Then the Funnel

Three weeks ago I said that marketing and sales are the roof, and that nearly everyone builds them first. Today the roof goes on, and I want to show you what it looks like when it goes on last, because it is not the same roof. It is smaller, quieter and far more effective, and the reason is that it finally has something to rest on.

A funnel built first has to do everything. It has to find customers without knowing who they are, because the business model has not been written. It has to justify a price that was set by feel. It has to generate enough volume to cover a margin nobody has calculated, so it goes for as many enquiries as possible, from anyone, at any cost, and the owner judges it by how busy it makes her. It shouts because it does not know who it is talking to. It discounts because it does not know what the work is worth. And it is rebuilt every six months because it never had a number to be measured against, so nobody can tell whether it is working.

A funnel built on a floor knows four things before it is designed. It knows who the customer is, by name or by type, from the sorted list. It knows the price, from the margin sums, and does not negotiate it in the copy. It knows how many conversations a month the business needs, from the financial model, which is usually a far smaller number than the owner feared. And it knows how it will be measured, from the operating plan: enquiries, proposals, yeses, by month, against a target.

With those four things, the funnel stops being a performance and becomes a piece of arithmetic. If the business needs three new clients a quarter, and one proposal in three says yes, and one conversation in two becomes a proposal, then the business needs eighteen conversations a quarter, which is six a month, which is a Tuesday afternoon. The owner who has been posting daily to a thousand people who are not her customer can stop, and spend the time having six good conversations with people who are.

The response is to design the funnel backwards from the number, which is the opposite of how most funnels get built.

Start at the end. How many new customers does the financial model need next year, in which months, at what value? That is the output. Then work backwards through the conversion rates you have, or your best estimate if you have none: proposals to yeses, conversations to proposals, enquiries to conversations. The result is a number of enquiries per month, and it is nearly always smaller and more achievable than the owner assumed, because the owner was assuming she needed everyone.

Then choose the fewest channels that will produce that number from the customers on the sorted list. Not every channel. The one or two where those customers already are. The funnel built last is allowed to be narrow, because it is not trying to compensate for a missing floor by being wide.

Then measure it the way the operating plan says, monthly, against the model, and change it only at the review. The funnel that gets rebuilt every time a post underperforms is the roof-first funnel. The funnel that gets a quarter to prove itself and is then adjusted on evidence is the one that compounds.

The owner who does this usually finds that she has been doing far too much marketing for far too long, to far too many people, and that the business needed a fraction of it aimed properly. The hours that come back are the hours the floor was asking for in the first place.

The house is now built in the right order. Business model, financial model, operating plan, product, funnel. Tomorrow I want to go underneath the floor, to the thing that was there before any of it, and that quietly decided how the house got built in the first place. It is the subject of the session I am running on Wednesday evening, and it does not shout.

Continue reading: It Does Not Shout →

The session: The Nine Fears, and the floor underneath your business. Wednesday 2 December, 5pm UK, free →

Or start the diagnosis: Take the free 10-minute Entrepreneur Gap scan →

The book: The Science of Getting Rich and How to Apply It →