What is a sales funnel?

Most people who land on your website, see your ad or hear about your small business through word of mouth won’t buy the first time.

But what if there were an automated sales system that could help you consistently reach those leads, educate them on how you can solve their problem and then move them toward a sale?

That’s a sales funnel.

While there are many ways to build a sales funnel for your small business, they are all designed to attract potential customers and then nurture them along multiple touch points until they convert from casual browser into new customer.

The visual of a funnel illustrates the wide range of people who may become aware of your service or offering, and how that number narrows as some fall away while others engage with your brand and become customers.

View an image of a sales funnel on entrepreneur.com

Understand your audience

It might be tempting to cast a wide net with your sales funnel and try to appeal to everyone. But then, how will your customers know you’re speaking directly to them? It may seem counterintuitive, but it’s critical to prioritize narrowing your focus to be hyper-relevant to a core market.

This core market will become clear when you define your buyer persona. In other words, what attributes make up your ideal customer?

• What keeps them up at night?
• What are their aspirations?
• What are their pain points?
• Where do they shop?
• Where do they spend time online?

“The goal of your entire sale funnel and platform is to solve your customer's problem,” R.L. Adams writes for Entrepreneur. “When you know the problem, and you build content to draw them in, then offer them a product or service to solve their problem, that's when the real magic happens.”

You can build multiple sales funnels for multiple buyer personas, but each needs to focus on just one specific buyer persona — and one specific offering than can solve their problem.

The sales funnel stages

Just like any human relationship, nurturing a prospect takes time. Think of each phase of your marketing sales funnel as a deeper way to get to know each other and to show your prospect that your offer can, in fact, solve their problem.

1. Awareness

The top of the funnel represents awareness. This is when consumers first learn about your brand. Maybe their friend shared your social media post or your search engine optimization (SEO) helped them find you organically.

Those in the awareness phase usually aren’t warm leads quite yet. Creating marketing materials that speak to them and their specific pain points can pique their interest, guiding them down the funnel.

Incorporate a variety of marketing materials that can drive traffic to your site, including:

• Blog posts
• Social media
• Paid ads
• YouTube videos
• SEO

A common first step to move prospects past the awareness stage of the funnel is with a lead generator, such a free eBook in exchange for their email address. For any goal, include a clear and direct call to action (CTA) to tell your prospect how they can keep engaging with your brand, such as a “Download now” or “Book a discovery call” button.

2. Interest

Entering the mid-funnel, prospects in this stage want to know more about you. They are researching and comparing. At this point, it’s time to get more specific with targeted content, emails and case studies.

How can you help them gather the information they need to feel comfortable moving toward a decision?

Hopefully, you were able to earn their email address at the top of the funnel. Now, it’s time to build on the relationship with an automated email nurture campaign.

Again, include a direct CTA. Remember, the next action someone should take might seem obvious to you, but never assume it is to a potential customer. Should they download the free report? Go check their email for a confirmation? Watch the video?

At every stage of the funnel, tell your buyer exactly what they should do next.

3. Decision

Still mid-funnel, the prospect is really doing their homework now. Your nurture emails or sales calls spoke directly to their pain point, and you look like the solution to their problem. They’re very interested, but not quite convinced that they should part with their resources (time, money, reputation).

They need proof that your brand is an authority.

Demonstrating your authority is critical in moving them to action. On your landing page, in your sell sheets and in videos, incorporate proof points such as:

• Reviews
• Testimonials
• Favorable PR

Positive reviews and written or video testimonials for your small business go a long way toward demonstrating your authority and easing your prospect’s mind.

4. Action

You’ve reached the bottom of the sales funnel — where your hard-earned prospect finally takes action and converts into a customer.

What do they need to do now to become a customer? Said differently, what is the exact step they need to take so that you can solve their problem?

Do they need to buy now, schedule their appointment or join today? It’s critical to be direct and crystal clear with your CTA to close the sale.

5. Retention

Now that you have a first-time buyer, it’s time to turn them into a loyal customer and raving fan.

Continue to nurture the relationship with exclusive access, insider updates and early bird offers. You can also create content and deals around:

• Referral programs
• Webinars
• Events
• User-generated content on social media

Measure results and optimize

Now is not the time to “set it and forget it.” Gather data, measure results and set up KPIs (key performance indicators) to understand what to improve or eliminate altogether in the sales funnel.

“Over time you'll notice which steps along the way of your funnel need more attention to optimize,” Inc. suggests. “Don't try to fix and refine your funnel all in one massive move, instead pick one conversion point at a time and implement a wave of improvements to the funnel. This iterative approach is powerful because it both feels doable and fits in to the busy business day of you and your team.”

One important metric to track is lead velocity rate (LVR), which measures month-over-month growth in qualified leads. In the article “Sales funnel metrics you should be tracking in your SaaS startup,” author Elicia McDonald recommends setting your LVR about 15% above your revenue growth target.

You can calculate lead conversion from leads captured (awareness) through business won (action) as:

Conversion % = (Won deals / Leads) x 100

Consider breaking this equation down further to measure conversions through the key stages of the funnel. For example, evaluate how effectively your free lead generator is moving website visitors from the awareness stage to interest:

Lead to opportunity conversion % = (Opportunities created / Leads) x 100

Now that you’ve launched your funnel, tracking these KPIs can inform how you adjust your sales funnel tactics over time to improve sales performance and grow your business.

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