One key to successful B-to-B lead generation programs is to calculate exactly the right number of qualified leads to provide to sales—as part of your campaign planning. If you generate too many leads, you’ll be wasting precious marketing dollars. If you generate too few, your firm may be at risk of missing its revenue targets, with potentially disastrous financial implications. Moreover, you’ll annoy your sales team by not supporting them properly. So, let’s look at a neat way to figure out in advance how many leads your company needs, so you can invest accordingly.
This easy method uses your sales people’s quotas to back your way into the number of leads required, based on sales productivity per lead. You will need four numbers:
- The average revenue quota per rep, in the period, whether it’s a year, or a quarter, or a month.
- The average revenue per order, or per closed deal.
- The percent of their quota that the sales people generate naturally, without the help of leads. This revenue typically flows from repeat sales, from deeper penetration within the accounts, or from referrals.
- The conversion rate from qualified lead to sales.
The first three numbers are likely to come from a discussion with sales management and your finance department. The last number you probably have on hand, from sales and marketing experience.
Here’s an example of how to do this calculation, based on a set of hypothetical numbers that might be common in large-enterprise selling environments. We are saying that each rep is on the hook to deliver $3 million in sales in the period. As a first calculation, subtract out the percentage of that revenue that the rep can produce without any leads supplied by marketing. In this example, it’s 40 percent self-generated, leaving 60 percent, or $1.8 million, that the rep needs help with from marketing.
We divide that remaining revenue by the average deal size, which is $60,000 in this example, to get the number of closed deals that each rep, on average, needs to complete to deliver on the revenue quota. In this example, it’s 30 deals.
Finally, we divide the number of deals required by the lead-to-sales conversion rate, which is 20 percent in this example. Voila. Now we know that each reps needs, on average, 150 qualified leads to make quota.
You can also take this to the next step and calculate the campaign inquiries required by dividing the 150 leads by your inquiry-to-lead conversion rate. With that, you can plan your campaigns to generate enough inquiries for your pipeline that will convert to a known number of qualified leads, and thereafter to the needed revenue.
So, with this simple math exercise, you can avoid waste and keep your sales reps as productive as they can be. Do you use another method that you can share?
A version of this article appeared in Biznology, the digital marketing blog.