2 Steps to Calculating Your Annual Leads-to-Revenue Ratio : Do it yourself

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You are running a business and you are to calculate the Annual Leads-to-Revenue ratio. It is a deep relation between converting leads and revenue goals. The volume and quantity of these leads is very important for a sales team that is working to achieve the revenue goals every year. You need to assess number of leads that you have to produce in order to reach the revenue target. This will provide your sales team enough steam to get going and maintain control over the sales the whole year.

Maintaining an approach through simple mathematics

There are several units you will need including your revenue target, leads-to-customer ratio, and the revenue you receive per order or deal that depends on the type of business you are running. Calculating the Ratio, I recommend you get a paper and pencil and a calculator.

Step 1
Set-up a revenue target, It can be anything from 1 to Trillions. For explanation purposes, we use 50 million as the target that we have to reach in an year. Now we have to determine the raw data for the revenue collected per the closure of every deal. We take it as $250,000. Using simple mathematics we derive a formula that is simple division.
Target revenue / per deal revenue = converting leads
$50,000,000 / $25,000 = 200 leads

Step 2
Now we have the number of leads but we know that not every lead is going to convert the way it should so it is important to make other important calculations that consist of leads that will be according to the customers.
Explaining as an example, only one out of every four leads you generate might end in a sale resulting in a 25% lead-to-customer conversion rate. Using this, now we have to calculate the total number of leads that will satisfy our revenue goal for the year using the leads-to-customer conversion rate. Again by using simple mathematics, divide the number of converting leads you need by your lead-to-customer conversion rate. We use a 25% conversion rate as an example.

converting leads / lead-to-customer conversion rate = total number of leads
200 converting leads / 0.25 lead-to-customer conversion rate = 800 total number of leads

Importance of using Annual Lead-to-Revenue ratio
The calculation of these ratios makes the recognition of exertions that we make for the business. It helps us ascertain that the we are in the correct flow and productivity is following. This results in the better apportion of resources which makes sure that the sales never stop. These two mathematical equations make a sales team ready to prepare a report and present it to a Chief Financial Officer with the Solid story that you have prepared to get the very resources that you require for the business. This will prepare you make correct decisions and you will know what you specifically need for the business and for supporting sales. Finally, it will result in profits and the exact revenue that you made target at the beginning of the year.
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