In a recent conversation with the sales manager of a local firm I was very surprised to find out that they do not track their customers as they move through their sales funnel. To be fair they did have a "sort-of-record" of some recent leads, having recorded the recent leads as rows in a spreadsheet. Unfortunately the spreadsheet only covered the last couple of months, not their full sales history (many years worth) and it doesn’t provide them with the ability to easily generate reports about their sales.

So why is that a problem?

In my opinion there are two very good reasons to record the numbers relating to your sales funnel (or sales pipeline if you prefer). Firstly the numbers can be used as Key Performance Indicators (KPIs). KPIs are a way of measuring a businesses progress towards a goal or against a benchmark performance (which could be either a competitor or its own past performance). Lets consider an example.

If your sales process has several stages:

Prospect > Lead > Appointment > Proposal > Customer

Where a prospect is someone you believe might be interested in your offering, a lead is someone who has expressed an interest, an appointment is an agreement to meet and discuss a definite  requirement, a proposal is quote resulting from the appointment  and a customer is a signed order.

Now if you know that for every 100 prospects you contact you get 20 leads, of which 10 become appointments, resulting in 5 proposals which lead to 2 sales you have some metrics for your sales funnel. You can now compare these to other businesses in your industry to see how you compare. You can also use them to compare your past and present performance. For example if you suddenly find you’re only getting half as many customers you can look at the numbers to see what has change. If your metrics tell you it’s now taking 200 prospects to generate the same 20 leads then you instantly know where to focus your attention – perhaps in this case your marketing is now generating less qualified prospects. Alternately if your ratio of proposals has dropped from 5:2 to 10:1 you may need to examine your price, and so on. It’s not just a matter of fixing problems either, even in the good times you can use the numbers to continually tweak your sales process looking to improve the ratios at every stage to maximise sales. This information can also be used to compare salesmen allowing a sales manager to determine the best and worst by documenting how the best salesmen work and then to training the worst salesmen on what works best.

The second reason to record the numbers in planning. If you don’t know your numbers it’s going to be hard, if not impossible to plan for future orders. You won’t know how much stock is required, how much cash is required to purchase the stock, what staffing levels will be needed to fulfil the orders or what the future cash flows of the business are likely to be. Taking it even further you can include details of your revenue and marketing and use that to determine the ROI of every penny spent on marketing or working in reverse you can determine what marketing budget would be required to achieve a target level of sales.

So, do you know your numbers?

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