If you started with 100 leads, and you closed 20, what was your success rate? 20% right? No, maybe much better. There’s a key piece of data missing from this initial analysis: how many deals did you lose?
Let’s run that again. Start with 100 leads, close 20, lose (or reject) 40. Your success rate was 33% (20 out of 60 that have been decided). The 40 still in your funnel could swing either way and so cannot be included.
One of the reasons we often overly simplify this calculation (20 from 100 rather than 20 from 60) is that we know that many of the 40 deals in the funnel have actually leaked, but we’ve not yet conceded defeat. So how long should you leave stalled deals in the funnel before conceding defeat? As a rule of thumb, if a deal has taken longer than 50% longer than your normal cycle length it has probably already leaked, and should be removed from your funnel.
There’s a whole lot more to this analysis if you want to do this properly, but I’ll save that for another day. Factors included in more comprehensive analysis include :
- breaking the lag (time taken to progress) by each stage in the buyer’s journey rather than using a single figure end to end;
- date-stamping CRMs to afford this analysis;
- calculating whether deals which have taken longer than normal are more likely to leak or less (we have seen both); and
- varying this analysis by campaign (the math is usually different).
For now, I am making a simple point: in any funnel analysis, strip out all of the deals that have not yet been won or lost, and calculate your ratios using only those that have been decided.