All sales people know their sales target right? Well you would think so. Amazingly many people don’t or their company haven’t given them one. However, even more surprising is how few sales people understand how many leads are needed each month to deliver that target. In many cases they guess the number of sales leads.
How many leads do you think you would need to get just 20 orders a year?
Using typical and common conversion rates, you’d need more than 1300 leads to return 20 orders in a year. That’s more than 100 per month. For many sales teams – that’s a big number – however it’s good to know what you have to deal with.
How to calculate a sales lead target and some of the main factors that you need to consider during the process.
Calculating a sales lead target.
It’s important to calculate a sales lead target because:
It helps create an effective sales funnel. They are called sales funnels for a reason – and logically if you think of where you would start – potential leads which if you pour them in the top, the more results you’ll get out of the bottom of the funnel. However you shouldn’t overfill the funnel as it won’t be manageable.
Sales teams will therefore need a certain number of leads to achieve the sales targets each year – too many leads and they won’t be able to cope with the workload to manage them, too few and they won’t be able to hit their sales target. Therefore it’s important to know what is the “right” number of leads.
It provides an understanding between Sales and Marketing. Generating new sales leads is mostly a Marketing responsibility and thereafter Sales people need leads to hit their targets. So Sales and Marketing need to work together closely to deliver the Businesses growth goals. A lead target starts the process of an understanding between Marketing and Sales teams, and reaching the new sales lead targets should one the Marketing departments main objectives whether outsourced or not.
How to calculate a Sales lead target
To calculate a sales lead target, you need to look at the sales pipeline with a different perspective – put simply backwards from the sales target to the number of leads needed. The steps are simply as follows:
- Identify a sales target – individual or team.
- Use an average order value to convert the sales target into a number of orders won.
- Use an average win % to work out the number of proposals needed to achieve the target number of deals
- Use an average conversion rate to calculate the number of first time appointments needed to provide the required number of proposals
- Use an average qualification rate to determine the number of leads needed to generate the desired number of appointments.
There is a simpler way! – use this on-line calculator (click below) from a colleagues site Business Services Growth which will do it for you.
The lead generation process will be started by the Marketing operation, with support from the Sales team. The business will have to analyse historic sales performance so you can see what conversion rates to use.
There are some success factors to remember:
- It’s a team effort. Sales and Marketing must work together to set the targets – both sides need to be agree the targets.
- Conversion metrics vary. The metrics needed to calculate the lead targets (average order value and conversion rates for each stage) will vary according to the nature of the business. You will therefore to have to calculate different lead targets for each product/service line, business unit, market etc
Now what happens?
In many cases business will then need to work out where will those sales leads come from and this is a speciality area where we can help.
Fill out the form or call 0208 242 6667 and speak with one of our advisors.