What is the net present value of your lead stream?
Today, everyone cares about making their goals. Wouldn’t it be nice if your pipeline projection looked like the graph to the right? These days, that’s rare.
Financial wizards focus on net present value (NPV) as a way to measure the value of something in today’s dollars. In a recent conversation, a colleague and I came up with the idea of measuring the NPV of a lead stream. The goal is to assess the current value of the flow of leads. Since the flow of leads ultimately becomes the company’s revenue, this is a key measure of the health of a business.
Interactive Data Corporation. (IDC), the industry analyst group, recently reported that companies in the business-to-business space will need 20-30% more leads this year than last to generate the same revenue stream. This means that most companies will need a very good lead generation campaign just to maintain their current market share. Also, the market has become so competitive, with many companies looking for leads with the same “ideal lead” characteristics. All of this indicates that having a highly effective lead generation program is critical to success. And there are new tools and best practices that make it easier to generate more leads, faster.
So what should I do?
1. Measure your current conversion rates. You can do this by creating three charts:
- Number of leads at each stage of the sales cycle
- Dollar value of leads by stage
- Average time in each stage
Looking at these graphs will reveal the weak links in your process. By applying your conversion rates to every step of the process, from lead to opportunity to sale to pipeline, you can assess the strength of your sales funnel and the gap between where you are now and where you need to be. It will show that you need more leads, you need to convert more leads to opportunities or more opportunities to sales.
2. Once you have identified the area of highest return on investment, identify the tools, process changes, skills training, and campaigns/programs needed to address the problem. Create an action plan and put it into practice.
You may have been considering implementing new lead generation tools or campaigns, but have been holding off due to concerns about spending the money. There are others who have implemented a new tool, but have not integrated it into their sales and marketing processes. Either way, you are leaving money on the table!
ACT NOW! Going even one quarter behind and not generating that 25% incremental leads you need to hit your goals means you need to generate 2 x 25% more leads in the next quarter to make up the shortfall. Acting now will make a big difference to the results at the end of the year.