Where Should You Focus in Your Funnel? 4/2

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📰 Today's Edition: Where Should You Focus in Your Funnel?

You've launched your product. Traffic is coming in. Some people are signing up. A few are even paying. But growth feels like you're pushing a boulder uphill.

Most founders I talk to obsess over two things: driving more traffic and making more money. The top and bottom of the funnel. Everything in between is a black box.

But the problem is almost all of your work needs to happen in that middle part. The part nobody wants to look at because it's messy, tedious, and hard to measure.

Let me walk you through how to actually debug your funnel.

Should you just drive more traffic?

No. At least not yet.

I see this constantly with early-stage founders. Traffic is the easiest metric to understand. You can watch it go up in real time. It feels productive.

But if you're pouring thousands of people into a broken funnel, you're just wasting money and time.

The reason to drive traffic early isn't to scale. It's to test channels and gather enough data to understand what's actually working.

You need some volume to learn from. But you don't need millions of visitors when your middle funnel is still unoptimized.

What about the bottom of the funnel?

Before you do anything else, validate that people actually want what you're selling.

I'm talking about finding product-market fit with at least five people who are willing to pay for your product and actually use it. 

This doesn't have to be through your automated funnel. Get on the phone. Do it manually. Whatever it takes.

Once you've validated this, then you can start thinking about the rest of your funnel.

Even after you validate the bottom, you still shouldn't obsess over conversion rates there. 

Not yet, at least.

Where should you actually spend your time?

The middle of the funnel. The path from signup to paying customer.

This is where founders lose the game. It's the hardest part to measure.

The typical B2B SaaS funnel has several stages. In simple terms, it goes from visitor → lead → qualified lead → customer. 

Each transition point represents an opportunity for people to drop off.

Your job is to follow a small group of users or customers and learn everything you can about them to understand what makes them convert. At this stage, your goal isn’t to convert thousands of people, just a few.

Before these people start using your product or become customers, you should learn as much as possible about them. 

Call them. Talk to them. Get to know their motivations and pain points.

Once they begin using your product, observe their behaviour closely. Where do they get stuck? What actions do they take? What keeps them engaged?

This individual tracking won't scale forever. But you need to understand the path before you can optimize it.

How do you know what's broken?

Most founders have no idea what happens between signup and purchase.

Figuring out non-converters is hard. Do they lack the problem you solve, or is the product experience broken? 

First, define who they are and why they’d use your product. If it’s not a persona mismatch, dig into the funnel to see where and why they’re bouncing.

Once you understand the conversion barriers, you need to work on each transition point.

This might mean improving your onboarding flow. It might mean fixing your product. It might mean changing your messaging during the trial period.

The work here isn't glamorous. It's looking at data. Talking to users. Testing small changes. Iterating constantly. And, not being afraid to pick up the phone or do things manually sometimes. 

How do you debug by customer acquisition channel?

Once you understand your overall funnel, you need to get more granular. Not all traffic is created equal.

Let's say you have 100 people coming to your website. Maybe 5 came from ads (you spent $50), 50 came direct or unattributed, and 45 came from referral codes.

The overall numbers might look fine. But when you dig into each channel, the story changes completely.

Those 5 people from ads cost you $10 per click. If your product is $100 per month and nobody from ads converted, that's a problem. 

You might need to run more ads to see if any of those conversions came from paid traffic. If you run another 100 people through at $10 per click, you're spending $1,000. That's expensive. You better have some conviction that this channel can work before you spend that money.

If nobody's converting from ads after your initial test, don't double down on ads first. Try other channels.

Now let's talk about referrals. If you're offering $10 off or one free month to new subscribers and the referrer, that's a cost. Don't treat it as free. You need to track whether those 45 referral visitors are actually converting, and at what rate compared to other channels.

With only 45 people, you probably don't have enough data yet. But as you grow, dig into who's converting among those referral visitors.

And then there's direct traffic. This is the tricky one.

About half of most companies' traffic is unattributed in Google Analytics. That's normal. But it creates a problem, when half your traffic is unattributable, and makes your traffic harder to decipher.

Should you optimize underperforming channels?

Here's something interesting about successful companies: they tend to find channels that work right out of the gate, even with basic, unpolished campaigns. And typically it’s one maybe two channels. Not typically a lot of channels. 

If you put reasonable effort into a channel and it's not working at all, move on.

Optimization is for things that are already working. If a channel is dead on arrival, optimization won't save it.

You might think, "Well, maybe if I just improve my ad creative" or "Maybe if I optimize my landing page for this channel." But successful companies usually see some signal from a channel immediately, even with straightforward campaigns.

Different ad channels work differently. Facebook ads operate completely differently from Google ads. YouTube ads can be surprisingly cheap. TikTok is the current craze. Ads are also cyclical, so a channel that doesn't work now might work later.

But in the beginning of your startup, your job is to find the one or two channels that show promise quickly. Focus there.

Create a separate funnel for each channel. Track conversion rates by channel. See which channels are driving not just traffic, but qualified traffic that converts.

Then double down on what's working rather than trying to fix what's broken.

What should you do right now?

So to recap, track 20 users individually from the moment they hit your site to the moment they convert or churn. Write down every action they take. Call them. Talk to them.

Find out if they are the right customer persona? If they are, what is their biggest drop-off point? Why are they not converting?

Fix that specific problem. Not by guessing, but by talking to users and testing solutions.

Then move to the next drop-off point and repeat.

Most founders want to put their foot on the gas pedal. But if your car isn't running right, going faster just breaks it more.

Fix the engine first. Then drive fast.

Dunky, the "funnel-flying" hippocorn

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