I’ve read and heard (from a well-known industry analyst firm) that best-in-class companies close 30% of sales qualified leads while average companies close 20%.
Those results factor in lead leakage of between 52% to 86% of the marketing qualified leads put into the top of the funnel.
If you do the math, this tells us that sales reps are expected to work 1000 marketing qualified leads down to 14 to 48 sales qualified leads and close 20% or 30% of those leads respectively; and end up with 3 to 14 deals. Not very efficient, right?
And, guess what the reality is? Sales isn’t qualifying down from 1000 marketing qualified leads to 14 sales qualified leads. They don’t have the time or interest (or the DNA).
So, what happens? Best case a stack of leads (virtual or otherwise) is rifled through, a few leads are cherry-picked out – and other leads are left to go into the black hole frequently called CRM.
Imagine Spending $208,350 on Marketing Leads That Are Trashed Immediately
One of the biggest software companies in the world has a division that spends over $200,000 per year on leads that sales refuses to follow-up on.
Why don’t they follow-up? Because a few years ago the sales group asked us (PointClear) to validate those so-called leads and it turned out that only 1.8% were even qualified companies, let alone what could be termed sales qualified leads.
Less than 2% of the total were merely qualified companies, mind you. None were actually leads.
What chance do you think there is that sales will work 9,000 “leads” when they know just 162 of them are even qualified companies? The sales close rate on these leads is zero percent. What a waste.
Imagine That You Could Deliver 100% Sales Qualified Leads to Sales
This is not the place to explain how you can deliver 100% sales qualified leads to sales (but I can certainly tell you if you want to know, give me a call at 678-533-2722 or shoot me an email, firstname.lastname@example.org). This is the place to show how amazingly low the close rate can be to break-even on converting marketing qualified leads to sales qualified leads via lead qualificant and nurturing, and what the return is on good sales lead management:
Margin is 60% (probably conservative for software and services)
Cost per sales qualified lead is $1,250
Assume that the deal size is either an on premise license sale or a SaaS model with net present values calculated – for here we just want to make the match easy.
For a $300,000 deal ($180,000 in margin) the close rate would need to be .694% (not even 1%)
For a $100,000 deal ($60,000 in margin) the close rate would need to be 2.08%
For a $10,000 deal ($6,000 in margin) the close rate would need to be 20.8%
If the average company could, in fact, close 20% of sales qualified leads the ROMI would be $28.80 for every $1 invested (again based on 60% gross margin).
I find that close rates are generally over-stated. When I ask sales executives what percent of sales qualified leads they can close their answer is generally in the 60% to 80% range. What they mean is that they will close 60% to 80% of what they thought they would close. Close rates probably can be a lot lower than most people think. Not that they should be. But they can be.
Finally, no sales executive wants to admit that they are closing one-out-of-10 opportunities (as an example). So, they don’t provide visibility into the pipeline until late in the game which causes inaccurate forecasts and other pain.
What is a healthy close rate for your solution(s) and/or service(s)?
How much money could you save and how much more revenue could you generate if you understood the optimal close rate and provided sales with sales qualified leads?
Did you know that leads cost more than you think, but probably a lot less than you are currently paying?
Contact me at email@example.com for help evaluating your situation.
Topics: Lead Qualification, Lead Management, Cost Per Lead