The sales funnel is the sum of all the sales cycles and activities a company is attempting to close and turn into revenue. Typically the sales cycles are identified with labels such as leads, prospects and customers. Generating a lead, qualifying the prospect and closing the customer are the steps of a typical sales cycle.It’s called a sales funnel because of the progressive relationship between the quantity and quality of sales cycles in a funnel, the higher the quality the lower the quantity. There are more leads than qualified prospects. There are more qualified prospects than customers.Every sales funnel reaches an optimum level of quantity and quality of sales cycles. Say, for example, Acme Roofing sells a standard roofing installation for $5,000 at a margin of 20%. To generate $100,000 in revenue Acme needs to close 20 average installations. However, the closing percentage of leads is 5%. Acme needs to have 400 sales cycles in the sales funnel to close 20 deals.