The funnel stage that loses the most leads is almost never the one holding back growth

The bottleneck in the sales funnel is the stage where a small improvement in the conversion rate most increases revenue. The first stage of the funnel loses the most people by nature, because it is the widest, and so it usually takes the blame. The bottleneck appears when you compare each stage's conversion against its own history and calculate how much one extra point in each is worth in sales.

For whoever is responsible for the target, this changes the pipeline meeting, which starts discussing the stage that holds back sales before asking marketing for more leads.

Why the stage with the biggest loss is misleading

The widest stage of the funnel almost always loses the most people in absolute numbers, because everyone passes through it. Imagine a fictional funnel with 1,000 leads per month. Of the leads, 30% become meetings. Of the meetings, 40% become proposals, and of the proposals, 25% become sales, which gives 30 sales in the month.

• From lead to meeting: 700 people drop out.
• From meeting to proposal: 180 deals drop out.
• From proposal to sale: 90 deals drop out.

Looking only at volume, the first stage is the villain. But a good part of that exit is expected: leads outside the profile, contacts who never answer, curious people who only wanted the material. That loss has known causes, such as the lead leaks between the form and the sale. Even so, the size of the number does not say whether that is where growth stalls.

The most common reaction to this picture is to increase the top. The calculation of how many leads you need to hit your goal works, but in the example each additional sale would require the media spend for more than 30 new leads.

How to find the bottleneck in the sales funnel

Two comparisons solve it: each stage against its own history and the effect of one extra point in each stage on sales. The idea comes from the theory of constraints, by the physicist Eliyahu Goldratt, popularized in the 1984 book The Goal. The Lean Enterprise Institute glossary entry on the theory of constraints summarizes its focus: improving profit by managing constraints, the factors that keep the company from reaching its goals.

Compare each stage with its own history

Calculate the conversion rate by stage for the month and place it next to the average of the last six months for the same stage. The stage that dropped the most relative to itself is the first candidate, because it shows a change in the operation with a cause to investigate.

Before the comparison, check that the base counts each person once. Duplicate leads in the CRM inflate the number of entries and drag down the conversion rate by stage without anything having changed in the process.

Calculate the effect of one extra point in each stage

Funnel rates multiply, so one percentage point more weighs differently in each stage. In the fictional funnel, the effect looks like this:

• Lead to meeting, from 30% to 31%: 31 sales, about 3% more.
• Meeting to proposal, from 40% to 41%: 30.75 sales, about 2.5% more.
• Proposal to sale, from 25% to 26%: 31.2 sales, 4% more.

The lower the stage's rate, the more each point gained in it weighs on the result. In the example, the stage with the lowest rate is precisely the one that loses the fewest people in absolute numbers.

Resource · In PortuguesePrompt Guide for Marketing and Sales70 prompts with questions about marketing, sales and behavior to ask your data.Download the guide

An example with fictional numbers

The bottleneck becomes clear when both comparisons point to the same stage. Continue with the same fictional funnel and an average ticket, also fictional, of R$ 10 thousand, which gives R$ 300 thousand per month.

Over the last six months, the top stayed stable at 30% and the middle at 40%. The step from proposal to sale, which used to sit at 32%, dropped to 25%. It is the stage with the lowest rate and the only one that fell relative to itself.

• Returning to 32% at the proposal: 38.4 sales in the month, or 8.4 more, about R$ 84 thousand.
• Reaching the same result through the top: 280 more leads per month, because only 3% of leads become sales in this funnel.

Also weigh the value that passes through each stage. The 120 proposals of the month add up to R$ 1.2 million under negotiation, and each deal that gets there has already consumed media, pre-sales hours and meetings. Losing at the proposal costs more than losing a lead that has just arrived.

What to bring to the pipeline meeting

The pipeline meeting pays off more when it opens with the stage that dropped and the value of one extra point in it. A short agenda is enough:

1. The conversion rate of each stage in the month, next to the average of the last six months.
2. The effect of one extra point in each stage, in sales and in revenue.
3. A hypothesis for the drop in the chosen stage, such as lead profile, response time, proposal or price, with someone responsible for investigating.
4. A conversion target for that stage, reviewed at the next meeting.

If the drop is in the handoff between areas, the quality criteria and response time of the SLA between marketing and sales are the first place to look. To see that handoff, the marketing and sales stages need to be in the same design, as in a unified marketing and sales funnel.

In complex, long-cycle sales, use a longer history window, because a single month has few deals and any closing changes the rate. With that, finding the bottleneck in the sales funnel becomes a monthly routine, and the team's effort goes to the stage that returns the most revenue.

Frequently asked questions

What is the difference between a bottleneck and the stage with the biggest loss?

The stage with the biggest loss is the one with the most exits in absolute numbers, almost always the top. The bottleneck is the stage where one extra point of conversion generates the most sales and that dropped relative to its own history.

How do I calculate the conversion rate by stage?

Divide the deals that advanced to the next stage by those that entered the stage in the same period. The definition of each funnel stage must be the same in all the months compared.

Can the bottleneck in the sales funnel move?

It can. When the stage that was limiting sales improves, another becomes the constraint, which is why the comparison needs to be redone every month.

To get the formula and a practical example of each indicator, organized by funnel stage, download the Laiki Metrics Guide.