How Many Leads Are Needed to Achieve Sales Goals?

“How many leads do you need to hit your sales goals?”

That is one of the most common questions that I hear from marketers focused on demand generation.  I have heard it so many times that I developed a model that can be used to answer that question in about 3 minutes.

My model looks at the following components:

1. Monthly sales quota.  After a look of experimentation, I decided that a monthly model is really the best one.  It focuses the demand generation team on constantly filling the lead pipe and it more accurately characterizes the pipeline as a fluid mechanism that is always changing.
2. Pipeline sources.  I’m surprised that so many people ignore this step.  The marketing team develops a model for leads based on 100% of the sales quota without accounting for the fact that the sales team should be responsible for developing their own opportunities.  The channel team needs a target too.  This model helps facilitate an alignment discussion with all the parties to make sure it is clear where we expect the pipeline to come from.
3. Average deal size.  This is a key metric when developing demand models.  My model accommodates for the fact that you should see different average deal sizes from each opportunity source.  In many cases, direct sales teams develop larger opportunities because they are fishing in large accounts.  In an ideal world, you would develop these deal size metrics with data, but if you don’t have the data, at least make a logic-based guess.
4. Lead pipeline conversion metrics.  The terminology in my model is based on the Sirius Decisions waterfall, but it doesn’t really matter what you call your lead stages.

With these four simple components, you can quickly determine the number of leads of each stage you need to develop per month. I find that the higher up in the funnel (AQLs in the Sirius Model), the more variable the results.  The best measures are the ones lower in the funnel – ideally SQLs (when leads turn into opportunities).  But in my experience, MQLs are the most practical measures because it filters out some of the low-quality AQLs, but you don’t have to wait until the leads get through their qualification steps.

I’d love to hear what you think about the model – please add your comments below.

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