Use This Tool to Calculate Lead to Revenue

Posted by Dan McDade

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on Jun 21, 2018 1:44:09 PM

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Accurate lead/revenue projections are a powerful tool that all B2B organizations need to manage sales and marketing. Problem is, most lead to revenue calculators out there are overly simplistic.

A useful lead to revenue calculator includes all critically important metrics—including the impact of lead qualification and lead nurturing—on bottom line results. A good one differentiates between prospects and SQLs—which have way different potentials to impact revenue. And an excellent tool provides you with insight into the value of inbound vs. outbound leads.

Guess what. We have a great revenue prediction calculator. PointClear’s Lead/Revenue calculator can help you avoid that sinking feeling when you, as a marketing or sales leader, realize one day that you’re behind, and the quarter or year-end is looming.

Below is a screen grab of the PointClear lead to revenue calculator using hypothetical numbers and followed by descriptions of the line items. 

Click on the button at the end of the blog to download the calculator and input your own numbers for accurate predictions of the leads you need to generate the revenue you've projected.

Here’s what a lead to revenue calculator should look like (PointClear’s calculator using hypothetical numbers):Lead_Calculator2018

Let’s walk through this example row by row:

  1. We start with prior year revenue—what did you bring in last year? This is a key benchmark.
  2. Your lead to revenue calculation needs to include an estimate the percentage of revenue that will be retained from the previous year. Many companies estimate their retention levels on the fly, without setting goals, measuring them, and actively working this avenue of revenue generation.
  3. In the example, $2,240,000 is revenue retained.
  4. Of course the current year goal is a key data point.
  5. Subtract the revenue retained to get the net new revenue required.
  6. Now project the revenue you expect to generate through inbound leads. Our experience at PointClear over the past 20 years (as well as industry benchmarks) shows inbound leads, properly followed up by sales, contribute 35% of total net new revenue required. (Note this is less than commonly thought. We’ve found that marketers often overestimate this contribution—it needs to be measured.)
  7. In this case, inbound leads contribute $966,000 to the net new revenue goal.
  8. Next it’s time to project the percentage of revenue you expect to generate by nurturing leads. We have found that by properly nurturing both inbound and outbound leads you can triple your lead generation results—and close an additional 11.25% toward your net new revenue goal by expending this effort. (Leads that are worth continuing to work across sales cycles range from those that are qualified/no immediate interest to those that are qualified/no response—read more about determining which leads you shouldn’t give up on too soon here.)
  9. The dollar value of that nurture effort in this scenario is $310,000.
  10. Now project the revenue you need to generate via outbound leads. This is the number that closes the gap between net new revenue required ($2,760,000 in this example) and what you can expect to generate via inbound and nurture ($1,276,500 in this example). In this case, outbound must generate $1,483,500.
  11. Of course the average deal size must be factored in to the calculation: in this case it’s $200,000.
  12. Now you know the net number of outbound deals that are required to close to meet your revenue goal (7.4175).
  13. Next, input your average close rate, in this case 10% …
  14. … to tell you the number of SQLs required (7.1475 divided by 10, or 74.175).
  15. Factor in the outbound marketing lead rate, which in our experience averages 5% (pre-nurture, see #8 above).
  16. If you need 7 deals and 75 SQLs, and there is a 5% lead rate, you need almost 1,500 prospects to hit your number.
  17. While many companies expect that sales reps source 60% or more of their own business, the reality is that each company should provide a higher percentage of potential new business in the form of SQLs. Hence, the 35% used in this example.
  18. This is the number of new prospects (not including inbound, inbound nurture or outbound nurture) that need to be worked assuming sales finds 35% of its own business.

Take a look at what YOUR lead to revenue calculator looks like

PointClear’s Lead/Revenue calculator factors in metrics frequently ignored by others’. It’s a model you can adjust to fit your company. So download this calculator, then multiply, add zeros, adjust percentages or make whatever other changes you feel will shed light on your lead source prediction process.

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Another thing you can do—pick up the phone and call me (678-533-2722). Or, contact me here. I can add value by walking you through the process and customizing the calculator with you. I’ve walked through this scenario with many clients and industry contacts. Most have been surprised to see their actual metrics in this format, and how they stack up against other companies. This simple tool has helped them and others better meet the challenge of making their number, year-over-year. It can help you too.

 


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Revenue - Inbound - Nurturing = The GAP. We guarantee you'll be surprised by your actual metrics. Try our Lead Revenue Calculator
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