How To Set Your Lead Generation Budget

At any given point in time, some of your potential customers will be actively looking for a solution like yours, engaging with suppliers like you, and progressing to a commercial relationship with their chosen new supplier.

Unless you’re in a niche market, there will be a healthy number of suppliers competing to win business from the same companies. So, if you’re responsible for Sales or Marketing within your business, your job is to ensure that you’re one of the suppliers that these potential customers are speaking with!

The businesses that enjoy the greatest sales growth are those that generate the most leads; they simply give themselves more opportunities to tell their story to Buyers that have a need, and we all know that Sales is a numbers game.

Setting a Lead Generation Budget

It’s unlikely that your ambition is the barrier to growth, but your budget might be!

As with many business decisions, it’s about striking a balance. If you don’t invest enough in Lead Generation, you’ll put a limit on how many opportunities you’ll get to win business from companies that are in the market for your solution.

To work out your ideal Lead Generation budget, you first need to clarify some basic points and do some calculations:

  1. The top and/or bottom line growth that you want to achieve

    The ultimate goal of generating leads is to achieve sustainable business growth. Without a growth target to aim at, e.g. £200k in a year, it’s much harder to plan your marketing activity effectively. Establish this revenue target before thinking about any spend on marketing, especially Lead Generation.

  2. The typical value of a new customer

    When considering what a customer is worth to your business, you need to think about more than just their initial value in the first year of the relationship: you need to consider the Customer Lifetime Value (CLV).CLV indicates the total revenue a business can expect from a single customer account over the course of your business relationship with them.

    A new customer often brings in more revenue in the first year of a relationship than the years that follow once they’re retained. So, to determine the true value of signing a new customer to your business, it’s important to take both factors into account.

  3. The number of new customers needed

    To achieve your growth target, you need to win new customers. By looking at your target for annual growth alongside the typical value of a new customer, you’ll be able to work out how many new customers you need to win in a year in order to hit that target.Bear in mind that these new customers will also bring further value to your business as they are retained for years to come.

  4. The number of leads needed

    This is where the real maths comes in.In general, most businesses manage to convert between 15% and 35% of qualified leads. These figures can be used to work out the absolute minimum number of leads required in a year, as well as a more realistic figure to aim for.

    Take a look at the table below to understand the figures and the process in more detail. In summary, you can work out that to achieve growth of £200k in a year, it will take winning 14 new customers (assuming a new customer value of £15k a year), so you’ll need somewhere between 40 and 100 qualified leads.



    You’re now in a good position to set an accurate budget for Lead Generation, based on the number of new customers and therefore the number of qualified leads required to achieve your annual growth target.


What does ROI look like?

This model only considers the value of a new customer in the first year of an agreement. Although it would be great to achieve a positive ROI within the first year, this isn’t always realistic.

The case for investment in sales and marketing needs to factor in the ongoing value of each customer, especially if your customers have a high CLV. Any marketing activity should be planned and carried out with an eye on the long-term. This applies to Lead Generation too, as the long-term value of a retained customer should not be underestimated.


Summary

Clearly the figures and percentages will vary from business to business. However, there are a few key points that apply to most B2B businesses:

  1. You’ll need a large volume of leads if you want to achieve an ambitious growth target.
  2. Don’t get hung up on making an ROI within 3 months, as the CLV for most B2B businesses is usually significant.
  3. Be realistic about the cost of generating high quality leads. If the profit from winning a customer is £10,000 over 10 years, the cost of generating that lead is unlikely to be £100.

Ultimately, Sales is a numbers game. The businesses that give themselves the most opportunities to talk to Buyers in their target market are usually the most successful.

They won’t always have the best proposition, but they’re more likely to hit upon new customers where the chemistry and solution works for both parties. They don’t just come across these opportunities by chance: they have a system in place for generating leads.

Beanstalk are Lead Generation specialists. We implement bespoke and integrated telemarketing campaigns, alongside email and content marketing, to generate qualified sales appointments for our clients.

If you want to have more conversations with your potential customers, get in touch so we can help generate those leads.