Sales Funnel Basics for Entrepreneurs & Small Business Owners

Now that you’ve invested in social media ads, case studies, webinars, and even TV commercials, how are you going to manage all of your new leads? As a small business owner, you need to maximize every opportunity that comes your way. 

Before you talk to prospective customers, create your sales funnel. Sales funnels provide context for your salespeople so they can talk to the right prospects, stay on top of opportunities, and increase your conversion rate.

What is the Sales Funnel?

A sales funnel is a visualization of the stages your customer goes through during their buyer journey. It starts with their initial interest in your brand and ends after they have made their purchase. 

Historically, the sales funnel and the marketing funnel were considered two separate workflows. Today, most companies view the sales funnel as just one section of the overall marketing funnel.

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The marketing funnel has three sections:

  1. Top of Funnel (ToFu)
  2. Middle of Funnel (MoFu)
  3. Bottom of Funnel (BoFu)

The bottom of the funnel is where the sales funnel lives and can be broken down further into its own stages. At this point in the buyer journey, the prospect has responded to marketing content they’ve consumed and raised their hand to speak with a salesperson.

There are four stages to the sales funnel:

  1. Awareness
  2. Interest and consideration
  3. Desire and decision
  4. Action

What is a Sales Pipeline?

You’ll also hear the term “sales pipeline” in business-to-business (B2B) sales. While this term is often used interchangeably with sales funnel, there’s a slight difference. Your sales pipeline is actually a way to track each and every sales opportunity as it makes its way through the sales funnel. Each stage has specific prompts for your reps to follow. 

The stages come with a set of sales activities intended to move the deal along towards conversion. While every company has their own unique stages, you’ll typically see a variation of these six steps:  

  1. Prospecting
  2. Qualification
  3. Demo/meeting
  4. Proposal/negotiation
  5. Verbal commitment 
  6. Closed/won

B2B vs B2C Sales Funnels

Your company probably sells to either other businesses or directly to consumers. Some organizations do both, like internet service providers. Semgeeks created a helpful infographic that helps explain the differences between a B2B and a B2C sales funnel.

B2B Sales Funnel

B2B sales cycles take longer on average than B2C sales cycles. When a company is deciding on a purchase, different stakeholders have to confer and agree on what works best for everyone. Finance and legal will also get involved in contractual negotiations. The steps of the sales funnel will include:

Sales funnel awareness

Stage 1: Awareness

These buyers are making a purchase on behalf of their company and will start their journey by researching what solutions are available to solve their specific business problems.

Sales funnel consideration

Stage 2: Consideration

Once they have an idea of what type of solution they want, they can narrow down their search to a short list of vendors. Next steps include everything from researching and comparing features to product demos.

Sales funnel decision

Stage 3: Decision

Using data like ROI, time-to-deployment, and long term relationship potential, B2B buyers will review proposals and decide on a vendor.

Sales funnel action

Stage 4: Action

Pricing, quantities, and services are negotiated and both parties sign a contract.  You’ll want to focus on post-purchase now and fulfill all of the deliverables in the signed agreement.

B2C Sales Funnel

Consumer sales cycles move much faster and have less engagement with a sales rep. The entire purchase may be guided by marketing content alone. Purchases are based on personal desires, product deals, and emotional responses.

Sales funnel awareness

Stage 1: Awareness

Buyers become aware of your brand through traditional marketing, like TV and radio commercials, or through social media campaigns and ads.

Sales funnel interest

Stage 2: Interest

Buyers will research features, pricing, and deals while comparing options. Personal referrals and product reviews go a long way in establishing interest.

Sales funnel desire

Stage 3: Desire

Buyers put your product in their shopping cart. While the decision can happen fast, overall consumer purchases have a lower conversion rate.

Sales funnel action

Stage 4: Action

The consumer completes a purchase. For online sales, the deal isn’t actually done yet. From the customer’s viewpoint, the purchase is not complete until the product has been shipped and delivered into their hands. Quality delivery experiences result in repeat customers.

Sales Pipeline Stages

Remember, the sales funnel is part of the marketing funnel. That means that even though your prospect has entered your sales pipeline, that doesn’t mean your marketing efforts should stop. Salespeople play a key role, using the sales pipeline, in ensuring potential leads don’t go cold by providing them with the latest marketing content.

Stage 1: Prospecting

While marketing is funneling new leads into the top of the marketing funnel, sales reps are conducting their own targeted prospecting and keeping leads warm. Leads that are at the top of the sales funnel usually need more time before they are ready to buy.

According to Hubspot, 63% of people requesting information today about your products won’t purchase for at least three months. 20% of these people won’t purchase for over twelve months..

Stage 2: Qualification

After sales reps engage with a lead, they can determine if it’s a sales qualified lead (SQL). This means that the lead has a high chance of converting into a customer based on budget, product fit, timeline, and other qualifiers. 

Stage 3: Demo/Meeting

Depending on your product, you might need to demonstrate how it works. The point of the demo or meeting is to make sure you have a business use case. Before you leave this stage you need to know how much of your product or services they will need, how much they’ll need to spend, and a timeframe for completion.

Stage 4: Proposal/Negotiation

At this point, the sales rep will dive into the proposal process to demonstrate why this prospect should buy from you, rather than your competitor. You’ll need to show how purchasing and deploying your product now will result in success later.

Stage 5: Verbal Commitment

After you’ve negotiated your scope of work, agreed on pricing, and decided on a go-live date, the sales rep will seek a verbal agreement from the prospect. If there’s no verbal commitment then the deal is at risk. If there is a verbal commitment, the sales rep can close the sale.

Stage 6: Opportunity Won

The purchase is complete and the prospect has become a customer.

Bonus stage 7: Post purchase

Aside from making sure that the customer gets everything they paid for and expect from their agreement, quality customer service ensures that when they need to buy again they come to you first.

Sales Funnel Best Practices

  • Know your metrics and decide how you’ll measure success. The most common metrics include: number of leads, number of sales qualified leads, lead conversion rate, cost to acquire leads, total lifetime customer value, sales cycle duration, and average deal size.
  • Actively monitor your pipeline and keep an eye on each lead. Things can change fast. If you take too long to connect with a prospect, they may have already purchased from a competitor. 
  • Be clear on how you qualify leads. To avoid wasting time on the wrong prospects, identify your ideal customer profile based on company size, industry, budget, market demographic, etc. 
  • Use a customer relationship management (CRM) tool. CRMs store all of your customer data, leads, and sales opportunities in one place. They also have dashboards and visualizations of your sales pipeline and can be updated with opportunity notes. Check out our recommendation for the best CRM (and other tools too.)  
  • Make sure your entire sales organization follows the same process. If you have reps who don’t document their activity at each stage of their sales pipeline, you’re losing valuable information that can help sell more later. Build sales coaching into your forecasting reviews. 

Sales Funnel Takeaways

By visualizing your sales funnel, you’ll gain more insight than just which leads convert into sales. You’ll learn how long deals take to go through the funnel, which marketing content is most effective, and what your salespeople can do to improve their results. Due diligence now leads to more sales later. If these sales pipeline stages are too complex or rigid for you, don’t worry, they’re not set in stone. Feel free to adjust them to meet the needs of your business.

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A special high five to Tahera Ali Khan for her outstanding research and contributions to this article. We love working with and supporting like-minded entrepreneurs. Thank you Tahera! ❤️

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