The stages of the B2B sales processMar 17, 2019 - Marcel Odena
Companies that want fast growth know the secret to success lies in making sales. With sales comes revenue, which is typically recurrent, i.e., a closed sale this month will generate a monthly recurring income until the customer unsubscribes from the service. This model is typical of SaaS (Software As A Service) companies. Obviously, the product and other company aspects have to meet customer expectations for the model to work. If the product is good, the customer will continue using it and pay a fee each month.
When creating the formulas for a company growth prediction, it’s common to make a forecast on the sales growth by month. This usually results in a challenge which is complex, yet at the same time easy to express: Obtain the sales volume every month as stipulated in a table similar to this:
- Month 1: 30 sales
- Month 2: 40 sales
- Month 3: 60 sales
The stages of the sales process
As is the case in many things in life, the saying “Divide and Conquer” can be applied to sales. Thus, the objective of hitting monthly sales targets is often broken down into other control metrics, which are usually in the hands of several company actors who are involved in the sales process.
It’s common for each company to have its sales processes customized to their particular situation. As an example, we’ll briefly describe an inverted sales process that is commonly used in many companies:
1) 30 sales achieved (deals): say we’ve reached the month 1 goal, which is excellent.
2) 120 opportunities generated (opps): let’s say we’ve had to create 120 opportunities to get those 30 sales. Therefore, we’ve sent 120 commercial proposals to different companies, and of those 120 offers, 30 proposals have been accepted, so we’ve closed 30 sales. What happens to the rest of the opportunities? Of the remaining 90, many won’t accept our proposal (for whatever reason). Some will need more time to think about it so we might be able to close that sale at a later time.
- Opportunities to Sales Conversion Ratio: Note that we’ve closed 30 sales out of a total of 120 opportunities, which means we’ve got a conversion ratio of 40%. In my point of view, the conversion ratio is just as important as the absolute value because it tells us how effective we are in each phase of the sales process, and because it allows us to make predictions based on data from previous months.
3) 142 Meetings generated: it’s common to have a preliminary meeting with a potential client before making a commercial proposal, either to do a product demonstration or to clarify doubts, etc.
- Conversion rate from “Meetings” to “Opportunities”: In this example, 120 commercial proposals have been sent out of 142 meetings. This means 22 companies weren’t interested in our product after a meeting (either because it doesn’t align with their needs or for other reasons). Again, the meetings to opps ratio is critical here. In this example, the conversion ratio would be approximately 92%.
4) 1,200 Sales Accepted Leads (SAL): In this example, 1,200 leads (Sales Accepted Leads) were needed to generate 142 meetings. Therefore, the sales team has made an attempt to contact these 1,200 leads to offer them a meeting or a product demonstration, and 142 of those have accepted. The other leads have either been uncontactable, are currently in the sales process, or have said they’re not interested in the product and have since been discarded.
- Conversion Ratio from “SAL” to “Meeting”: In this inverted example, note that the SAL to Meeting conversion ratio is approximately 10%. Therefore, a meeting has been generated for only 10% of the SAL leads.
5) 2,000 Leads: In this example, to get the sales team 1,200 qualified leads, we had to generate 2,000 leads in total. This means we’ve obtained about 800 leads that don’t meet the predetermined criteria to be considered a qualified sales lead. In these cases, it’s advisable to review any existing campaigns and adjust the relevant segmentations to direct advertising to our target audience and avoid trying to sell to professional profiles that aren’t our target audience.
- Conversion ratio from “Lead” to “SAL”: In this example, the conversion ratio from “Leads” to “Sales Accepted Leads” is 60%. This means 40% of our leads are not qualified to start the sales process. The lower this percentage is, the better, because we can devote more to advertising that generates qualified sales leads.
Note that many companies also work with an extra criteria called “MQL”: Marketing Qualified Lead. This indicator measures the quality of the lead according to the criteria set by the marketing department. Of all the MQL leads, only one part will be converted as Sales Accepted Leads. In other words, only one part will meet the criteria that add sales. This depends heavily on each company: the product they sell, how they organize their team, etc.
Understanding the phases of the sales process is crucial to be able to divide it into different phases, calculate the conversion ratios between each phase, and to improve each part of the process. Furthermore, having distinct phases with historical conversion data allows us to make more reliable predictions about future sales.
From a marketing perspective, being able to see all sales funnels helps us become aware of the fact that leads are generated for a specific purpose: to make sales, and therefore all efforts to focus on generating quality leads are few.
- Basic concepts about lead generation (What is a SAL)
- Delimitation of responsibilities between Marketing and Sales
- How to make leads progress through the sales funnel
- How to generate B2B leads with LinkedIn campaigns
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