Building A Revenue Generation Machine Is All About The Numbers
I’ve written about the math and science of B2B lead generation a number of times, but it bears repeating because we keep talking with CEOs of very successful companies who need to be more intimate with the numbers associated with their marketing and sales efforts.
We can break the entire revenue generation process down into a set of very basic mathematical equations and then align marketing and sales tactics directly to those numbers. Improve execution and improve revenue. It’s really that simple.
Ignore the numbers or disparage the numbers at your own peril.
But embrace the numbers, align your strategy and tactics for improving the numbers, track the numbers and work to optimize the numbers daily, weekly and monthly, and you will be handsomely rewarded with a scalable, predictable and repeatable revenue generation machine.
Ready to go?
1) Total Visitors Or Session To Your Website
I’ve seen several CEOs dismiss this number as a frivolous vanity metric. That would be a mistake.
When you look at your prospects’ buyer journeys objectively, their visits to your website are the start of their journeys. Blow it here and you’ll severely diminish your chances to generate leads and revenue with your investment in marketing.
The number of people coming to your website is critical. This number should be improving month over month. This is a number that can be improved month over month. Content creation, website page optimization, referral links, social media and paid demand generation campaigns will drive visitors to your website, and email marketing campaigns will drive returning visitors to your site.
The importance of visitors to your website cannot be underestimated. When we work with clients this is always something we look to optimize early in our engagements.
Since we’re talking math, let’s look at the power of this number. Here’s an illustration.
Your website is currently getting 2,000 visitors a month and you’re converting at an extremely low rate (.5% as an example). That means you’re generating 10 new contacts a month, and if 80% of those are leads (this is a bit higher than industry averages, but with solid content, this is a number most of our clients realize), you would be looking at eight marketing-qualified leads each month.
Here’s why those visitor numbers are important. If you can improve your conversion rate to 1%, you’ll double your number of leads each month to 16, and if you can go from 2,000 visitors to 3,000 visitors, you’re now looking at 24 new leads each month, or a 300% improvement.
Website visitors matter. Track this number weekly, review it monthly and make sure you know your daily visitor number so you can do projections mid-month, ensuring you never miss your growth numbers.
2) Net New Contacts
We mentioned net new contacts in the website visitors section. This is the number of new contacts added to your prospect database. This number is important because it represent the audience you have easy access to.
Want to talk to everyone in your database? Send them an email. Done! You want this number to go up month over month. This database is another asset you’re nurturing. The people in your database will be in all stages of their buyer journeys. Don’t worry that they’re not buying yet. Don’t worry that they’re not asking to talk to you.
Just keep the conversation going with these people and they will surface when they’re ready. Here’s some more math.
You have 5,000 names in your prospect database. Every month you email them once or twice. Every time you send them an email you get 20% of the list to open the email (these are conservative numbers) and 4% to click through (also conservative).
That’s 200 people you’ve sent back to your website, and if they convert as we discussed above, that’s two more people added to your lead totals, simply from a basic email marketing campaign.
Now improve your 5,000 names to 6,000 names. Then work on your email campaign click-through rate and get that to 5%. Now you’re getting three new marketing-qualified leads a month from email, a 50% improvement.
This is how the math works. Small adjustments compound to produce bigger results.
3) Marketing-Qualified Leads (MQLs)
Not all of your new contacts are going to be marketing-qualified leads. An MQL is defined as someone who is in an active buyer journey. They may be early, but they are engaged. Typically, we know this because they signaled you by downloading, consuming or attending an offer you provided to your prospect database or website visitors.
If your marketing is firing on all cylinders, then you should be turning roughly 80% of your new contacts into MQLs.
MQLs are a common measure of overall marketing performance and one that should be increasing month over month. However, understand that certain marketing decisions can impact this number dramatically.
For example, if you decide to ungate content or even ungate certain content or ungate a percentage of your content, MQLs will decrease. Here’s a related article on gating and ungating content.
Marketing people across industries are testing the idea that sales opportunities represent a better measure of marketing’s performance than the traditional MQL measurement.
Our recommendation to most companies, especially companies just starting to build a revenue generation machine, is to track MQLs and use that as a baseline for performance in context to the other numbers discussed in this article.
4) Sales-Qualified Leads (SQLs)
To keep our vocabulary clean, SQLs are people who ask to talk to you. They actively emerge from the forest, announce themselves and let you know they are far enough in their buyer journey to be ready to speak with you or one of your reps.
They may not be qualified, but they want to talk to you. What you do with this opportunity is up to you and your team.
For example, at Square 2, we’ve decided to talk with anyone who wants to talk with us. But some companies want to do more qualification before assigning an SQL to a rep. Regardless, there is math in play for this metric, too.
Let me illustrate again. Typically, SQLs represent about 20% of all MQLs. This could be higher or lower depending on your industry, products/services or strategy.
There are very specific ways to improve this percentage. If we use our previous data and start with 24 MQLs a month, applying our 20% number, you’re looking at five SQLs each month.
One way to improve this number is by adding more late-stage buyer journey offers to your website. Another is by adding live chat to your website. People who are ready to talk to you will happily engage via chat.
If you can improve your conversion rate from 20% to 40%, you can double the number of SQLs from five to 10 a month, a 100% improvement.
5) Sales Opportunities
OK, hang in there, we’re almost done. Sales opportunities are SQLs that the sales team agrees are legitimate opportunities. The prospect has budget, they’re talking to the right people and they have a stated need based on the qualification criteria your sales team is using. These people are qualified opportunities.
If the machine is working well and marketing is generating high-quality leads, then the conversion rate from SQL to sales opportunity should be roughly 50%.
It’s important to note that the other 50% might still be great opportunities, but they could be earlier in their buyer journey, they may need more nurturing or simply they may need more time before they’re ready to be considered a sales opportunity by the sales team.
If you’re getting 10 SQLs a month and half are sales opportunities, that’s five new opportunities handed over to sales as a result of marketing.
6) Proposals/Agreements/Contracts Submitted
Once sales does its thing, these opportunities should progress to the point of needing to see your contract, agreement or proposal.
The data we’ve seen from clients shows that most clients have around a 40% close rate on proposals submitted. If you have five sales opportunities, you’d be closing two of them each month.
But our work has helped clients improve that close rate, and by designing a more remarkable, guided and educational sales process and working more closely with prospects during the sales process, we’ve seen close rates run closer to 80%.
Since you’re becoming a math whiz, you now know this would translate into a 100% improvement, and a doubling of the number of new customers from two a month to four a month.
7) New Customers Signed And New Revenue From New Customers Signed
We’re pretty close to the end here, so hang in for one more number. Of course, this is what matters most, and it’s the number of new customers and the amount of new revenue generated.
When you run the numbers all the way through the cycle, this is the result. Right now, our illustration is showing four new customers a month. If you need six or eight, you have to back into the math all the way up and through the revenue cycle we’re illustrating here.
It’s just that simple. This tells you exactly how many visitors you need, what your conversion rate needs to be, how many MQLs, SQLs and sales opportunities you need and what your close rate needs to be to hit those new customer goals.
It’s all about the math, the science and the numbers.
One last tip. Revenue comes from new customers, but it also comes from existing customers, and it’s often easier to find when people know, like and trust you — as existing customers typically do. Don’t forget to actively work your customer base for additional revenue opportunities.
Email them customer success stories that highlight cross-sell or upsell scenarios. Offer them additional educational content that supports cross-sell and upsell opportunities. Encourage them to reach out to their rep or contact them to talk about cross-sell and upsell opportunities.
Active customer marketing can add up to 20% in additional revenue to your revenue goal each month. Don’t overlook it.
These numbers can easily be spun up into a dashboard that allows CEOs to keep tabs on marketing and sales performance. Yes, this is a high-level perspective, but for CEOs with a marketing and sales team, these high-level numbers are enough.
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Posted By Author Mike Lieberman, CEO and Chief Revenue Scientist
Mike is the CEO and Chief Revenue Scientist at Square 2. He is passionate about helping people turn their ordinary businesses into businesses people talk about. For more than 25 years, Mike has been working hand-in-hand with CEOs and marketing and sales executives to help them create strategic revenue growth plans, compelling marketing strategies and remarkable sales processes that shorten the sales cycle and increase close rates.