Increasing Leads or Increasing Closes?

There’s an ongoing debate in among sales managers about which is more important: Do you need more leads or do you need to better qualify your leads to increase your sales production? The answer is you need both! If your team is doing better of qualifying leads, they are working on deals that have a better chance of closing, although they have now filtered out the non-qualified which may result in leaving the cupboards a little bare. After all, a lead with no sale isn’t worth anything at all, but it is hard to close deals with no leads. It might be easy to say that they’re equally important, but to do so is to miss the point of the argument. Leads and closes work together so they cannot be analyzed separately.

Take a close ratio using baseball as an example. How many “at bats” does a player need to get a hit?” Everyone on the team has a different batting average, the same as everyone on a sales team has a different closing percentage. Understanding how many people each rep needs to talk to is critical. If a sales rep knows they have a 20% close ratio, they would expect to close two out of every ten deals. That’s pretty good. But if their close ratio is 5%, they would close half a deal out of every ten deals. That may be a problem because it’s pretty challenging to close half a deal. They would want to improve their close ratio which they could do by generating higher quality leads.

Are you maximizing your team’s close potential? Ask yourself the following questions.

  • How do you define a ‘qualified’ lead?
  • Are you currently tracking qualified vs. unqualified leads?
  • Are you tracking how many sales meetings or demos are with pre-qualified leads?
  • Are you incentivizing your team to produce qualified leads or general leads? For example, is the marketing team paid for leads, and do they have to fit a certain criterion?
  • Is there a clear understanding of sales metrics?
  • How varied is the pool of prospects? Should you have reps specialize based on area, industry, etc.?

Once you have maximized your team’s close potential, it is time to evaluate the necessary volume. Let’s assume it takes ten qualified leads to get five sales opportunities to close one deal. How many leads will a sales rep need to sort through in order to get a qualified lead? And how many deals does each sales rep need to close per week, month, and year in order to cover your costs? Now you can begin to understand how many leads your marketing and sales teams need to generate and tie incentives to those numbers.

Next, you need to evaluate your sales team’s time. Do you have enough reps to generate the activity needed to meet your goals? Are those reps working efficiently? Studies show that only 37% of a sales rep’s time is actually spent selling. Do you have systems in place to set your team up for success or are they struggling under the weight of manual processes? It won’t matter if the marketing team generates 500 leads a day if your team only has time to call 20. And that is only the tip of the iceberg.

In short, leads vs. closes is a chicken and egg equation. You can’t have one without the other. Instead of trying to figure out where to put your focus, dedicate some time to optimizing the full process from lead to close. The answers you seek may very well be in the data and if the data is too overwhelming bring in a third party to help with your reporting. CLS knows just who to call.

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