Confession: when I began my marketing career, I didn’t know what a “lead” was. I came from a creative background where marketing meant over-designing websites or crafting a clever tweet. That’s okay. Those things work in the early days when any net new site traffic translates into “crazy” growth (think a few visitors turning into thousands per month).
However, there will come a point where you can no longer index your site’s traffic to your company’s revenue growth. A spike in traffic will not equate to a spike in revenue. Some day you’ll be in a board meeting and will be asked “what if we doubled marketing spend, does that double growth?”. I like simple marketing equations but not overly-simple. The faster your marketing efforts can mature to align directly with sales, the faster you’ll solve the elusive spend x, make y growth equation.
This equation is why your marketing team needs a lead quota. What’s a lead quota? No different than your sales team and their bookings quota, your marketing team should be accountable for a minimum number of leads provided to your sales team during some time period (month, quarter, etc). Here are three reasons why this will make your life easier.
1. Sales and marketing alignment is easier
Pay attention to the successful companies you follow. My guess is the great ones have incredible growth alignment across their sales and marketing departments. This alignment doesn’t happen by accident. It is incentivized.
Creating a lead quota for your marketing department and holding them accountable for their number means they are deeply responsible for their sales team’s success. This tension between sales and marketing will result in great strategy meetings, impromptu “oh crap” meetings when numbers are low, and real empathy for what each team struggles with.
You want your marketing team to wake up every day and worry about keeping your sales team busy. And when they hit their quota for the month you should hear cheers and high-fives between both departments. This makes growth fun.
2. Budgeting and forecasting is easier
One of the most challenging things you’ll do at your startup is create a marketing budget. Most early marketing budgets start with the question: “how much money do I have to spend on marketing?”. You know how much your server, people and office costs are and you know how much you have in your bank. Knowing these things, your marketing budget is back-of-the-napkin math on what you feel comfortable spending on marketing each month. This is the wrong approach.
You want to change marketing budgeting to start with the question “what do I need to spend on marketing?”. But how do you know what you you need to spend on marketing?
Before you budget this way, you need to first understand a few things:
- How much revenue do you expect each sales rep to book (quota)?
- What does it cost to generate a qualified sales lead?
- How many leads does each salesperson require to hit their quota?
Number three becomes your marketing team’s lead quota. You can now do the math on how much you need to spend on lead generation for your sales department. If you expect a rep to book $1,000/month in MRR (monthly recurring revenue), it costs $50/lead, your sales reps require 50 leads per month to hit their quota then you’ll need to spend $2,500 per sales rep on lead generation. Make sure that is a line in your budget.
Stop asking “what can I spend on marketing?” and start asking “what do I need to spend on marketing?”.
3. Creating a revenue machine is easier
Predictably growing your company means you’re likely trying to solve the elusive growth equation: How can I spend x to make y? In early stages, equating marketing efforts to sales results is challenging. You may not have the infrastructure to track leads through conversion, you haven’t experimented enough with marketing channels or [enter some other excuse I’ve used here].
However, you will need to figure this out. Whether you’re just trying to build a sustainable revenue model or you’re seeking capital to grow your company, someone is going to ask how your company puts money to work.
You can solve the equation and answer the questions quicker by implementing a lead quota. Once you’ve proven your marketing strategy can consistently hit lead quota and your sales team is successful at converting those leads into customers, you’re on the verge of cracking the code.
This is when things get fun. You and your team can start asking questions like: What would it cost to hit x revenue this year? What if we lowered our cost to acquire a lead (CAL)? How much financing do we need to hit $x in revenue this year? Or, we only have $x in our bank and our investors expect us to hit $y MRR this year – is it possible with our current “machine”?
You want the growth of your company to be on your terms and inputting more capital should result in more sales. When you and your team sit down to plan for next year, you can come prepared with answers to growth questions and even dream about what things would look like with an infinite bank account. As your marketing efforts continue to mature, you will eventually arrive in a world where your marketing inputs drive sales output. Your goal is to mature your marketing strategy so “eventually” comes sooner. Marketing lead quotas are a great way to make this happen.