What is a Sales Funnel and what are its stages?

*This article regarding the sales funnel is part of the “How to set up your Startup B2B Sales Process in 3 weeks” series.


Essentially a sales funnel looks like a …. you guessed it…. a funnel. Its purpose is to help you navigate the sales process and filter your prospects through the different stages in order to let you narrow down your search for new customers and focus your attention on those that have the highest potential to close.

Different companies can have different stages. At Out2Bound we’ve seen multiple sales funnels but as a general rule, we can look at two main examples of sales funnels depending on whether or not you’re selling B2B Products or B2B Services.


When selling a B2B Product you may have these sales funnel stages

The 3 main parts of the funnel are top, middle, and bottom. Each of these requires a different skillset, mindset, and practice.


At the top of the funnel depending on whether or not you have outbound sales, inbound marketing, or both you may have the following:

  • Suspects – anyone that fits your ICP and is on your radar but you’re not actively reaching out to them.
  • Prospects – any suspect that you’re currently actively reaching out to using outbound but haven’t engaged with them in a meeting, yet.
  • Needs Discovery – here we put everyone who’s agreed to meet with us over a quick initial phone/video call or physical meeting. The goal is to qualify if the prospect has an opportunity for us or a problem we could help solve. At this stage is where prospects are either qualified and transferred for further meetings to discuss a proposal or disqualified.


In the middle of the sales funnel we have the following stages:

  • Additional discovery meetings may be needed to further learn about the customer’s use cases or needs. Still at the Need Discovery stage.
  • POC/DEMO or Proposal (depending on whether or not you prefer to execute a POC/DEMO before you sign a customer or after. We advise you to not do anything without having an agreement with the prospective customer). At this stage of the sales funnel, we have a clear understanding of the needs and scope of a project and are ready to extend an official proposal to the customer. Once a proposal is sent we put a deal on that stage in the CRM.
  • Accepted offer – we usually put this stage to clearly outline when a customer has verbally accepted our offer but have not finalized the contract and signed it.


At the bottom of the funnel we have the following stages:

  • Closed LOST – At this stage, we move any prospects that have asked us not to contact them again, or deals that haven’t been successfully closed and don’t have the potential to reopen in the future. Here we advise you to spend time analyzing the deal. What were the reasons to lose it and what could you have done differently for future opportunities?
  • Closed WON – At this stage, we put deals that have been successfully closed and converted leads into customers. BUT your job is not done! Now your account manager (responsible for the execution of your value proposition comes into play. He/She must build a lasting and repeat relationship with your customers. He/She should also work to further extend contacts, selling more of the same product or service (UP-selling), or offering other services/products as add-ons to the existing relationship (CROSS-selling). Repeat business is the sweetest and easiest way to scale.
  • Follow up at a later stage/Try again later – here we put all prospects that have requested to follow-up at a different time OR are not considered permanently lost.


Conversion rates

NB! Based on our experience at Out2Bound we’ve noticed the following conversion rates that companies usually achieve and are considered satisfactory but still can have a lot of space for improvement.

  • Suspects: Prospects – 100% – you should reach out to anyone that is on your radar!
  • Prospects: Needs Discovery – at least 5-10% depending on your target group agree to 1st meeting
  • Needs Discovery: POC/DEMO OR Proposal – at least 3 – 5% of the meetings held should convert into the next stage
  • 25% of demos held should result in an extended proposal/offer sent
  • Proposal: Closed WON – at least 1 in 5 offers should convert into a deal


Some questions you can ask during Sales Reporting meetings are:

  • What number of people do we need to reach out to book one initial call/meeting?
  • How many calls/meetings do we need to book to have one DEMO/POC?
  • How many DEMOs/POCs do we need to send one offer?
  • What number of offers do we need to send to close one deal?

At Out2Bound we like to say that you can only improve if you measure your performance. As the great W.Edwards Deming says “In God we trust, all others bring data.”


If you found this helpful, you can also check our previous article about SMS startup sales. In the next part, you can find out more about the Buyer process and its stages.

Buyer process
Out2Bound has been acquired by MarketStar