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Breaking Down the Stages of a Typical Sales Funnel

Without sales, your business fails. That just might be the most obvious statement … ever. However, succeeding in business is much more than just selling goods.

You have to continually monitor your sales process--from the moment when potential customers become aware of your company to that moment when they hand over payment--and make ongoing improvements.

Think of the whole process as a giant funnel that you continually fill with new leads. Some leads "leak" out and disappear, while some stay and continue to move down through the funnel, until, hopefully, you land the business.

Here are the five stages of the sales funnel, along with the key actions you should take during each stage.


This is the largest part of the funnel and consists of all of those people who fit into your target demographic. You haven't contacted the leads directly, but it's possible that they have at least heard of your business. 

Remember that lead-to-close ratios vary from industry to industry and business to business, so first learn what the typical lead-to-close ratio is for your type of business. Then ensure that you are doing enough marketing, search engine optimization, social media outreach, and more to keep generating new leads.

During this stage, you also want to track which channels tend to generate the most leads who move to the next stage so that you can focus your marketing efforts on those customers.


As leads move down the funnel, they become prospects--individuals who have shown at least some interest in your products or services. They have registered for free demos, requested more information, or communicated with your company via email or phone call.

Your most important goal during this stage is to brief your prospects on your company and gain their commitment on moving to the next stage in the process.

Qualified Prospects

During this stage, your top priority is to qualify your prospects. It can be a long and time-consuming process, but the stage is essential to closing the deal later.  You will meet with the customer, conduct sales presentations, offer insight, quote prices, and more.

You will spend the bulk of your time during this stage determining if the customer needs your product or services, whether the customer feels he or she will benefit from working with you, and whether the customer can afford to do business with you.

It is critical during this stage t0 ensure that you are working with the person who has decision-making or purchasing power, and that the two of you agree to a timeline for closing the deal.


Even the most qualified customers will drop out at some point. Some will decide that they can't afford your product or service right now. Others will choose to work with another company. A few may just get cold feet and decide to park any decisions on major purchases. 

However, those customers who offer a verbal agreement move down the funnel to the "committed" stage. During this stage, you will manage the details, including finalizing contracts, setting up delivery of products or services, and collecting payment. Remember that customers can still back out during this stage, so it is critical that you remain devoted to closing the sale and that your level of service remains high.  


The lead is now officially a customer. The contract is finalized and signed, and the revenue from the sale is booked. Maintaining the relationship and taking steps to ensure repeat business is now the focus for that particular customer relationship. And you can now you start the process all over again with another customer.  

Your goals should be to continue to funnel larger numbers of good leads into your sales process and to work to increase the percentage of people who move down through each stage in the process.

Ongoing analysis of what's working and isn't working within your sales process will allow you to make changes to price, contract terms, your approach, and more so that you move more people to the transaction stage.

Image Credit: Serge Bystro

Avalara Author
Jaimy Ford
Avalara Author Jaimy Ford