July 28, 2017

Tying the Lead Generation Plan to the Financial Forecast

(This is Part 2 or a 2-Part post)


The last time we talked about tying the sales forecast to the financial plan and the fact that many entrepreneurs don’t do this well.  Let’s go upstream.  Now, let’s discuss how to tie the lead generation plan to the sales forecast.  You simply can’t achieve your sales targets and growth without a strong and quantifiable lead generation plan.  And tying the lead generation plan to the financial plan is less likely than tying the sales forecast to the financial plan.

Of course, entrepreneurs are trying to forecast contract sales and cash balance 1 to 12 months into the future.  But how can you tell if you have a chance of achieving that forecast?  The sales forecast can help tell you what is going to happen in the next 90 days, but how about beyond that?  Most entrepreneurs have no clue.  But it is possible to forecast and plan for.  This is done through quantitative lead generation planning and setting specific monthly metrics.

So how do we tie the lead generation plan to the sales financial forecast?  The first step is listing out all of your marketing lead generation categories.  These could include:

  • SEO
  • Search Engine Marketing
  • Viral Marketing
  • Email marketing
  • Content Marketing (like blogs, eBooks and other programs)
  • Sales outreach calls
  • Resellers
  • Trade shows or conferences
  • Speaking engagements
  • Targeted blogs
  • Social Media
  • Webinars
  • PR
  • Publicity
  • Engineering as marketing (offering free tools and audits sponsored by you)

Yours could be different.  You could have more or you could have less.

But listing these is not sufficient.  You need to assign numbers to these categories by month and then plan programs which will achieve these monthly numbers.  So, for instance, if you have the above lead generation methods, your marketing department (or you) is committing to generating the following number of sales opportunities by category for the next three months:

Now, you have a forecast of leads by month into the future and you should have programs that realistically support these goals for each month.  But, how do you tie this to the financial sales forecast?  This is more complex.  Ideally, you should know and apply historical conversion rates and time frames from step-to-step in the sales process.  If you don’t have these metrics, you should begin to track them.  It is pretty easy to determine how many days it takes for an average prospect to get from say the demo stage to close and what percentage of these “real” prospects actually close.  It is more about discipline to track this information than anything else.  Most organizations simply lack the discipline to do it.

So, look at your metrics once you have some history.  In the meantime, you can do your best to guesstimate these.  So how do you forecast how many leads turn into discovery calls?  Well, if you don’t have historical statistics, you may determine that, on average, 25% of leads turn into discovery calls within 30 days and 70% simply go away.  Now you know how many discovery calls you will have in the next 30 days.  Now you need to repeat this for the demo stage.  How many discovery calls lead to demos, how many just die?  And, how long is the lag between discovery call and demo?  Now you can repeat this process.  How many demos turn into the next stage and in what time period.  This progresses all the way to the end of the sales process (closes).  Now you need to do this for every month.  You will find that, in practice, some prospects in the sales process do not move from month to month, so you will need to have some metrics built in to accommodate the fact that, in any given step, a prospect may move forward, stay where they are or be lost (no longer a prospect).

Now, let’s assume that you have a three-month sales cycle (on average).  For simplicity, let’s assume that you have the following sales process for those three months and that your conversion rate from step-to-step is about 50%.  So, 50% of your opportunities in one stage move to the next stage and 50% drop out for one reason or another.  Finally, let’s assume that your financial plan calls for 4 new sales 4 months out, 6 new sales 5 months out and 8 new sales 6 months out.  So, what does this look like?  Since 50% of all leads turn into discovery calls the 69 below represents 50% of total leads in month 1 from the above table.  Then each step is 50% of the prior step (obviously, you can adjust this to your own specific metrics).

Assume a 3-month sales cycle

Assume a 50% conversion rate from step-to-step

So, is this company going to hit its sales financial forecast 4 months from now based on the lead generation activity?  Absolutely not.  It is wishful thinking.

This now gives you an understanding of how, or if, you can realistically achieve your sales targets 4-12 months out based on your marketing programs and your sales conversion process.  You can either try to increase the number of opportunities, increase the conversion rate at various stages of the sales process or shorten the time period to close or all of the above.    This will force more discipline on your lead generation plans as you tie the lead generation plan to the sales forecast to the financial plan.  It tells you where you need to invest more resources in individual lead generation categories.  You can also try to determine how much you spend on various categories of lead generation.  This can help you determine how much you pay for leads. Once you understand all of this, you can make better decisions on where to invest valuable time, energy and money in each category.

So, the sales forecast should be used to tie to the financial plan for the next 4 months and the lead generation plan should tie to the financial plan for months 4 and beyond.  Here is an example of the flow:

Discipline in understanding lead generation programs and feeding the sales pipeline is critical to every organization’s success.  The above exercise can really improve both your understanding of what it is going to take to achieve future targets and help you understand where you can improve your marketing and sales effectiveness.

Samples of quantitative lead generation conversion to sales are available by contacting arbordakota@me.com.

For more information on how to better tie out your lead generation process to your financial forecast, please contact arbordakota@me.com.  We are committed to helping entrepreneurs grow their great ideas into great companies.

Ted D