How to establish your core funnel

Your core business funnel seems simple: leads enter, move through stages, and convert to customers. Yet, most SaaS startups struggle to get this right! Without a well-defined core funnel you track over time, you'll have no idea what's driving business growth. You can't run your business, grow it, or tell a compelling fundraising story.

Instead of taking for granted how your core business funnel works, treat it like a product. Your product has a dedicated owner who sets the vision, strategy, and roadmap. They align product teams around shared goals & milestones and iterate over time, adapting to changes in the business and market.

Your core funnel should be no different: Set a vision for how you acquire customers and provide them with ongoing value. Set revenue goals that reflect that value, and milestones for your team to reach those goals, and iterate. Your funnel can align your team and investors to your story or sow fear, uncertainty, and doubt. Getting it right is as critical to scaling as product-market fit is to viability.

In this post, first, we'll share how we’ve seen this go wrong. Then, we'll outline how to establish your core business funnel properly — with a single owner, clear definition, reliable data, and systematic processes to maintain it.

4 common mistakes startups make

1. They fly blind

Early-stage SaaS startups often expect their core funnel to just work. This is never the case for their product, which has a roadmap that reflects their vision, incremental milestones, and revisions as they ship and learn. Your core funnel deserves the same clarity, detail, and attention.

If you don't define your core funnel early, you’ll find that you trust your data less and less as you grow. Your teams will lose sight of what actually drives conversions and become reactive. Most importantly, you won’t know what’s working to acquire, retain, or expand customers and thus can’t take actions that accelerate growth.

2. They do too little

Startups often leave out steps or fragment their core funnel ownership across teams. Typically, they don’t track Retention and Expansion as core funnel stages and let Revenue teams (Sales, Marketing and Customer Success) define the stages they each own in silos. This yields a disjointed customer experience, incompatible data across teams, and inability to track and drive conversions. Once again, you’ll not know what actually works to acquire, retain, or expand customers and thus can’t act to do so.

3. They do too much

Making every customer interaction a core funnel stage or metric isn’t helpful either. For example, even if you always email leads before a demo, this need not be a core funnel stage. Core funnel stages should be pivotal moments in the customer journey and your workflow. If you cram every interaction into your core funnel, you degrade the customer experience and give your team information overload. The result is again the same: you won’t know what works and thus can’t take actions that reliably increase growth.

4. They don’t sustain it

Some SaaS startups iterate on their core funnel haphazardly and wake up one day to find that they cannot trust any of their data, let alone improve customer acquisition, retention and expansion. If you don’t regularly review your core funnel to ensure it still reflects how you acquire customers and track changes you make to it over time, you will end up with utterly useless data.

At this point you know the outcome - you won’t know what’s driving conversions and can’t take action to grow customers or revenue.

4 steps to setup up your core funnel the right way

The key to successfully establishing your core funnel is to treat it like a product. The right approach emphasizes ownership, direction, data, and systematic iteration:

1. Establish ownership

First, your core funnel needs an owner who can adjudicate between all teams, but with a focus on Marketing, Sales, and Customer Success. Generally this is a founder, Chief Revenue Officer, Head of Revenue Operations, or Head of Growth. Their mandate is to manage the core funnel stages and KPIs, just as a Product Leader is ultimately responsible for a product’s features and KPIs.

Although tasks can be delegated and parts of the core funnel may be owned by each revenue team (e.g. Marketing owns Visitor to Opportunity), the buck stops with the funnel owner. Their other responsibilities can include:

• Managing overall performance to hit or exceed revenue targets
• Reviewing core funnel reporting, e.g., volume, conversion rate, and MoM growth
• Ensuring revenue teams have a uniform understanding of core funnel stages and KPIs
• Verifying that customer and revenue data is accurately collected and reported on

2. Define stages and KPIs

Next, the owner must define core funnel stages and the KPIs for each stage. These definitions unify your teams around a single core funnel, the metrics that matter, and what drives revenue. Until you define your core funnel stages and KPIs, systematic insight is impossible.

Define core funnel stages

Start by identifying the top-level stages. These must be mutually exclusive and sequential (one after another, no skipping) to allow you to:

• Gain insights: KPIs like conversion rate are only possible if your funnel stages are sequential.
• Eliminate bad customer experiences: With funnel visibility, you can create consistent, positive experiences.
• Invest in scaling: You'll see what works and be able to create repeatable and scalable processes

In the example above, we’ve stated the goal of each stage and defined its entrance and exit criteria. For example, MQL is defined as positive 2-way communication indicating intent. Leads exit this stage if and only if they schedule a demo. This level of detail ensures your revenue teams have a shared understanding of your core funnel stages and correctly track KPIs.

Important: Startups often fail to make their funnel stages sequential. If you do not do this right, you won’t know conversion rates and your historical data will be useless.

Define KPIs

Next, determine the KPIs you need to measure and manage core funnel performance effectively. We recommend the following for each core funnel stage:

• Volume: The absolute number of leads/customers that reach each stage each month.
• Conversion rate: The percentage of leads converting from the prior stage each month.
• Time-in-stage: The average time spent in each stage.
• Month-to-month growth: The change in volume compared to the previous month.

IMPORTANT: Always document how you calculate KPIs for each core funnel stage. You’ll know what data to collect and can ensure all teams & tools use the same definitions.

Align stakeholders

It's important for the funnel owner to involve key stakeholders in defining core funnel stages and KPIs. This must include Revenue leaders (Marketing, Sales, and Customer Success) and may also include Finance and Product, so that the funnel suits their needs.

This gives them skin in the game and empowers them, resulting in increased collaboration, commitment to goals, and accountability.

Lastly, even when you do this, there will be times when consensus is hard. It’s the funnel owner's job to get stakeholders to "disagree and commit" to keep things moving. This means faster iterations, better conversion, and increased revenue

3. Collect funnel data

With core funnel stages, KPIs, and calculations specified, the next step is to collect the right data. Start by specifying how you’ll do this by working side-by-side with your key stakeholders, and only then build your data-collection systems to create events, integrations, and code.

Specify it

Specify exactly where you will source the data for each core funnel stage and its KPIs. If you use a CRM (we recommend Hubspot for early-stage companies) this may be simple, with all data coming from its objects.* If your stack is more complex, this will take longer. Before you build, inform any stakeholders who gave input on core funnel stage and KPI definitions, so they continue to have skin in the game.

Build it

We’ve found that simpler is better when building your core funnel i.e. the fewer tools the better.** You should also keep data collection and transformation as simple as possible. This makes it easier to understand and make changes to your core funnel over time, meaning you can improve faster.

4. Measure and manage your funnel

Now that you have a well-defined core funnel and reliable data, you need to create a reporting process and a framework for acting on these reports. We repeatedly find that startups struggle to draw insights and act on them because they lack a consistent process. To avoid the extremes of analysis paralysis and everyone working on their own, startups must systematically analyze and act on their core funnel.

Measure it

Given that the purpose of your core funnel is to acquire customers and grow revenue, your reporting must show how the core funnel generates customers and where your recurring revenue comes from.

We recommend starting with an MRR build. It’s a report that tracks monthly visits, leads, and eventual conversion of leads to customers, along with monthly recurring revenue (MRR) from new customers, expansion, contraction, and churn. Having this consistent view of your leads, customers, and revenue over time is the absolute minimum for effectively understanding your business, growing revenue, and fundraising.

For our own clients, we also create cohort retention reports to track expansion, contraction, and churn and top-of-funnel reports to better understand new customer acquisition. We recommend you do the same and suggest starting with Equals templates and integrations.

Manage it

To effectively drive customer and revenue growth, you must systematically use core funnel reporting to run your business. There are three jobs you’ll need to regularly do:

1. Review your funnel metrics to know if you’re on track
2. Decide if anything needs to be done and do it
3. Follow up on any actions taken

We recommend doing this on a weekly cadence and have found the Observe, Orient, Decide, and Act (OODA) loop to be a useful framework. Its data-driven, iterative nature prevents your teams from acting on impulse or making decisions by seniority alone.

Making this an organizational habit also means you’ll be proactive instead of reactive. Your core funnel will become your means to drive customer and revenue growth, rather than a constant source of worry.

What are you waiting for?

Your core funnel is as critical to the success of your business as your product, and it demands the same attention and intention. When mapped, measured, and maintained properly, it accelerates your search for a repeatable, scalable, and profitable growth process.

This is not an easy journey, but there have never been better tools, such as Equals, and people, like us, to help early-stage founders get this right.

The sooner you begin this journey with your team, the faster you’ll understand what drives your business, grow your customers and revenue, raise funds to scale, and fulfill your mission for both your customers and your team.

Additional Notes

*A Note About Hubspot

If you’re using Hubspot, fantastic! It’s a great tool, especially for early-stage startups. However, it doesn’t force Contact Lifecycle stages to be sequential out of the box. Thus, you can skip lifecycle stages e.g. convert a Lead to Opportunity, skipping MQL and SQL. If you fail to force sequential lifecycle stages you cannot measure funnel conversion rates. Make sure you do so.

**A Note About Tools

We typically implement 3 foundational tools for B2B SaaS startups:

• Equals to easily analyze data or create standard reports, share them with your team, and ingest data from your CRM, billing tool, data warehouse, or other sources
• Hubspot CRM to track your core funnel, enforce sequential lifecycle stages, and even invoice customers or do basic website analytics (Equals integrates freely with it)
• Stripe to invoice and track subscription customers (Equals integrates freely with it)

If you have high inbound traffic or are a B2C or Product-led B2B startup, you need a more robust tool to track visitors, sessions, and events. We recommend Rudderstack’s free tier.

Rahul Reddy and Kyle Doherty are co-founders of RDC, a full service RevOps & Analytics agency that helps startups adopt foundational SaaS reporting, tools, and processes to accelerate their revenue growth. Their experience includes building the Business Intelligence and Growth Operations at Trusted Health, high leverage Business Operations and Growth Operations work at Intercom, and Data Science and Full Stack Engineering roles earlier in their careers.