Lead Management: The 3-Headed Monster – Part 1July 27, 2023
“What gets measured gets done.”
This powerful saying holds true in many aspects of life, and it’s particularly relevant in the business world. When speaking with contractors, one recurring request stands out: “We want more leads, more leads, more leads!” (followed closely in popularity by, “We want better leads…”) While increasing leads is undoubtedly essential for growth, there’s a hidden opportunity lying within the existing leads – a chance to dramatically enhance revenue and financial performance through better lead management.
Imagine you are planning a road trip from Miami to Denver. You might ask, “Could I drive all the way from Miami to Denver on 1 tank of gas?” The answer isn’t so simple without data. To determine whether it’s possible, you need to know two things: the distance from Miami to Denver and how many gallons of gas your car burns every mile. It’s about 2,070 miles between the two cities. If you have a massive 85-gallon tank and averaged 25 miles per gallon, the math says it’s possible. In the transportation world, we have “miles per gallon,” and in business, a similar metric exists – “revenue per lead.”
The Great Equalizer
Revenue per lead acts as an equalizer, enabling businesses to compare productivity across salespeople with varying lead volumes. By tracking and measuring this metric, you gain valuable insights into the average productivity per sales lead. Even if you give Johnny 30 more leads than Billy, you’ll still know their effectiveness per lead. Thus, the foundation of a successful lead management program begins with three core components:
- Measuring leads
- Qualifying leads
- Managing the sales team using those metrics
Let’s talk about the importance of measuring leads and how it can transform your business performance. In future articles, we’ll discuss qualifying leads and effective sales team management.
The first step in your lead management journey is measuring your leads. Revenue per lead becomes the crucial metric to track. However, knowing this metric alone is not enough. You also need to know how many leads you’ve burned to achieve a specific revenue total.
Consider this example: You run 10 sales leads and manage to close 5, resulting in a 50% conversion rate. These 5 closed leads generate $20,000 in revenue. To calculate your average revenue per lead, divide $20,000 by the total number of leads burned (10 in this case). Therefore, your average revenue per lead would be $2,000. For every lead that you worked and sold or didn’t sell, they each averaged $2,000 in revenue.
Why is this crucial? It provides a clearer understanding of lead costs. Often, companies think losing a lead costs only the lead’s value (e.g., the $350 it might have cost for purchasing the lead). However, you must also factor in the average revenue per lead lost – in this case, $2,000. Therefore, a lost lead not only costs the lead price but also the revenue potential associated with it. In other words, it also costs the average sale amount because it was not converted to a sale. For our example, we won’t do a deep dive into the full cost per lead formula, as it deals with certain factors not covered in this article.
Fresh Tracks Ahead
Now that we recognize the significance of measuring leads, let’s explore a simple yet effective method to manage your leads efficiently. Whether you’re a salesperson, manager, or owner, this process is applicable to your role.
Begin with a basic spreadsheet designed to measure sales productivity for each salesperson. Across the top, list the months (January to December), while the left side displays the number of leads run, leads sold, conversion rates, total revenue, and average revenue per lead. This straightforward table allows you to track sales productivity on a monthly and year-to-date basis.
Every time a salesperson receives a lead, mark it in the corresponding cell. Similarly, when the lead is closed, or lost (unsold), mark it accordingly. As the month progresses, the data adds up, providing valuable insights into individual and overall performance.
With this system in place, you can identify trends and outliers. Suppose one salesperson consistently generates $4,000 revenue per lead while another achieves $2,000. By comparing their approaches, you can identify best practices and implement training to improve the lower-performing salesperson’s numbers. Or you may use this information to eliminate some bad habits of his, and enforce new policies to help the team.
By consistently measuring sales productivity and identifying areas for improvement, you can elevate the performance of your entire sales team. Over time, this process becomes a powerful management tool, enabling you to ensure accountability, motivate your team, and continuously optimize performance.
Get the Lead Out
Beyond individual performance, tracking revenue per lead offers an opportunity for broader analysis and process improvement. The data collected can highlight inefficiencies in your sales system, allowing you to fine-tune and streamline your lead management process for enhanced results. It also helps you when purchasing leads, as you may be able to track the more valuable leads from one vendor vs. another. Or use the information to negotiate a better deal.
Measuring leads is the critical first step in any successful lead management program. Revenue per lead provides invaluable insights into individual sales productivity, enables better lead cost analysis, and drives overall business growth. Put this into practice, and you’ll have a powerful tool at your disposal. Remember, what gets measured gets done!