Lead Generation Math Made Easy

By Heather Baldwin

You’ve just been given your 2006 sales quota and it’s huge. Or perhaps you’ve set yourself a goal to sell 30% above your quota next year because you want to buy that new car you’ve been eyeing. How do you get there? Create a lead generation plan, says Kendra Lee, president of Centennial, Colorado-based KLA Group and author of Selling Against the Goal (Dearborn, 2005). “Once you define your goals it’s time to do the math and determine how many leads you need to achieve those goals,” she says. “Those numbers help you track results and figure out if your goals are within reach.”

Identifying the number of leads you need to generate to achieve your goals starts with an understanding of two numbers.

1. Your closing ratio. This is the number of qualified opportunities you need to work to close just one opportunity. If you generally close 2 of every 10 opportunities, your closing ratio is 1 out of 5 or 20%.

2. Your average sale amount. To determine your average sale, add the total dollar amounts of your sales for the previous year and divide the total by the number of sales you closed.

Once you know these numbers you can calculate how many leads you need to generate to achieve your sales goals, Lee says. For example, say your closing ratio is 20%, your average sale is $25,000 and you need to sell $1.2 million to achieve your goal. With an average of 21 selling days per month, a few taps on the calculator reveals you’ll need to generate 240 qualified leads per year, which works out to 20 per month, or an average of one qualified lead per day.

Sound impossible? If so, Lee says to take a look at the two primary variables in the calculation – your closing ratio and your average sale size. Improving your closing ratio or increasing the average size of your sales will significantly reduce the number of leads you need to generate. For example, say you learn to more effectively qualify new leads and spend your time only on well-qualified, best-odds opportunities. This might help you close one out of every four sales or 25%. Then say you decide to pursue some larger opportunities that seemed too daunting last year. Or you focus on selling additional services to your current opportunities. This might help your average sale grow to $28,750. Doing the math with these changes shows you now only need to generate 167 leads per year or 14 per month.

Why are there figures important? Because once you know the number of leads you need to generate, you can determine how many lead generation plans to implement throughout the year. It’s all a numbers game – achieve the right targets in lead generation and you’ll meet your goals, provided your closing ratio and average sale figures remain consistent. In short, any goal is reachable with a plan, but you can’t create a plan without the raw numbers.

For more information, visit www.klagroup.com.