Between post COVID inventory excesses and now higher interest rates, a recession is likely. Constraints will move from inside the four walls to customer demand. It’s time to tune up the sales funnel.
The sales funnel is at the core of business development. Theory of Constraints and Lean Thinking are manufacturing fundamentals. Good things happen when these concepts intersect.
Start by mapping your sales funnel. What happens from lead to prospect to customer to cash? What criteria are used to qualify leads and prospects? Keep it simple: rectangles for process steps, diamonds for decision points. Document rework loops where steps are repeated…and why. Note IT systems along the way. This journey will be cross-functional: credit approval in finance, feasibility in engineering, costing in purchasing, etc.
Next collect metrics that measure flow: numbers of leads and prospects, conversion rates to quotes and orders, days and dollars in the funnel, etc.
By now, your sales funnel is indeed looking a lot like a factory…because it is! Just like a factory converts raw materials into finished products, the sales funnel converts customer inquiries into cash. Both have capacity constraints. Both are full of waste, especially waiting and rework. Both can be improved through Theory of Constraints and Lean Thinking.
Getting found is not enough. Now with leads flowing like water into cash, all that hard work with SEO and social media will really pay off.
Sales Funnel Case Study
A client company was in a business that designed, manufactured, and installed mostly custom products. Its sales funnel was a project management process that included site renderings, permitting, and electromechanical design. While there was a backlog of outstanding quotes, the company’s factory was often waiting for orders. Could the flow through the project management process (aka sales funnel) be improved?
Here is a redacted portion of the company’s very complex sales funnel that incorporates the entire span of project management activities through installation:
From this map, short-term bottleneck actions were identified to reduce waiting, rework, and overprocessing:
• Publish standards for weights and measures
• Refine pre-production status codes
• Scrub standard product catalog to eliminate pricing errors
• Expedite new customer credit approvals
• Increase visibility of long-lead items
• Standardize permitting process
• Identify key jurisdiction permitting contacts
• Provide building codes and standards training
Longer term, project management software was implemented to further improve the linkage (and communication) between upstream project management and downstream purchasing and manufacturing.
Operations engineering tools like Theory of Constraints and Lean Thinking are not just for factories. When applied to business processes, in this case the sales funnel, more money comes out and faster. What’s not to like about that?
For more on this topic, click HERE for a great blog post with examples of effective sales funnels.