In earlier stage and rapid growth companies, managing the funnel as a holistic system is critically important.

My personal experience with it started at my previous startup. In 2003 I founded Submittal Exchange in Des Moines, Iowa, a Software-as-a-Service (SaaS) platform for communication on commercial construction projects.

I grew the business substantially, and in 2011 a larger software company acquired it. I worked for the acquirer for two additional years, managing my business as a unit of the larger entity and also taking over responsibility for another business they had acquired. Throughout this time, I was responsible for the marketing and sales results for my business as well as other units of the company that acquired us.

In one particular quarter in 2012, my sales organization missed their sales goal significantly, even though my sales leadership had told me they thought they were on track.

The next morning my boss, the CEO, called me and demanded answers about what went wrong and where our revenue would go in the future. I spent hours digging through data from our CRM and building a complicated spreadsheet model to answer his questions.

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I found that our sales shortfall was completely predictable. Our data showed a clear story starting with warning signs higher up in the funnel that had occurred months earlier, but at the time, no one had been watching for it. The experience was a wake-up call for me personally about the importance of managing my revenue funnel as a holistic system.

Asking the right questions

I left in 2014 to build a new startup, FunnelWise, that focuses on helping other businesses with their revenue funnels. I followed the Lean Startup model and spent an initial year doing research and talking to other marketing and sales leaders about how they manage their funnels.

The stories I heard from them were similar to my own experiences. In many businesses, CRMs and other tools can answer backward-looking questions like: How many leads did we create yesterday? How many calls did we make last week? How many deals did we close last month?

But CRMs do not provide clear answers to the more important forward-looking questions such as: Is my business on track for its future revenue goals? If it is not, what needs to change? Is my marketing and sales funnel functioning properly as a unified, healthy system?

The Revenue Funnel Science framework

As a byproduct of my conversations with hundreds of other business leaders, I began documenting a framework for how businesses should look at their funnels. The framework is known as Revenue Funnel Science because it provides a scientific, analytical methodology to measure, forecast, and optimize your marketing and sales funnel.

The framework consists of three levels, and each level has multiple components. The levels are:

1. Build the foundation

Establish key foundational measurements about what is moving and changing in your funnel. This includes net new movement, conversion rates, velocity, and aging, along with being able to create sub funnels for different lead sources, campaigns, sales reps, and other dimensions that are important to your business. While CRMs and marketing automation software may capture the data needed for these measurements, they don’t provide it in a manner that is helpful without further work on your end.

2. Connect the dots

Use the foundational measurements to build forecasts and answer forward-looking questions. This includes reverse engineering your revenue goals, calculating your funnel momentum and using it to forecast where your revenue results are headed, looking at CAC:LTV, and performing cross-funnel comparison analysis to identify which levers you can pull or dials you can turn close gaps in performance or grow revenue even more.

3. Operationalize the funnel

The best analysis in the world isn’t worth much if you don’t deploy it within the business to impact your decision-making, but many businesses fail to take this final step. Operationalizing your funnel means establishing a cadence of internal meetings with the appropriate business leaders to review the right information at the right time, along with providing more detailed drill downs into key questions that are frequently asked by CMOs, CSOs, CEOs, CFOs, and Board members.

FunnelWise is continuing to grow as a new member of the Midwest startup community, and it has been exciting to work with many other companies across the country to help them with optimizing their marketing and sales funnels.

Recently I published a digital book about the Revenue Funnel Science framework to help others learn from the results of our research. You can download a free copy of my book at www.revenuefunnelscience.com/book

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Matt Ostanik is the Founder & CEO of FunnelWise and the author of Revenue Funnel Science: How to Optimize Your Marketing and Sales Funnel.