There’s a paradox in sales and marketing for improving sales funnel performance.

It goes like this:

If you could improve any part of your funnel by 10%, which would you choose?

Most sales and marketing leaders would choose to convert more leads at the bottom of the funnel.

But the best sales and marketing leaders know that increasing the number of leads at the top of the funnel is the best way to scale your revenue.

This is the Sales Funnel Paradox.

Let’s dig in…‍

The Parts of a Funnel‍

In its simplest form, there are three parts to a sales funnel.

The Top-of-Funnel (TOFU) includes all qualified leads that you reasonably expect your sales team to work by calling and attempting to convert them to a new opportunity.

TOFU could include inbound leads from your marketing site, leads from a trade-show, or even qualified outbound leads that are confirmed to be good fit for your customer profile.

The Middle-of-Funnel (MOFU) includes all sales opportunities that have expressed interest in evaluating your product or service and a solution for their business.

These leads have connected with a salesperson and have agreed to see a demo of the product.

The Bottom-of-Funnel (BOFU) includes all sales opportunities that have seen a product demo and are considering purchasing the product.

We could break out a sales funnel into many more parts than this, but for the sake of this example let’s stick with the three sections of the funnel we have laid out here.

So I’ll ask the question again: “If you could improve any part of your funnel by 10%, which would you choose?”

Most sales and marketing leaders rush to the bottom of the funnel. The part that’s closest to the money.

Surely if we could increase our conversion from demos to customers we would be better off, right?

Not so fast.

It doesn’t actually matter which part of the funnel you focus on.

A 10% increase in any part of the funnel will result in a 10% increase in sales.

The funnel math

While it may seem that focusing on the bottom of the funnel is the most likely way to increase sales, the math tells a different story.

Let me explain using a simple funnel example:

1000 leads

10% conversion to prospects (100 prospects)

20% conversion to sales (20 sales)

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If we improve any stage by 10%, here's what happens:

Improving leads: 1100 leads → 110 prospects → 22 sales

Improving prospect conversion: 1000 leads → 110 prospects → 22 sales

Improving sales conversion: 1000 leads → 100 prospects → 22 sales

In each case, we end up with 22 sales, which is a 10% improvement over the original 20 sales.

So the question remains. If you could focus on any one part of the funnel, which would you choose?

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[[clockwork]]

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Choosing the right part of the funnel to improve

It’s easy to understand why most sales and marketing leaders rush to the bottom of the funnel.

If we convert more demos to customers, we close more customers and generate more revenue.

That is good for this month or quarter’s numbers.

But it’s short-term thinking at best. Why?

There are three reasons:

1. Effort - it takes significantly more effort to increase your BOFU conversion rate 10% than to increase your leads by 10%.
   
   For example, getting more leads could be as simple as creating more content for your ideal customers or spending more on ads. More content or ad spend leads to more website visits. More website visits creates more leads.
   
   On the other hand, getting the sales team to convert 10% more demos to customers is an effort in coaching, discipline, and management.
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2. Leverage - When you increase the number of leads at the top of the funnel, you apply this increase across every part of the funnel. You can always work on improving conversion rate later.
   
   The effort to increase the top of the funnel will compound your revenue production.
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3. Durability - Increasing your lead volume is much more durable than increasing your demo to customer conversion rate.
   
   Once your web traffic and lead volume has gone up, it takes a while to come back down. Whereas your conversion rate will fluctuate month-to-month based on the performance of the sales team.
   
   The actions that influence your demo to customer conversion rate - improving salespeople skills, refining the product demo, better sales process execution - are malleable skills that require constant attention and coaching.
   

Measuring your funnel performance

I’ve talked before about the only report you need to scale your sales team. This is the report that I used to manage a 70-person revenue team.

It’s not a fancy report. I put in the number manually, every single month for years.

The elements of this report are straightforward: each part of the funnel is outlined along with the conversion rates from stage to stage.

As your business grows, this report becomes more complex. But you can see the bones of the report are similar to what we have laid out in this essay.

Every month, take stock of the funnel performance. Look at how your TOFU is growing. Measure your conversion to opportunity, and then from opportunity to customer.

Keep a record of the actions that you take to improve each part of the funnel.

It won’t take long for you to see how you are using effort, leverage, and durability to drive more revenue for the business.

Respect the Top

The next time you review your funnel with the leadership team, take a hard look at the three parts to the funnel.

Then ask yourself what it would take to improve each part 10% and what impact it will have on your revenue performance.

Remember the Sales Funnel Paradox and consider more than just the math.

As you scale your team, you want your effort to compound and accelerate your revenue performance.

If you are honest with yourself and your team, you will find that increasing your top of funnel leads is the best place to put your sales and marketing efforts.