Every business venture is undertaken with some targets – you start with some target figures which you want to achieve within a specified time. These figures could be related to marketing, growth, sales or revenue. The most significant among these is perhaps revenue targets since that drives all other targets.
You know the amount of revenue you want to generate by selling your product. But how do you reach that number.
The numbers will be different for everyone – but, the basic calculation would be the same. You have to know the revenue you want to generate in one year. Divide that by 12 to get an average for a month. Next, calculate an average amount of revenue you make by selling each unit of your product or what you make from a deal. So, now you know how many units you have to sell or deals you have to make in order to fulfil your monthly target.
A simple example can help to clarify this calculation.
Your revenue targets for the whole year is $120,000. So, your monthly target will be $10,000. Suppose, you get an average revenue of $1000 from the sale of one unit or one deal – you have to sell 10 of those to reach the figure of $10,000 every month.
Of course, the actual situation will not be as simple as this – but you should get the basic idea. There could be many other factors, multiple products, varying profits etc. which you will have to take into consideration while doing your calculations.
This is all like a backward calculation. Once you know the number of units you have to sell, you will need to calculate how many leads you will need to reach that target. Leads are what lead you to a closed deal ultimately and they are the backbone of your sales.
Information about a prospective customer who has shown some interest or intent of buying the product you deal with is called a lead. This information in the form of a phone number or e-mail address enables you to directly contact the person and pitch your product. There is no guarantee that a lead will convert to a sale – most leads don’t actually.
A lead turns into a sales qualified lead when after the initial contact the prospect is still interested in your product and his or her intent to purchase has grown stronger. The possibility of these leads getting closed is high and you need to be focussed on these. On an average about 75% of all leads become sales qualified leads and 20% of those get converted to actual sales. This number will take you to your sales target.You can also include your contacts through friends, family, existing contacts to reach people who might be interested in your product. It is more difficult to convert them into sales because they have not even shown any interest, like leads, towards your product. It is literally a shot in the dark but worth the effort.
So, you can calculate how many leads you need in the first place to start, how many you have to convert to sales qualified leads and how many you need to close. Although these numbers may not be water-tight, you will have an idea about the level of effort you have to make and also get a general road map for yourself or your sales team.