sell, 1 mo. to perform, 1 mo. to pay Mo.7 8 9 10 11 12
Sales 2 4 8 11 13 15
Revenue Booked After Job Completed/Invoiced (avg. sale is $2000)   4K 8K 16K 22K 26K
Cash Received 1 month after invoice; 2 months post-sale     4K 8K 16K 22K
Total Cash           50K

Note: you need enough start-up cash to support your business expenses until cash begins to come in.

Example 3: Salesperson Time Required in Year 2 of Example 1

Task Time for Each # to Do Total Hours
Attempt to Contact Lead 5 minutes 7500 37,500 mins / 60 = 625
Make Contact 1 hour 750 (10% of leads) 750
Write Proposal 2 hours 150 (20% of contacts) 300
Negotiate 4 hours 100 (67% of proposals) 400
Close Sale 4 hours 75 (50% of proposals) 300
Total Time     2375
Your time @ 20hrs/wk     1000Shortage = 1375

 

Example 3 shows that your sales forecast is unrealistic unless you add one or two salespeople, or you spend more than 20 hours per week selling. If you don’t, your revenue flow will be less than half your forecast, and you will run out of cash before the business can turn a profit. “Don’t be this guy!”

The Sales Funnel is a simple tool for forecasting revenue amount, revenue timing for cash flow, and the size of your sales force by analyzing each of the sales steps for your business. For a good graphic of the funnel, see http://marketingartfully.com.

Questions? Call or email Tom Gray.

Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), a Certified Business Development Advisor, and a Certified SCORE Mentor. He can be reached at 630-512-0406 or tgray@tom-gray.com. See www.tom-gray.com