Sales Director x Win fast, fail faster mindset

I am often asked why we define so many funnel stages. Isn’t having just three stages — such as 1. budget quote, 2. binding quote, and 3. negotiation — sufficient?

Having more stages offers a key advantage: they create additional “gates” for the sales opportunity to pass through. A “gate” is a “critical commitment” from the customer that justifies further investment in pursuing that opportunity. Each gate ensures that resources are allocated only to opportunities with the potential for success. 

In the machining business, each additional funnel stage involves significant investment. It starts with the relatively small cost of a “budget quote” at the top of the funnel, moves to developing technical feasibility concepts and more detailed offers in the middle stages, and culminates in expensive trials at our Technical Center and multiple customer visits in the lower stages of the funnel. 

By setting stricter gates in the upper part of the funnel, fewer sales opportunities make it to the middle stages. This approach significantly reduces the workload for Sales, Inside Sales, the Technology Department, and the Technical Center. When opportunities are seen as investments by the organization, it becomes easier for sales teams to implement this strategy daily and secure the necessary commitments from customers.  

The sales director acts as the gatekeeper, working with the team to define the criteria for each stage of the funnel, thereby guiding the conversion rate between stages.

If an opportunity fails to pass a gate, it means we will no longer invest in it. In practice, this often requires uncovering why we aren’t receiving the necessary commitment. The analysis frequently reveals that the customer is simply not at that stage in their decision-making process. In such cases, it indicates that the opportunity is not yet ready to move past the gate. 

Many sales directors view the hit rate as an indicator of market feedback on the product. While this is generally true for the overall hit rate across the entire funnel—from opportunity creation to win/loss/termination—the sales team’s approach heavily influences these outcomes. However, within the funnel, the hit rate can be actively managed by setting stricter gates between each stage. 

Raising the quality of sales opportunities leads to a clearer focus on the most promising leads and reduces the overall effort required from the entire organization.

Why so important 

Fewer sales opportunities provides the sales team with more time to proactively generate new leads. Many sales teams operate in a cycle: when the funnel is full, they have little time to seek new opportunities. Once the funnel empties, they scramble to generate as many new leads as possible under pressure. By regulating the funnel and maintaining a “healthy funnel structure,” the team can consistently dedicate time to generating new sales opportunities, avoiding peaks and valleys. 

Benefits

• Easy overview of hot opportunities due to fewer opportunities in the lower stages 
• Significantly fewer internal resources / investments required in sales opportunities for the same result  
• More time for opportunity generation (e.g. in collaboration with representatives/agents) 
• Better, more reliable forecast (e.g. from quota 67% hit rate in scenario B compared to 15% in scenario A) 

Conundrum

What makes this use case so challenging is the question: “Are we willing to enforce strict gates in the upper funnel stages and require strong commitments from customers early in the sales process?”

Action steps 

• Define the sales process and the respective sales actions in the various stages of the sales process 
• Define a “weak gate” and, in comparison, a “strong gate” for the stage between “Identify” and “Qualify” and analyze the result: How many sales opportunities would have progressed? How specific would they have been? 
• Define all gates for all stages 
• Analyze the opportunities on a weekly basis and checks whether they are all sorted correctly 
• After 6 months: Review the stage gates and work in best practices 

Our take-aways

• Strong commitments in the upper part of the funnel are, for example “access to the decision maker to better understand the business case”, “a joint on-site meeting to better understand the technical application“ or ”access to information on the manufacturing process where the machine will be positioned” 
• Customer commitment in return for an expensive investment: We have learned that the funnel is lived consistently when sales directors perceive the gates as a condition for the organization to invest in a sales opportunity (e.g. trial, technical concept, …).  
• The higher the deal size and the longer the cycle time of an opportunity, the more stages make sense. In reality, we work with the funnel described above up to a deal size of €10-15 million and a cycle time of 12-18 months.  
• Sales managers find it particularly difficult to ask for customer commitments. This is where coaching from the sales director / sparring from other sales managers is helpful and necessary. After initial trial and error with sales opportunities, there is often an “aha” moment when it becomes clear that it is perfectly acceptable to expect something in return from the customer for our investment in the sales opportunity.
• Stage gates may need to be adjusted for different cultures. For example, in China, they can be defined and requested in a more indirect manner.