Part 1: Analyzing The Sales GoalOver the past several months, I have had the privilege of advising a few friends who are founders of startups in silicon valley. Among them, two companies standout. Their products are past trials, their cash reserves are low, they target businesses as their customers i.e. b2b sales, and they have an intense urgency to generate revenue. One of them is a tech consulting company and the other is a cloud-based service provider. I also believe in ‘eating your own dog food’, and we will use our own advice for our enterprise SaaS company Pivot It a pioneer in b2b selling automation. The Goal: $1 Million revenue in 12 months Both startups are targeting to generate sales of $1 Million in 12 months. This is not an atypical ambition for many silicon valley startups. I inquired, “Are you sure of your sales goal? What happens if you do not hit the sales goal? What if, I prove to you it is impossible to hit this sales goal? What do you have to lose?” The intention is to seek out the core ambition and the need, to target such a revenue goal. The questions would be the same if the goal was $100,000 in revenue. The founders of both these companies seem to find something intensely personal to hit their goal. Let’s make a few assumptions, and these assumptions differ for each company. For the purpose of this blog and the associated calculation let’s assume the following:
- Average deal value - $ 50,000 (ADV) : This is an estimated based on perceived value of the product offered to the customer.
- Opportunity pipeline conversion ratio – 20% (PCR): Let's estimate that 40% of forecast opportunities result in a proposal, and a 50% of proposals result in a positive win signal, assuming a high competitive value definition.
- Sales qualified lead (SQLs) to pipeline conversion ratio – 50% (SCR): While it is difficult to consider adding layers of qualification to the lead pipeline, it is critical to score leads and qualify them further and this helps allocate precious time from the busy team and founders.
- Marketing qualified lead (MQLs) to sales qualified lead ratio – 10% (MCR): This ratio is difficult to predict during the early stages of a company
Number of SQLs = (GOAL / (ADV * PCR * SCR) ) = 200Many founders are optimists, and they perceive that each lead they touch has a win signal painted on its back. As a startup founder, many times I believe that too, and often think of the above analysis as pessimistic, our deal values will be higher, our message is stronger and reaches more people, we need fewer good leads, we have deep contacts, we have several hot leads, and more. Suppose you have a near 100% conversion rate from proposal to a win signal, or your average deal value is much higher, then adjust the model to your needs. The role of your marketing and content marketing machine Your marketing team is expected to leverage several channels to generate the required site traffic and deliver the mechanism to convert the traffic into marketing qualified leads, mainly click-thru-responses. Marketing, content management, marketing automation, lead management, email marketing, landing pages, and many similar topics, are important to identify the role and accountability of your marketing and content marketing team. Several blogs, market research companies, and vendors, offer excellent information and analysis on these topics. Here is a small list of links for research and how to engage marketing to generate the leads: - Landing pages and conversion - B2B content marketing benchmarks - Marketing automation software Next Up: Based on the above model, each startups need 200 sales qualified leads to generate a million dollars in revenue in the next 12 months. In the next several blog posts we will discuss how to plan and achieve this goal.