Quite simply, every business has goals. Some may seek to increase revenue while others aim to maintain customer satisfaction. How do you define a goal? How do you set yourself up to successfully meet your goal? Read on to find out.
What's a Goal?
If you want to meet a goal, you need to first have a goal. We recommend that you start with a good goal: one that's specific, measurable, attainable, realistic, and time-bound or SMART. A SMART goal isn't saying, "We want to increase sales"; it's saying, "We want to increase sales by 15 percent by the end of this fiscal year." The main goal, increasing sales, is included. It's made more specific with the inclusion of the phrase "by 15 percent" and time-bound with "by the end of this fiscal year." We know that sales numbers are measurable (otherwise this blog post would be a moot point!). If there is a good demand for this product or service and the fiscal year is a sufficient length of time away, then this goal is also attainable and realistic.
So you've set a goal, and it's nice and SMART. Now it's time to start tracking the right metrics to meet that goal. This list specifically addresses the metrics you should consider to track goals surrounding revenue and growth.
Cost to Acquire a ...
Lead
How much does it cost your company to acquire one new lead? This is a foundational metric to track when deciding which avenues are best for sales reps and marketing teams to pursue. To calculate, choose a time period that mirrors your goal (e.g., one fiscal quarter or one fiscal year). Add up your total number of leads generated and divide by lead generation costs during that period (salaries are optional).
Marketing Qualified Lead or Sales Qualified Lead
As a variation, you may also want to calculate how much it costs to generate a qualified lead. Use the same method as you use to calculate the cost to acquire a lead, but add your total number of MQLs or SQLs instead.
Opportunity
First, calculate your expenses for generating opportunities. This should include lead acquisition costs plus anything that helps an opportunity come to light. Frequently, business development or inside sales teams will work in this function, although including salaries is still optional. Next, tally up your number of opportunities for the set time period. Then, divide the number of opportunities by the total cost.
Customer
Determining customer acquisition cost is the next step. Take the number of customers you've acquired in your specific time frame and divide it by the amount of money you've spent on generating those customers. This should include costs from lead or opportunity generation plus any additional money spent during the sales or "closing" process.
Why These Costs?
If you're trying to increase revenue by a certain amount or percent, it's important to know how much you should expect to put out to bring in enough to meet your revenue goal. You may also want to calculate:
- Cost to upsell a customer if relevant to your business model. Use the same method as above, but only use the budget you'd put toward presenting new opportunities to existing customers
- Customer lifetime value, especially if your goal covers an extended period of time. To find this, calculate the length of time you keep a customer and multiply it by the average revenue from customers during one unit of that time period.
How Many _____ You Need
New Sales
This number can include new customers or upsells to existing customers. Based on your goal and average deal size or customer lifetime value, how many new sales do you need to reach your revenue goal?
New Opportunities
Because you know how many new sales you need, you can calculate approximately how many opportunities you need to reach that goal. This number is your opportunity to customer rate. To find it, divide the number of won opportunities for a time period by the total number of opportunities (won or lost) in that same time period. To turn this into a goal for new opportunities to be created, divide the number of new sales you need by your OTC rate.
New Leads
With a goal for new opportunities, you can next back into new leads. Take the number of opportunities created during your time period and divide it by the number of new leads generated during that same period. You can also do this for MQLs or SQLs. This is your lead to opportunity rate, MQL to opportunity rate, or SQL to opportunity rate.
And So On ...
If your goal involves inbound marketing or website lead generation, you'll want to go one more step backward and calculate the visitor to lead rate for your website. If you're attending many tradeshows to generate leads, use the average number of qualified leads generated at a show to calculate how many shows you need to attend (and how much that will cost).
Next Steps
With your goal in place and the necessary metrics tracked, it's time to roll up your sleeves and begin the hard work of reaching your goal. Give yourself some mini-goals at regular intervals in your main goal time period. These mini-goals serve as checkpoints to ensure you stay on track and will end up successful at the end of that period.
