How to Create a Sales Funnel

on Blog August 18th, 2023

Businesses face numerous challenges in acquiring and retaining customers. To overcome these hurdles, the implementation of an effective sales funnel is essential.

A sales funnel serves as a roadmap to guide potential customers through the buying journey, from initial awareness to conversion and beyond.

In this article, we will explore the purpose of a sales funnel, how to analyze the performance of an existing funnel, and the key elements involved in developing a successful sales funnel for local service businesses.

Page Contents

Understanding the Purpose of a Sales Funnel

A sales funnel is a systematic approach that maps out the customer journey, leading prospects from the initial point of contact to becoming loyal customers.

The purpose of a sales funnel is to guide potential customers through the buying journey, from the initial point of contact to becoming loyal customers. Here are the key purposes of a sales funnel:

Streamline the Sales Process

  • A sales funnel provides a structured and systematic approach to sales, allowing businesses to streamline their processes. By breaking down the customer journey into stages, businesses can effectively manage and nurture leads, ensuring a smooth transition from one stage to the next.

Nurture and Convert Leads

  • A sales funnel helps businesses nurture leads by providing relevant information, addressing their pain points, and building trust. At each stage of the funnel, prospects receive targeted content and interactions that guide them towards making a purchasing decision. By nurturing leads effectively, businesses can increase their chances of converting prospects into customers.

Optimize Conversion Rates

  • The ultimate goal of a sales funnel is to optimize conversion rates at each stage of the buyer’s journey. By understanding customer behavior and preferences at each stage, businesses can tailor their marketing and sales strategies accordingly. This optimization helps maximize the number of leads that progress through the funnel, resulting in higher conversion rates and increased revenue.

Identify and Address Bottlenecks

  • A sales funnel allows businesses to identify areas where prospects drop off or fail to progress.
  • By analyzing these bottlenecks, businesses can uncover obstacles or issues that hinder conversions and take appropriate measures to address them. This may involve improving messaging, adjusting the sales process, or enhancing the overall customer experience.

Enhance Customer Retention and Loyalty

  • A well-developed sales funnel not only focuses on acquiring new customers but also on nurturing existing ones.
  • By delivering personalized and valuable experiences throughout the customer journey, businesses can increase customer satisfaction, loyalty, and retention. Satisfied customers are more likely to become repeat buyers and advocates for your brand, leading to sustainable growth.

Improve ROI and Cost Efficiency

  • By implementing a sales funnel, businesses can track and measure the effectiveness of their marketing and sales efforts at each stage.
  • This data-driven approach enables businesses to allocate resources more efficiently, identify underperforming areas, and optimize their strategies to improve return on investment (ROI). The ability to target specific buyer personas and tailor messages accordingly helps minimize wasted marketing spend.


how to build a sales funnel

Analyzing the Performance of Your Existing Funnel

Before diving into sales funnel development, it’s crucial to assess the performance of your existing funnel. Here are a few key metrics to consider:

Conversion Rate

  • Measure the percentage of leads that convert at each stage of the funnel. o calculate conversion rates, you need to compare the number of conversions at a specific stage of the funnel or at the end of the sales funnel to the total number of leads or prospects at that same stage.
  • Here’s how you can calculate different conversion rates:

Lead-to-MQL (Marketing Qualified Lead) Conversion Rate

  • Determine the number of leads who have been qualified as MQLs.
  • Divide the number of MQLs by the total number of leads.
  • Multiply the result by 100 to get the conversion rate percentage.
  • Formula: (Number of MQLs / Total Number of Leads) * 100 = Lead-to-MQL Conversion Rate (%)

MQL-to-SQL (Sales Qualified Lead) Conversion Rate

  • Determine the number of MQLs who have been further qualified as SQLs.
  • Divide the number of SQLs by the total number of MQLs.
  • Multiply the result by 100 to get the conversion rate percentage.
  • Formula: (Number of SQLs / Total Number of MQLs) * 100 = MQL-to-SQL Conversion Rate (%)

SQL-to-Opportunity Conversion Rate

  • Determine the number of SQLs who have progressed into opportunities.
  • Divide the number of opportunities by the total number of SQLs.
  • Multiply the result by 100 to get the conversion rate percentage.
  • Formula: (Number of Opportunities / Total Number of SQLs) * 100 = SQL-to-Opportunity Conversion Rate (%)

Opportunity-to-Closed Deal Conversion Rate

  • Determine the number of closed deals or sales.
  • Divide the number of closed deals by the total number of opportunities.
  • Multiply the result by 100 to get the conversion rate percentage.
  • Formula: (Number of Closed Deals / Total Number of Opportunities) * 100 = Opportunity-to-Closed Deal Conversion Rate (%)

It’s important to note that conversion rates can vary depending on the specific definitions of each stage in your sales funnel.

Make sure to define each stage clearly and consistently to ensure accurate calculations. Additionally, regularly tracking and analyzing conversion rates allows you to identify bottlenecks or areas for improvement in your sales funnel and make data-driven optimizations.

Customer Acquisition Cost (CAC)

  • Calculate the average cost to acquire a new customer.
  • Calculating the CAC provides valuable insights into the effectiveness and efficiency of your customer acquisition efforts.
  • It helps you evaluate the cost-effectiveness of different marketing and sales strategies, assess the return on investment (ROI), and make informed decisions regarding resource allocation and budgeting.

To calculate the Customer Acquisition Cost (CAC), you need to determine the total cost incurred in acquiring new customers over a specific period and divide it by the number of new customers acquired during that same period. Here’s how you can calculate the CAC:

  1. Determine the Time Period: Decide on the specific time frame for which you want to calculate the CAC (e.g., monthly, quarterly, annually).
  2. Calculate the Total Cost of Acquiring Customers: Add up all the costs associated with acquiring customers during the chosen time period. This includes expenses such as marketing and advertising costs, sales team salaries and commissions, software or tools used for customer acquisition, and any other relevant expenses directly related to acquiring new customers.
  3. Count the Number of New Customers Acquired: Determine the total number of new customers acquired during the chosen time period. This can be obtained from your sales or customer records.
  4. Divide the Total Cost by the Number of New Customers: Divide the total cost of acquiring customers by the number of new customers acquired during the same period.
  5. Formula: Total Cost of Customer Acquisition / Number of New Customers = Customer Acquisition Cost (CAC)

For example, if the total cost of acquiring customers in a quarter is $50,000 and you acquired 100 new customers during that period, the CAC would be $500 ($50,000 / 100).

Customer Lifetime Value (CLTV)

  • Determine the total value a customer brings to your business over their lifetime.
  • To calculate Customer Lifetime Value (CLTV), you need to estimate the total value a customer will bring to your business throughout their relationship with your company. CLTV is an important metric that helps businesses understand the long-term profitability and sustainability of their customer base. Here’s a general approach to calculating CLTV:
  1. Determine the Time Period: Decide on the specific time period you want to evaluate, such as one year, five years, or even longer. The time period should align with your business model and industry.
  2. Calculate Average Purchase Value: Calculate the average amount a customer spends on each transaction. This can be done by dividing the total revenue generated from a customer by the number of purchases made during the selected time period.
  3. Estimate Purchase Frequency: Determine how often, on average, a customer makes a purchase from your business within the selected time period. For instance, if you’re analyzing annual data and a customer makes two purchases per year, the purchase frequency is 0.5.
  4. Calculate Customer Lifespan: Determine the average number of years a customer stays engaged with your business. This can be calculated using historical data or industry benchmarks. For example, if the average customer retention period is three years, the customer lifespan is three.
  5. Calculate Customer Value: Multiply the average purchase value by the purchase frequency to determine the customer value per year. In the above example, if the average purchase value is $50 and the purchase frequency is 0.5, the customer value per year is $25.
  6. Calculate CLTV: Multiply the customer value per year by the customer lifespan. In the given example, if the customer lifespan is three years, the CLTV would be $25 * 3 = $75.
  7. Adjust for Customer Acquisition Cost (CAC) and Profit Margin: If desired, you can subtract the customer acquisition cost from the CLTV to account for the expenses incurred in acquiring the customer. Additionally, adjusting for the profit margin will provide a more accurate representation of the value generated by the customer.

Remember, CLTV calculations are estimates and may vary depending on the nature of your business, customer behavior, and other factors. It’s important to regularly reassess and refine your CLTV calculations as new data becomes available to ensure their accuracy.

Funnel Leakage

To calculate funnel leakage and identify areas where prospects drop off or fail to progress through the sales funnel, you need to analyze the conversion rates at each stage of the funnel. Here’s a step-by-step approach to calculating funnel leakage:

  1. Define the Stages of Your Sales Funnel: Identify and define the different stages that prospects go through as they move through your sales process. Common stages include leads, marketing-qualified leads (MQLs), sales-qualified leads (SQLs), opportunities, and customers. The specific stages will depend on your business and sales process.
  2. Collect Data on the Number of Prospects at Each Stage: Gather data on the number of prospects or leads at each stage of the funnel. This data can be obtained from your customer relationship management (CRM) system or sales analytics tools.
  3. Calculate Conversion Rates: Calculate the conversion rate from one stage to the next by dividing the number of prospects who progress to the next stage by the number of prospects at the previous stage. For example, if you have 1,000 leads and 500 MQLs, the conversion rate from leads to MQLs would be 500/1,000 = 0.5 or 50%.
  4. Identify Areas of Drop-off: Analyze the conversion rates between each stage to identify areas of drop-off or low conversion. Look for significant drops in conversion rates that indicate a high level of funnel leakage. These drop-off points indicate where prospects are failing to progress through the funnel.
  5. Investigate the Causes: Once you’ve identified areas of drop-off, investigate the causes of funnel leakage. Possible causes could include unclear messaging, lack of engagement or follow-up, a lengthy or complicated sales process, or ineffective lead nurturing strategies. Analyzing the causes will help you understand why prospects are dropping off and allow you to take appropriate actions to address the issues.
  6. Take Action to Reduce Funnel Leakage: Based on your analysis of the causes, implement strategies to reduce funnel leakage. This could involve optimizing your marketing and sales processes, improving lead nurturing and follow-up, refining your messaging, or streamlining your sales process to make it easier for prospects to progress through the funnel.
  7. Monitor and Iterate: Continuously monitor your funnel conversion rates and make iterative improvements. Regularly assess the impact of your actions and refine your strategies to further reduce funnel leakage and improve overall conversion rates.

By calculating funnel leakage and identifying areas of drop-off, you can gain valuable insights into your sales process and take targeted actions to optimize your funnel, improve conversion rates, and maximize the number of prospects that convert into customers.

By analyzing the above metrics, you can identify areas for improvement and make data-driven decisions to optimize your sales funnel.

Elements of a Successful Sales Funnel

Identifying Target Buyer Persona

  • By creating detailed buyer personas, you gain a deeper understanding of your target audience, allowing you to align your marketing and sales strategies with their preferences and needs.
  • This enables you to create more targeted and effective campaigns, tailor your messaging, and improve customer engagement and conversions. Regularly revisit and update your buyer personas as your business evolves and new insights emerge from ongoing research and customer interactions.

Research and Define Your Ideal Customer Profile

  • Start by conducting thorough research on your existing customer base. Analyze their demographics, such as age, gender, location, and occupation. Look for common characteristics and trends among your most valuable and satisfied customers.
  • Identify key attributes that make them an ideal customer, such as their industry, company size, or specific needs that align with your services.
  • Consider conducting surveys, interviews, or customer feedback sessions to gather insights directly from your target audience. This will help you understand their preferences, challenges, and expectations.

Understand Their Needs, Pain Points, and Motivations

  • Dive deeper into understanding the needs and pain points of your target audience. What problems do they face that your services can solve? What challenges do they encounter in their daily lives or business operations?
  • Identify the motivations and goals that drive your target audience. What are they trying to achieve? How can your services help them accomplish their objectives?
  • Consider the emotional and psychological factors that influence their decision-making process. Are they seeking convenience, cost savings, status, or a sense of security? Understanding these factors will help you tailor your messaging and approach accordingly.

Create Buyer Personas to Guide Your Marketing and Sales Strategies

  • Once you have gathered sufficient data and insights, it’s time to create buyer personas. A buyer persona is a fictional representation of your ideal customer based on research and analysis.
  • Give each persona a name, demographic details, and a background story to make them more relatable and tangible.
  • Include information about their goals, challenges, pain points, preferred communication channels, and decision-making criteria.
  • Determine the key messages and value propositions that resonate with each persona. Tailor your marketing and sales strategies to address their specific needs and motivations.
  • Use visuals, such as photographs, to bring the personas to life and make them more memorable for your team.

Growing Contact Lists

By leveraging various sources, focusing on quality over quantity, and segmenting your contact lists, you can grow a targeted and engaged audience for your local service business.

This approach ensures that your communication efforts are directed towards individuals who are most likely to become loyal customers. Remember to regularly review and clean your contact lists to maintain their accuracy and relevance.

Leverage Various Sources like Lead Generation Tools, Website Forms, Social Media, and Networking Events

  • Utilize lead generation tools and software to capture contact information from website visitors. Implement opt-in forms, pop-ups, or gated content that offer value to visitors in exchange for their contact details.
  • Leverage social media platforms to expand your reach and capture leads. Encourage interested individuals to sign up for newsletters, free resources, or exclusive promotions by providing a compelling call-to-action (CTA).
  • Attend relevant networking events, conferences, or trade shows where you can meet potential customers face-to-face. Use sign-up sheets or digital tools to collect contact information from interested attendees.

Focus on Quality over Quantity to Ensure Your Contacts Align with Your Target Buyer Persona

  • Rather than pursuing a large number of generic leads, focus on attracting and capturing leads that align with your target buyer persona. Quality leads are more likely to convert into paying customers.
  • Use targeted messaging and content to attract individuals who have a genuine interest in your services. This can be achieved through personalized ads, blog content, or social media campaigns that speak directly to your ideal customer’s pain points and needs.
  • Consider implementing lead qualification processes to assess the fit and potential value of each lead before adding them to your contact list.

Segment Your Contact Lists for Personalized Communication

  • Segmenting your contact lists allows you to deliver personalized and relevant communication to different groups of leads. This helps increase engagement and conversion rates.
  • Segment your contacts based on demographics, interests, behaviors, or engagement levels. Use data and insights to categorize them into distinct groups.
  • Tailor your email marketing campaigns, newsletters, and other communication efforts to address the specific needs and preferences of each segment. This can include personalized offers, content recommendations, or targeted promotions.

Creating Compelling Email Communication

If you stick to the following guidelines, you can create compelling email communication that grabs attention, personalizes content, provides value, and drives conversions. Remember to maintain consistency in your branding and messaging across all your email campaigns. Regularly review and refine your email strategies to ensure they align with the evolving needs and preferences of your target audience.

Craft Attention-Grabbing Subject Lines to Increase Email Open Rates

  • The subject line is the first thing recipients see in their inbox, so it should be compelling and pique their curiosity. Use actionable language, urgency, or personalization to grab their attention.
  • Keep subject lines concise and clear, ideally under 50 characters, to ensure they are fully visible on mobile devices.
  • Experiment with different subject line strategies, such as posing a question, using humor, or offering a compelling benefit.

Personalize Emails Based on the Recipient’s Interests and Pain Points

  • Use the data you have about your contacts, such as their previous interactions, purchase history, or website behavior, to personalize your emails.
  • Address recipients by their name and tailor the content to their specific interests and pain points. Show that you understand their needs and offer relevant solutions.
  • Segment your email list and create targeted email campaigns for different buyer personas or customer segments. This ensures that each recipient receives content that resonates with them personally.

Provide Value, Offer Solutions, and Highlight the Benefits of Your Services

  • Your emails should be valuable and informative to the recipients. Provide educational content, industry insights, tips, or exclusive offers that can help them solve their problems or achieve their goals.
  • Clearly communicate the benefits of your services and how they can address the recipient’s pain points. Focus on the value you provide and how it can improve their lives or businesses.
  • Use storytelling techniques or case studies to illustrate how your services have benefited other customers. This helps build credibility and trust.

Incorporate Persuasive Call-to-Actions (CTAs) to Encourage Conversions

  • Each email should have a clear and compelling call-to-action (CTA) that guides recipients towards the desired action, whether it’s making a purchase, scheduling a consultation, or downloading a resource.
  • Use action-oriented language and create a sense of urgency to motivate recipients to take action.
  • Make your CTAs prominent and visually appealing, using buttons or contrasting colors to draw attention.

Test, Track, and Optimize

  • Regularly test different email elements, such as subject lines, CTAs, content length, or visual elements, to identify what resonates best with your audience.
  • Use email analytics and tracking tools to measure open rates, click-through rates, and conversion rates. Analyze the data to identify patterns, strengths, and areas for improvement.
  • Continuously optimize your email campaigns based on the insights gained. Experiment with different strategies and iterate on what works best for your audience.

Establishing Sales Process Automation

You should leverage  sales process automation – it can save time, improve efficiency, and enhance the overall customer experience.

Automation helps ensure that leads are nurtured consistently, follow-ups are prompt, and relevant content is delivered at the right stages of the buyer’s journey.

With the help of tracking and analytics tools, you can measure the success of your automated efforts and make data-driven adjustments to optimize your sales process. Integration with other tools streamlines workflows and creates a seamless experience across various touchpoints.

Utilize Customer Relationship Management (CRM) Software to Automate Lead Nurturing and Follow-ups

  • Implement a CRM system to centralize and manage your customer data. This allows you to track interactions, capture lead information, and automate various sales and marketing tasks.
  • Use CRM workflows and automation features to set up automated lead nurturing campaigns. These campaigns can include personalized emails, reminders, and notifications that are triggered based on specific actions or time intervals.
  • Automate follow-ups with leads to ensure timely and consistent communication. Set up reminders or automated responses to inquiries, ensuring that no potential lead falls through the cracks.

Implement Automated Email Sequences Tailored to Specific Buyer Personas and Stages of the Funnel

  • Utilize email marketing automation tools to create targeted email sequences based on buyer personas and stages of the sales funnel.
  • Develop a series of pre-written emails that deliver valuable content, address common pain points, and guide leads through the buying journey.
  • Segment your contact list based on buyer personas and stage of the funnel to ensure the right content reaches the right audience at the right time.
  • Use automation features to schedule and send emails automatically, reducing manual effort and ensuring consistent and timely communication.

Use Tracking and Analytics Tools to Monitor Email Engagement and Adjust Your Strategies Accordingly

  • Utilize email tracking and analytics tools to monitor key metrics such as open rates, click-through rates, and conversion rates.
  • Analyze the data to gain insights into the effectiveness of your email campaigns and identify areas for improvement.
  • A/B test different email elements (subject lines, CTAs, content) to optimize your campaigns based on data-driven insights.
  • Continuously analyze and refine your email strategies to improve engagement and conversions.

Integrate Your CRM with Other Marketing and Sales Tools to Streamline Workflows

  • Integrate your CRM system with other marketing and sales tools to streamline workflows and ensure seamless data flow between systems.
  • Connect your CRM with your email marketing platform, lead generation tools, and other relevant software to automate data synchronization and reduce manual data entry.
  • This integration allows for a more holistic view of your leads and customers, enabling better targeting, personalization, and overall efficiency in your sales processes.

Building an Engaging Landing Page

Below I’ve outlined some guidelines for you to create engaging landing pages that capture visitors’ attention, effectively communicate your value proposition, collect valuable lead information, and attract organic traffic.

Remember to regularly analyze the performance of your landing page, make data-driven optimizations, and conduct A/B tests to improve conversion rates and overall effectiveness.

Create a Visually Appealing and User-Friendly Landing Page that Aligns with Your Brand

  • Design a visually appealing landing page that reflects your brand identity and resonates with your target audience.
  • Use consistent branding elements such as colors, fonts, and imagery to create a cohesive and memorable experience.
  • Ensure that the layout and navigation are user-friendly, with a clear and intuitive structure that guides visitors towards the desired actions.

Clearly Communicate the Unique Value Proposition of Your Services

  • Clearly and concisely communicate the unique value proposition of your services on the landing page.
  • Highlight the key benefits and advantages of choosing your services over competitors.
  • Use compelling and persuasive copy to clearly convey the value you provide and address the pain points of your target audience.

Include Persuasive CTAs and Lead Capture Forms to Collect Visitor Information

  • Include prominent and persuasive call-to-action (CTA) buttons that encourage visitors to take the desired action, such as signing up, requesting a consultation, or making a purchase.
  • Use action-oriented language in your CTAs to create a sense of urgency or exclusivity.
  • Incorporate lead capture forms strategically on the landing page to collect visitor information. Keep the form fields concise and relevant to avoid overwhelming visitors.

Optimize Your Landing Page for Search Engines to Increase Organic Traffic

  • Conduct keyword research to identify relevant and high-impact keywords related to your services and target audience.
  • Incorporate these keywords in your landing page’s meta tags, headers, and content to optimize it for search engines.
  • Ensure your landing page loads quickly and is mobile-friendly, as these factors also contribute to search engine optimization (SEO).
  • Provide valuable and relevant content on your landing page to increase its visibility and ranking in search engine results.

Utilizing Content Marketing

Effective content must educate, engage, and build relationships with your target audience.

When creating content you should focus on developing informative and relevant content, optimize it for SEO, promote it through various channels, and address pain points to position yourself as a trusted authority.

Remember to track and analyze the performance of your content, measure engagement metrics, and refine your strategies based on data-driven insights.

Develop Informative and Relevant Content (Blogs, Videos, Case Studies) to Educate and Engage Prospects

  • Create content that provides value to your target audience. Identify their pain points, challenges, and interests, and develop content that addresses those needs.
  • Use various formats such as blog articles, videos, infographics, podcasts, or case studies to cater to different preferences and learning styles.
  • Offer actionable tips, insights, or solutions that demonstrate your expertise and help prospects make informed decisions.

Optimize Content for SEO to Attract Organic Traffic

  • Conduct keyword research to identify relevant and high-impact keywords related to your industry and target audience.
  • Incorporate these keywords naturally into your content, including titles, headings, body text, and meta descriptions.
  • Ensure your content is well-structured, easy to read, and provides a great user experience.
  • Pay attention to on-page SEO elements such as meta tags, image alt tags, and internal linking to improve search engine visibility and organic traffic.

Promote Your Content through Various Channels, Including Social Media and Email Marketing

  • Leverage social media platforms to promote your content and engage with your target audience. Share snippets or teasers of your content, ask questions, and encourage discussion.
  • Use email marketing to share your content with your subscribers. Send newsletters, content digests, or personalized recommendations based on their interests and engagement history.
  • Collaborate with influencers, industry partners, or relevant websites to amplify the reach of your content through guest posting, cross-promotion, or content syndication.

Use Content to Address Pain Points and Establish Yourself as a Trusted Authority in Your Industry

  • Identify the pain points, challenges, and questions your target audience has within your industry.
  • Create content that provides solutions, offers insights, and addresses these pain points. This positions you as a trusted authority and builds credibility.
  • Share success stories, case studies, or testimonials to demonstrate how your services have helped others overcome challenges or achieve their goals.
  • Engage with your audience through comments, discussions, or Q&A sessions to foster trust and establish yourself as a go-to resource.

Sales funnel development is a crucial aspect of driving growth and conversion for local service businesses.

By understanding the purpose of a sales funnel, analyzing the performance of your existing funnel, and incorporating the key elements mentioned above, you can optimize your sales process and effectively nurture leads.

Remember, sales funnel development is an ongoing process, so regularly evaluate and refine your strategies to adapt to changing market dynamics.

With a well-designed sales funnel in place, you can maximize your conversion rates, build lasting customer relationships, and propel your local service business to new heights of success

Tony Lael

I work with entrepreneurs, marketing and sales executives to help them realize the true potential of their business or group - it's about creating a marketing and sales system. Inside of Fannit, I help guide our team to build out our own systems through standard operating procedures and am responsible for revenue growth. I believe it’s important to bring joy and a splash of humor to your work, and always give my top level of attention and effort. Connect with me on LinkedIn >