3 Steps to Calculate Your Leads-to-Revenue Ratio

By Rebecca Geier | Co-Founder and Brand Strategist

This is a short excerpt from the book Smart Marketing for Engineers: An Inbound Marketing Guide to Reaching Technical Audiences. The complete formula as well as a full description of how to organize your marketing team and define expected outcomes is detailed in Chapter 12

Do you want to know how many web visits and leads you need to meet your revenue goals? Follow these three steps to create the math model for your marketing and sales funnel.

Web VisitsAt TREW, we understand engineers want to know what output comes from certain inputs. Up to now, for traditional marketing, that’s been difficult. But with the transformation of marketing to the digital world, we now have much more insight into the inputs along the funnel such as website visitors, the rate at which those visitors convert to leads, and how leads become sales opportunities.

So let’s go through the formula. I’ll use hypothetical numbers to illustrate how it works.

Step 1: How many customers do you need to hit your revenue goal?
Revenue Goal Divided by Average Sales Per Customer
First, you should agree on your revenue objective. In this example, let’s assume we want to generate $500,000 in new revenue. Next, determine how much an average customer spends with you, also known as your "average sales revenue per customer" (ASP). Let’s assume our ASP is $10,000.

To determine the number of new customers we need to hit our revenue goal, we divide our revenue objective of $500k by our ASP of $10k. In doing this, we now know we need 50 new customers to reach our revenue objective of $500k.

trewblog_equation

Step 2: How many leads do you need to create one customer?
Web Traffic Divided by Lead Conversion
Rate
Now, taking one step up the funnel, we need to figure out how many leads it takes to create one new customer. For this example, let’s use a lead-to-customer conversion rate of 2% to calculate how many leads are necessary to create the 50 new customers we just determined we needed.

Divide the number of new customers (50) by the lead-to-customer conversion rate (2%). This shows us that we need 2,500 leads to create 50 customers.

trewblog_equation2

Step 3: How many visitors do you need to create one lead?
Lead Goal Divided by Visitor-to-Lead Conversion Rate
Moving up the funnel, we now need to determine our web visitor-to-lead conversion rate. For this example, let’s assume that 3% of visitors to our site become leads. With this in hand, we can now calculate the amount of web traffic we’ll need to create our 2,500 leads.

Divide the number of desired leads (2,500) by the visitor-to-lead rate (3%). By dividing 2,500 leads by .03, we can see that we need more than 83,000 visitors to the website. Spread over a year, that’s approximately 7,000 web visits per month.

trewblog_equation3

With these three simple equations, we’ve converted our sales revenue goal into clear marketing objectives. We now know very specifically what we need to produce in marketing to support sales and the business, and we’re ready to go the CFO with a solid story and get the resources we need.

83,000 Web Visits-2

Want to see this process in action? Watch our three minute video.

Watch the Video

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Rebecca Geier

Co-Founder and Brand Strategist

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