Sales Funnel vs Sales Forecasting

Sales Funnel
Sales funnel looks at the overall health of all the deals in the pipeline. The forecast maps customer’s buying cycle to specific business periods. This helps predict what business will close in the specific window of time. A sales funnel is a good leading indicator of medium to long-term health of sales efforts. It dampens wild unpredicted gyrations in forecasting.Sales funnel management helps estimate the probability that enough opportunities are moving towards closure. This allows the organization to keep revenue flowing for a period of time. Sales funnel opportunities estimates are compared against sales target and historical performance and conversion ratios. This helps to determine whether there is enough business in the intermediate term.

A sales funnel is a visual representation of the steps required to sell your products or services. A sales funnel should reveal how many prospects you have in each stage of your sales cycle, and also detail your conversion rates for each stage.




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Stages in the sales funnel (5 Stages). (1-3 Stages)
Lead (Suspect): A lead is someone you have not spoken to. But if a lead appears similar in profile to your target customer, you may decide that they are worth pursuing. Track your most fruitful sources of leads.

Prospect: A prospect has confirmed interest in your offering. You have had a conversation, provided the person with information about what you do, and both of you have agreed to a next step in the sales process.

Qualified prospect: Qualification is the most critical and demanding stage of the sales funnel. In the qualification process, you verify that the prospect has a need for your product, that the prospect sees value in your offering, that there is sufficient budget for a deal, that you have access to the decision-maker, and that there is an agreed-upon timeline for the sales process. The qualification process can be complex and lengthy, and can be managed with a Sales Call Talk Track and stakeholder management chart. ... More  

The sales funnel visually describes the sales process from initial contact to final sale. It uses the metaphor of a leaky funnel, into which a seller can “drop” sales opportunities. At some point, sales opportunities are removed from the funnel because potential customers become uninterested or you determine their lack of fit. The stages of a sales process refer to a potential customer’s degree of readiness to commit to a deal (from the seller’s perspective). Or put in a different way, readiness may be seen as the probability of the sale taking place.   

As a sales opportunity moves down the funnel, time to closing decreases and the probability of the sale occurring increases. The sales funnel metaphor enables you to analyze and manage a portfolio of sales opportunities. ... More  

There are 3 key metrics that can measure the health of your funnel:

■Number of opportunities in your funnel (#). You should also know the rate at which you are acquiring these opportunities – or arrival rate.
■The total possible value of every deal in your funnel – or funnel value. ($)
■Average amount of time prospects are in the sales funnel until they are acquired - or flow rate (days).  

Sales Forecasting
Sales Forecasting is the process of estimating what your business’s sales are going to be in the future. It is an integral part of business management. Without a solid idea of what your future sales are going to be, you can’t manage your inventory or your cash flow or plan for growth. The purpose of sales forecasting is to provide information that you can use to make intelligent business decisions. 

Sales forecasting inaccuracies can result from over-eager expectations as reporting periods near an end. Also, a lack of understanding of where opportunities are in the sales process leads to inaccuracies. Apply sound process, organization, management and analytic's to ensure predictable and accurate forecasts.

To the majority of organizations the most relevant measure is gross dollars that are projected to close in the next business period. Other forecast metrics include closed deals, recognized revenue, profit, and units sold. Decide which metric, or combination of forecast metrics work best for your company to create an accurate and impaction forecast.

Sales funnel and sales forecasting combined with analytic's and technology will help your company achieve improved sales performance, better business visibility, and better team management.  

Sales Funnel Management
Sales funnel management helps estimate the probability that enough opportunities are moving towards closure. This allows the organization to keep revenue flowing for a period of time. Sales funnel opportunities estimates are compared against sales target and historical performance and conversion ratios. This helps to determine whether there is enough business in the intermediate term. 

A sales funnel provides a clear view of the opportunities currently available to your sales team. With proper sales funnel management we can create an accurate map that details how you can improve your chances of making or breaking your revenue goals.

Leaky Funnel -
If a sales opportunity does not move down the funnel, the sale will not happen and the opportunity should be removed, hence the “leaky” funnel. A leaky funnel is not necessarily bad; as a salesperson, you want to focus on opportunities that are likely to yield results. It is the nature of sales to have to remove an opportunity from your funnel. It does not mean that you will not sell to that account (a positive action by the customer can put them back into the funnel), but for the time being, your should centre your attention on opportunities that remain in the funnel. ... More