Hi! In this week’s post we step through a simple yet powerful framework for identifying the top growth opportunities in your sales funnel.

Summary:

While the sales funnel is a familiar concept, many CEOs find it challenging to know where to focus and which strategies to employ to maximize growth.
The Full Funnel Model is a framework for solving this challenge. It describes the sales funnel through a set of growth metrics, which help flag common growth issues (and strategies to resolve them) at each stage of the funnel.

It can be hard to know where to focus to maximize revenue growth.

The concept of a sales funnel or customer journey is familiar to anyone who has worked in sales or marketing for a while. I like to lay it out like this:

Most startup CEOs (and investors) tend to focus their attention on the customer acquisition stages of the funnel, because it’s where most of the sales and marketing expenses are - and its where all the popular sales methodologies like BANT and MEDDIC focus. However, this leads to neglecting the customer retention stages of the funnel, even though it’s where most of the profit is created:

This issue is further complicated by org design, as sales, marketing and customer success teams are typically siloed under departmental VPs, each of whom reports to the CEO or COO and focuses primarily on the one or two metrics they can fully control:

This creates a headache for the CEO or COO as they have to align disparate efforts to drive consistent growth - on top of everything else their job requires. It’s very easy to get pulled in the wrong direction by one-off pieces of information, one-off conversations or ad-hoc analyses - and make the wrong decisions.

The Full Funnel Model is a framework for solving this.

The Full Funnel Model brings together the metrics that each team is tracking into a unified set of growth metrics that gives the whole go-to-market team visibility into how each stage of the funnel is performing.

The model is made up of the following growth metrics, which are fairly straightforward to calculate.

Metric definitions (for reference):
Prospect: A business on your target account list.
MQL (Marketing Qualified Lead): A prospect who has signaled intent to purchase, such as viewing multiple pieces of content, or requesting a demo.
SQL (Sales Qualified Lead): A prospect who has been further qualified via conversation as having a problem your company can solve.
Win: A prospect who has signed contract and become a customer.
Activated: A customer who has onboarded and is actively using your product.
New Customer ARR: Total amount of annual recurring revenue from new customers acquired during the time period of the analysis.
Period: Time period for analysis (e.g. 3, 6, 12 months)

Once you’ve calculated your growth metrics, your model will look like this:

The next step is to identify which of your growth metrics to focus on what underlying issue is driving it. Here are some of the most common issues I’ve seen at each stage of the funnel, and the strategies for addressing them.

If Prospect to MQL <10% —> top issues + strategies are:
Targeting too broadly. Refine your ideal customer profile to focus on the group of prospects most similar to your current customers. Limit the size of the group to 10x the size of your current customer base to force prioritization.
Messaging too cryptically. Ensure your messaging speaks directly to your prospects’ problems rather than to your product features or to broader market trends. Create content that helps buyers self-educate on the value of your product and how you stack up against competitors.

If MQL to SQL <20% —> top issues + strategies are:
Prospecting too generically. Research leads before reaching out to them and use your research to make your messaging more relevant. Incorporate insights from your data to illustrate how customers are solving their problems with your product and ask your prospects for feedback before asking for a meeting.
Following up on leads too slowly. Audit your lead routing to ensure that inbound leads are being routed to your reps in real time. Establish an SLA for responding to leads and incorporate it into your reps’ goals.
MQL criteria lacking intent. Ensure your MQL criteria contain an intent signal as well as company and persona matches. A good example of an intent signal is using an ROI calculator or reading reviews on your website.

If SQL to Win <30% —> top issues + strategies are:
Prescribing solutions too early. Ensure your salespeople are using the discovery stage to get the buyer to explain their problem in as much detail as possible and state their desire to change before jumping into demos. More details on how to do that are in this post.
Losing control of the buying process. Ensure your salespeople are driving the buying process by setting an upfront agenda for each call and scheduling the next call before hanging up. A useful analysis to see where reps are losing control is to unpack your sales process by stage.
SQL qualification too soft. If you have a separate sales development group doing initial qualification of leads before handing off to your salespeople, check that they are qualifying prospects as having a valid problem rather than just booking meetings to fill up calendars.

If Activation Rate <95% —> the top issues + strategies are:
Missing a joint success plan. Creating a joint success plan with a buyer should be a requirement for moving a deal to closed won. The plan should state the buyer’s challenges, desired impact and expected timeline for seeing results, detail the steps to reach the first value milestone and identify who owns each step.
Too low a bar for commitment. This is common in usage-based pricing models, where customers. Set the bar high enough so that the customer has an incentive to use your product for long enough to get to their first value milestone.

If Renewal Rate <90% —> top issues + strategies are:
Recurring impact not clear. You need to regularly remind customers of the impact you are delivering and how it is aligned with the impact they were originally seeking when they bought your product. Use your customer check-in calls to re-validate the challenges and impact from your joint success plan and and identify new problems.
Health metrics not tracked. Track the customer health metrics that predict churn, such as low usage, low responsiveness to comms and changing stakeholders so you can be proactive about reaching out.
Renewal process started too late. Create a process for re-validating your customer’s situation, challenges and desired impact with the buying team, starting at least 3 months before the contract is up for renewal.

If Expansion Rate <15% —> top issues + strategies are:
Customers not prioritized. Rank your customers by their current and potential value and group them into value tiers. Organize your customer success team so that the most valuable customers can get the most attention (fewer customers per CS rep) and create a playbook for identifying additional buying groups.
Unclear internal ownership. Decide which departments own cross-sells, up-sells and renewals. The simplest approach is to have sales own cross-sells (selling to new buyers in the customer organization) and customer success to own up-sells and renewals (both of which involve selling to existing buyers).

With your issues and strategies identified, add them to the model and set a goal:

You now have a chart you can review with your team, determine who owns what and weave into your weekly operating cadence.

If you want to chat about unlocking growth in your business, I want to work with you! Just reply to this email or DM me through LinkedIn or Twitter.

The Revenue Architect

How to identify the top opportunities in your…