The Loss of Sales Conversion “Efficiency”

Let me admit right off the bat that the post today contains less original thought of mine and more myself reminding my future self on a fact I always intuitively knew about but never saw documented anywhere: that in a sales funnel, an increase of in an earlier stage of the funnel quite naturally lends itself to lower sales conversion rates in the following stage(s).

Picture of Sales Funnel showing sales conversion from one stage to the next
Simple sales funnel – we start with the first stage, which is generally prospecting or lead generation; and eventually end up when the prospect or lead eventually makes a purchase. When absolute numbers in a single stage increases, sales conversion to the next stage tends to decrease.

From the book The Perfect Salesforce by Derek Gatehouse (a great book on building and managing a sales team, and that I thoroughly enjoyed, by the way – read my full review on goodreads.com):

A bigger machine will have more parts to fix and more leaks to patch. You cannot fight the natural byproduct of growing larger…

And if your closing ratio happens to drop from 25 percent to 15 percent over a five-year period, you should be okay with it: because it is an inevitable part of being bigger and, more relevant, given the choice, you would rather close 15 percent of five thousand prospects visited than 25 percent of one thousand prospects!

It is also interesting to note that Gatehouse doesn’t believe in “fixing” the lower sales conversion rates, saying that the top sales-centric companies focus on the sales instead of “the ones that get away”. This may sound slightly controversial, but not so much if you understand that Gatehouse very much believes in playing to your strengths and not shoring up your weaknesses.

Let me know what you think