The Sales Funnel is a critical component of building an effective sales process that blueprints your prospects’ journey into becoming a customer, while also establishing critical feedback loops to improve your sales and marketing processes.

Sales funnels tend to vary in size and complexity from company to company, but they all adhere to a handful of integral components.

A robust and thoughtful sales funnel allows you to accurately monitor your sales efforts' health and success.

Sales Funnel for Startups Basics

Most sales funnels share a similar structure: a wide top of early stages such awareness and qualification and narrow bottom of later stages like evaluation and closing.

Funnels are pretty straightforward in concept, but get a bit more complicated when it comes to building and executing one for your organization from scratch.

There isn't a single blueprint or template for sales funnels that will be a perfect fit for any startup because of each particular product and sales cycle's nuances.

Sales and marketing funnels share these general sequences:

1. Awareness, prospection, or first contact: The prospect enters your funnel by being aware of your company, by being contacted by a representative, or is added to a list to be further qualified.
2. Qualification of the lead: Is this lead worthy of moving into the funnel's more resource-intensive latter stages? Does it make sense to use our salespeople's time to contact these people?
3. Presentation, demo: Showcasing your solution and how it solves the problem your customer is experiencing.
4. Evaluation, negotiation: The prospect considers the value proposition; the sales organization keeps their interest; the parties potentially negotiate deal and contract terms.
5. Close: The deal is closed and the contract is signed, or however your organization defines a close.

Now that we’ve got the general idea of a sales funnel, we get to the fun part of building your own funnel. This is a particularly involved process for startup founders, as this is an excellent opportunity to set the infrastructure to learn about your business, its customers, and plan for takeoff.

Step 1: Define Your Customers, Stages, and Goals

Before you engineer your funnel, you need to have a clear understanding of the key elements that matter most to your business, such as your customers, targets, and goals.

What are your ideal customer profiles and buyer personas[2] ? Roughly just three to four personas can represent up to 90% of your sales – who do we want to target to enter our funnel?

What constitutes a close? What unique considerations must you make about your business in order to consider a sale closed? Do we define a close as being a single, one-time purchase, an average order value (AOV) threshold, or minimum subscription duration, or something else entirely? For example, if we’re going through a loss-leader strategy with the goal of long-term customers with higher LTV, but we define our close as being a single purchase, we may have a “successful” sales process on the books, but ultimately be bleeding our company out of revenue.

What happens next after close? Understanding what happens next after a close can be a valuable way to build a feedback loop for your sales and marketing teams and retain a larger percentage of customers and expedite the building of a more fruitful long-term relationship with your customer success and account management teams.

Step 2: Build a Funnel Foundation

To take a page out of The Lean Startup, we need to build a Minimum Viable Funnel:

A Minimum Viable Funnel is the most basic version of a sales funnel that allows your organization to gather the maximum amount of validated learning about customers with the least amount of effort.

Similarly, we need to build something functional that we can test, tweak, and refine for higher conversion.

Start as simple as possible and add complexity only when it matters. The key is to understand how your customers interact with your sales offerings on the most simple level, and use the feedback that comes in to test how alterations impact the overall conversion rate.

Consider AIDA:

Awareness: How do we make prospects aware that they have a problem and that our solution will make their lives easier?

Interest: How can we further interest the prospect to be able to make an informed decision to purchase our product.

Decision: How can we streamline the decision-making process, preventing any high-qualified leads from “leaking” out of the funnel?

Action: How can we push the action to close at the most effective rate possible.

You can use something like a free basic funnel builder to create a quick prototype. Or, you can even practically automate the creation of a Minimum Viable Funnel using platforms such as ClickFunnels or Instabuilder. Simply grab one of the templates that make sense for your startups and add in any unique functionality.

Step 3: Execute, Measure, Iteration

It’s time to let the ship sail from port.

Your sales funnel generally starts where your marketing and prospection processes have generated enough leads to go down the funnel. Hence, it's important to coordinate with any marketing automation and analytics tools to get a dynamic and granular view of your leads.

No matter how effective your funnel is designed to be, sourcing inferior leads will be a waste of time and money. Use a CRM provider such as Hubspot, Salesforce, or Pipedrive to organize everything from contact details to sales reports and forecasts in a single, manageable area.

Try to validate your funnel works with volume – it will be much easier to judge the largest leaking points, bottlenecks, and successful funnel components with 1,000 prospects rather than 10.

Keep in mind that every section of the funnel can be iterated and improved upon!

Use data to support what works and what doesn’t. By looking at a sales funnel with significant data, you can find out:

• Your most effective marketing strategy and materials: Is there one landing page or eBook that brought you the best leads?
• How long it takes: How much time on average should we expect a prospect to go from the top of the funnel to the bottom?
• Your conversion rate, average order value, and other pertinent metrics: How much more should we be investing into this sales process?
• Where you’re losing people: What are the biggest leaks in your funnel? Do we need to improve our qualification process? Do we need to invest in sales training? Are we able to generate enough interest to actually close the deal? Why not?

You can track dozens of metrics just by looking at your sales funnel– but don’t get overwhelmed for your MVF, start simple.

Final Thoughts

The best and most effective sales reps tend to know their sales funnels like the back of their hand. They know how to address a prospect’s key needs, deliver the right messages at the right time, and how to replicate a successful process that accounts for objections.

A sales funnel is your opportunity to build an automated selling machine that closes deals, optimizes your sales talent, and scales your business to new heights.

Further, by monitoring and iterating your funnel, you can build excellent feedback loops to improve your sales efforts, the quality of leads generated by your marketing teams, and an intimate understanding of how your market receives your product value proposition.