How many leads will it take to hit next years sales objective?

How many leads will you need to reach next years sales objective? This is a simple question, but one many people do not want to answer. Why? Simple, the answer is "a lot."

You could look at the current year's run rate, then see how many leads came into your sales organization that got you to that number. The danger is that you will include sales to your existing customer base in your calculation. Look at how many new customers you gained, and the number of leads that were generated to get to that number. There will be a stark difference between the two numbers. The other error you need to avoid is the failure to include the churn rate of your customer base, or how many customers did you lose? One more factor to consider: New customers typically don't buy at the run rate of your existing customers in the first year. For the sake of this discussion, we will assume they purchase 1/2 the amount of existing customers.

Let's look at a fictional company and see how these numbers play out.

• Annual sales volume: $100,000,000.
• Number of existing customers: 2000
• Avg. purchase of existing customer: $50,000.
• Churn rate: 15%
• Customers lost: 300
• Avg. purchase of new customer: $25,000
• Number of new customers needed to replace lost revenue 2 x 300=600.
• Sales growth target: 10% or $10,000,000
• Number of new customers need for growth target: 400
• Total of new customers actually needed to achieve 10% growth: 1000

Now, if you need 1000 new customers, how many leads do you have to generate? Assume that you need five hot or warm leads to gain one customer. (I am being generous.) You will need 5,000 hot or warm leads.

A study by the Direct Marketing Association revealed a average response rate of 2.61% for direct marketing programs. Using that number, to generate 5000 leads, you would need 191,600 impressions.

It's just math, right?

You can plug your own company's numbers into these calculations. The important thing is to include all the variables. The biggest issues I have experienced in marketing are an overly optimistic view of the response rate of a marketing campaign and how many of the leads generated will turn into a sale.

You should have all of the data available inside your company. Some of it will take work to figure out. However, you must do this exercise to find out where you are, and what it will take to hit your revenue objectives.

You can't build a sales and marketing plan based on wishes and good intentions. It takes discipline, and more than a little work.

Time Enough for Selling

I often have conversations with people regarding their sales targets. If you have been in the sales and marketing game long enough, you will recognize these simple rules: 

• Next years targets are always higher than this years.
• These targets will be achieved by increasing the quota of every sales person.
• To ensure that sales knows we are serious, there will be a process of tracking the sales person's progress. This process will take up the time of the sales person, leaving them LESS time to pursue the increased sales goals.
• To ensure we are getting the most profit from our sales, we will approve all quotes at headquarters. We can't trust our sales team to make the right decisions.

In summary, the strategy is by making life difficult for the sales team we will achieve increased sales.

Sounds crazy? If you want to be horrified, find out what percentage of time your sales team actually spends selling. If you ask your sales team you will hear a number from 25% to 50%. If you do some actual research, you will find out the number is closer to 10%. What are the biggest time wasters? Administration and problem solving. Together the can eat up more than 45% of a sales persons time. That great new process you implemented that has the sales person filling out forms, building spreadsheets, reporting, etc. just ate up 30% of available time. Add another 15% for the time a sales person spends on trying to find out the status of the order they have already closed. Go down the list and add up all the time wasters.

Are there ways of getting more out of your sales team? Of course there are. But if your sales team doesn't have the time to learn and implement them, they are all for naught.

Step 1. Ask you sales team what the time wasters plaguing them are.

Step 2. Eliminate them.

This may seem simple, but it likely won't be. Things that waste time have a way of justifying themselves. Question anyone who says something is necessary. Force them to prove it. Opinion doesn't count here.

"What are the facts? Again and again and again -- what are the facts? Shun wishful thinking, ignore divine revelation, forget what "the stars foretell," avoid opinion, care not what the neighbors think, never mind the unguessable "verdict of history" -- what are the facts, and to how many decimal places? You pilot always into an unknown future; facts are your single clue. Get the facts!"

- Robert Heinlein, The Notebooks of Lazarus Long, from Time Enough for Love