Steve Parks

Monetising Start-Ups - Optimise your sales funnel

After an extremely busy end to 2009, I've managed to use the first few days of 2010 to catch up on reading - and one of the first articles I've read contained the slideshow above.

Tony Wright is the founder of RescueTime a software business that helps business people track and analyse their use of time for better productivity.

He's clearly learned a lot in his entrepreneurial career, because I think the presentation is absolutely spot on in identifying the important things for a startup to focus on - and explaining why they are important. The presentation is based around software or web businesses, but the principles apply to any business.

You can read his full blog post here, or here are his key points:

You should look at your business as a funnel (which, incidentally, is how every salesguy on the planet looks at their sales pipeline).

What’s at the top of this funnel varies on what type of business you have. Maybe it’s page views from organic SEO and SEM. Maybe it’s warm leads from a bank of cold-calling lead-gen folks. And maybe your conversion event is a software purchase (like ours is). Maybe it’s an ad-click. Maybe it’s an account signup. But trust me, you have a funnel.

So when trying to figure out what the hell to work on as an entrepreneur, go worship at the alter of the funnel. That means:

* Measure the hell out of everything. If you don’t know many many new visitors are coming to your site, what percentage of them do something, what percentage of THOSE people, click signup, what subset of THOSE people actually successfully signup, and what percentage of THOSE people are paying you a month later, the first thing you should do is work on metrics. Don’t go overboard, but know your funnel.
* Work your way UP the funnel, not down (if you have the financial luxury to do so). Most entrepreneurs ask “how do I get people to come to my site so it can grow?” The answer most often is down the funnel: the product isn’t providing enough value, communicating clearly enough, engendering enough passion, or causing people to want to tell their friends.
* Seek the low hanging fruit in the funnel. That means that you should seek out where people are escaping your funnel. If you get tons of visitors but no one clicks on anything (high bounce rate, low time on site), chances are your value prop is confusing or isn’t very compelling. You might need to improve the product, but chances are you just have to improve how you talk about it.
* Seek leverage. The lower you attack the funnel, the more it helps. If you do something to improve your retention that will help you forever. If you do something that gives you a boost in acquisition (like a SuperBowl ad), the value will be short-lived (unless you have a true viral loop).

The full blog is well worth a read, and I urge you to step through the slides above.

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Hat tip to GigaOm for recommending the article.

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