Funnel Analysis: Where Are Your Customers Leaking?

Your sales team closes deals.

But before a deal gets closed, customers go through a journey. They visit your website. They read about your product. They request a demo. They talk to your sales team. Then they decide.

If you could see this journey from 10,000 feet, it looks like a funnel. Wide at the top (lots of people entering), narrower as it goes down (fewer people at each stage).

Funnel Analysis is the practice of measuring how many people drop off at each stage.

A Basic Funnel Example

Let’s say you run a B2B SaaS business. Here’s your customer journey:

Stage	Count	Drop-off
Website visitors	10,000	—
Visit pricing page	1,200	88% drop
Request demo	360	70% drop
Demo completed	300	17% drop
Proposal sent	180	40% drop
Deal closed	45	75% drop

At the top, 10,000 people visit your site.

By the bottom, only 45 become customers.

Your overall conversion rate is 0.45% (45 / 10,000).

But that number hides where the real problem is.

Identifying Your Leakiest Stage

The drop-off from “Website visitors” to “Visit pricing page” is 88%. That’s massive.

This tells you: Most people who land on your site never even look at your pricing. They leave immediately.

Why?

• Maybe your homepage doesn’t explain what you do clearly
• Maybe people land on the wrong page (from a misdirected ad)
• Maybe the page load is slow and they bounce
• Maybe they’re window shopping and weren’t ready to buy

The drop-off from “Proposal sent” to “Deal closed” is 75%. That’s also concerning.

This tells you: Out of 180 proposals sent, 135 don’t convert to deals.

Why?

• Maybe your proposals are too generic (not customized to customer needs)
• Maybe customers are comparing you to competitors and choosing the competitor
• Maybe your price is too high relative to value
• Maybe your sales team isn’t following up

The drop-off from “Demo completed” to “Proposal sent” is only 40%. That’s actually healthy.

This tells you: Once people get a demo, most of them are ready to move forward. Your demo is effective.

Where to Focus Your Efforts

In a funnel, you want to optimize the stage with the biggest absolute loss of people.

In this example:

• Website → Pricing page: Losing 8,800 people
• Pricing page → Demo request: Losing 840 people
• Proposal sent → Deal closed: Losing 135 people

The biggest opportunity is the top of the funnel. You’re losing 8,800 people before they even see your pricing.

Fixing the homepage to get even 10% more people to the pricing page would be huge:

• Instead of 1,200 → 1,320 people visit pricing
• Instead of 45 → 50 deals closed
• That’s a 12% increase in revenue

Compare this to the bottom of the funnel. Even if you doubled your conversion rate from proposals to closed deals (instead of 45, you’d get 90), you’d only get 45 additional customers. That’s improvement, but it’s smaller than the upside from fixing the top.

The Principle: Optimize the leakiest stage first. That’s where the biggest opportunity is.

Segment Your Funnel

Not all customers are the same. Your funnel might look different based on who’s coming through.

Let’s segment by traffic source:

Organic search traffic:

Stage	Count	Drop-off
Website visitors	5,000	—
Visit pricing page	1,000	80% drop
Request demo	250	75% drop
Demo completed	220	12% drop
Proposal sent	110	45% drop
Deal closed	30	73% drop

Paid social traffic:

Stage	Count	Drop-off
Website visitors	5,000	—
Visit pricing page	200	96% drop
Request demo	110	45% drop
Demo completed	80	27% drop
Proposal sent	70	13% drop
Deal closed	15	79% drop

Notice the difference:

Organic search visitors are 5x more likely to visit your pricing page (80% drop vs. 96% drop for paid social).

This suggests paid social is bringing lower-intent visitors. Maybe they clicked your ad but weren’t actually interested in your product.

You have options:

1. Improve your ad targeting: Show ads to more qualified people
2. Improve your landing page: Make it clear within 5 seconds that you sell what they need
3. Stop the paid social campaign: The ROAS is too low. Focus budget on organic

By segmenting the funnel, you see the real problem. It’s not that your sales process is broken; it’s that your paid social traffic is wrong.

Time-Based Funnel Analysis

You can also analyze how long people take to move through the funnel.

Example:

• Average time from website visit to demo request: 14 days
• Average time from demo to proposal: 7 days
• Average time from proposal to closed deal: 21 days
• Total sales cycle: 42 days

This matters because:

• If your sales cycle is 42 days, and you need 3 months of cash runway to survive, you need enough upfront cash to handle 1.5 cycles of pending deals
• If you could reduce the sales cycle to 30 days, your cash flow improves
• If customers are dropping off because they’re waiting too long, speeding up the cycle could improve conversion

Identifying Suspicious Drop-offs

Sometimes a funnel shows a drop-off that doesn’t make sense.

Example:

Stage	Count
Demo scheduled	100
Demo completed	95
Sales team sent follow-up email	200

Wait. 95 people completed demos, but 200 people received follow-up emails?

That’s impossible. You’ve got a data quality problem.

Either:

• The follow-up email is going to people who never took a demo (data is being mixed up)
• The demo completion metric is under-reporting (some demos aren’t being counted)
• The follow-up email is being sent to old leads, not just recent demo takers

This is why we always audit funnel data for inconsistencies before optimizing.

Building Your Funnel

To set up a funnel, you need to define stages that map to your actual customer journey.

For a B2B SaaS company:

1. Awareness: Website visit
2. Consideration: Visit pricing page or request resources
3. Decision: Request demo
4. Engagement: Complete demo
5. Commitment: Proposal sent
6. Close: Deal won

For an e-commerce company:

1. Awareness: Website visit
2. Interest: Product view
3. Consideration: Add to cart
4. Decision: Checkout started
5. Commitment: Payment completed
6. Success: Order placed

For a SaaS freemium product:

1. Awareness: Website visit
2. Interest: Sign up for free trial
3. Engagement: Complete setup/onboarding
4. Activation: Use core feature
5. Consideration: View upgrade prompts
6. Commitment: Upgrade to paid

Each stage should represent a clear, measurable action that a user takes.

What Causes Drop-off?

When you see a big drop-off, there are usually a few culprits:

1. Friction: The next step is too hard or unclear

• Solution: Simplify the process. Make the next step obvious.

2. Value gap: They don’t see why they should proceed

• Solution: Clarify the value. Use the demo or resource to demonstrate why they should care.

3. Timing: They’re not ready yet

• Solution: Re-engagement campaigns. Keep them warm until they’re ready.

4. Competitor: They chose a competitor

• Solution: Competitive positioning. Understand why customers prefer competitors and address it.

5. Price: It’s too expensive

• Solution: Offer a lower tier. Offer financing. Adjust your positioning to justify the price.

6. Wrong fit: They realize it’s not for them

• Solution: This is okay. You’re filtering out bad customers. Better to lose them now than after they sign.

The Takeaway

A funnel shows you where customers drop off. Your job is to fix the leakiest stage.

But you can’t just look at the overall funnel. You need to segment it by traffic source, by product, by segment, by geography. Each segment might have different bottlenecks.

We help you map your funnel, identify the leakiest stages, and track whether your improvements actually work.

Then you can stop guessing about why revenue is low and see exactly where to focus.