This is a guest post by Dan Fisher. Dan is founder and managing director of the Menemsha Group, a provider of sales training and consulting services to the IT staffing industry. He blogs about IT staffing sales best practices. You can reach Dan on LinkedIn and Twitter.
A Sales Funnel, What’s That?
One of the things that continues to amaze me about the IT staffing and professional services industry is how infrequently organizations utilize a sales opportunity funnel. Of the employers I have worked for and clients I have consulted with over the years, I can only think of a handful who actually utilize a sales funnel. And even fewer who consistently utilize and review their sales opportunity funnel to manage their sales opportunities. This month I thought I would share with you how and why you should utilize a sales funnel.
Why Use A Sales Funnel?
It’s real simple. Do you want to make your number and hit your goals this year? Need I say more? For entertainment……..I will.
Hmmm. Let’s see. The industry has an average sales closure rate between 28% and 33%. If you worked for a major software or hardware provider, or say in the advertising or financial services industry, those numbers would put you in the unemployment line awfully quick.
Let me begin by saying that “putting job requirements in the system” is not the same as using a sales funnel to manage your opportunities. And putting job requirements on the white board in your office is also not an effective way to manage your sales opportunities.
I had a conversation with the President of a national IT staffing firm earlier this year and she shared with me that “order activity has been great but I’m not sure where the business is going to come from 3, 6, 9 months from now because our team is so focused on closing existing deals.“ While the order activity is great, her concern is with the top of their funnel-adding new qualified accounts and hiring managers who will generate the revenue over the coming 6 months.
I had another conversation with the General Manager of an IT Staffing firm who told me “we’ve been really happy with the order activity and the top of the funnel but the bottom of the funnel needs work. Our closing % is way too low and needs to improve.” In this case the GM is concerned with the bottom of the funnel and closing existing deals.
Managing The Health of Your Sales Funnel
The first step in building a sales opportunity funnel is defining the stages of the sales cycle. For the IT staffing industry (selling individual job orders), I simply define them as the following:
1. Suspects (all the companies in the world)
2. Prospects (Fully qualified, meet your target customer profile/buying criteria)
3. Client offered verbal commitment for next job requirement(s)
4. Received qualified job requirement (live) from client(s)
5. Client is actively interviewing candidates (face to face)
6. Client conducting background checks/reference checks
7. Client extends job offer
Certainly not “cutting edge.” But very simple and effective. Of course I could add additional “stages,” but I don’t want to over complicate things. The important thing here is to make sure that each completed phase signifies that we are one step closer to making the sale. Notice that each phase is characterized by a task that the client has to complete, not the tasks we complete. This is important to note.
The key to using a sales funnel is to recognize and understand the difference between a healthy pipeline and an unhealthy pipeline. A healthy pipeline should be full with prospects at every stage of the funnel. In other words, you should have multiple customers in each stage described above. If for example you have 25 prospects in the qualified stage, three in the received verbal commitment stage and one in the actively interviewing stage, you have work to do. The goal is to keep each stage full with customers.
Another key component to managing the sales funnel is that sales professionals need to be consistently adding new, qualified prospects to their pipeline on a daily basis. If you have the same 10 customers cycling through your pipeline (which is a common occurrence with sales reps), you have an unhealthy pipeline. You need to be working new customers through each stage.
Another good rule of thumb to live by is that your sales funnel should always be at least 2.5X’s your sales goal. Ideally, if you close one out of three deals, than your funnel should really by 3X’s your sales quota.
How To Get Started
Here are a few basic suggestions on how to get started with implementing and managing a sales opportunity funnel.
1. Figure out where you are today (your current state)
2. Determine where you want to be (your desired state/goal)
3. Develop your sales action plan
4. Execute your sales action plan
5. Measure your results using the sales opportunity funnel described here
By utilizing our IT Staffing Sales Plan you can take advantage of our sales activity goal planning worksheets and templates, our sales opportunity funnel, sales & marketing action plans and our sales opportunity scorecards to benchmark your opportunities and track your success.
A Final Thought
In the IT staffing and professional services industry sales professionals (managers, representatives, etc) tend to focus too much time on more, more, more. This mindset subconsciously forces us to put a higher value on getting more meetings and more job requirements than actually closing business. As a result we don’t spend enough time focusing on how to improve our overall sales effectiveness. For example, when is the last time you tried something new to open a new account or close a deal? What have you done this year to improve upon your sales skills? How are you a better sales person today than you were on January 1, 2011? In order to close a higher % of our opportunities we should focus on improving our sales effectiveness, not simply on more activity. Utilizing a sales funnel is certainly nothing new to the sales profession but if managed properly and consistently, it can be an effective way to improve your effectiveness and closure rate.