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  • Writer's pictureEric Doherty

Determining MQLs and Budget for B2B Tech Companies to Achieve Annual Sales Targets

Updated: Nov 27, 2023

Determining MQLs and Budget for B2B Tech Companies to Achieve Annual Sales Targets

B2B technology companies operate in an extremely competitive environment. With huge spends by behemoths such as Cisco, Microsoft, Oracle, IBM, AWS and others on marketing it is intimidating for smaller technology companies with great products and services to try and identify and close opportunities. The best leads you can receive are referrals as a happy customer is singing your praises, the 2nd best is a lead that a salesperson has generated themselves. Either through their network or outbound calls, emails, or attendance at events.

…..……but as we all know it is extremely difficult to gain the attention of someone you have no relationship with as you are competing with incumbent vendors and suppliers and those large behemoths that have their attention. A well-researched and specially crafted cold outreach by an inside salesperson can be successful but it requires time effort and success is getting harder and harder these days.

Relying on the above, referrals and sales generated leads is not enough for most technology companies in the current business climate. You will need to generate marketing qualified leads (MQLs), how many do you need and what is the cost ?

Achieving annual sales targets is a complex puzzle that requires a blend of accurate data analysis, strategic planning, and efficient budget management. This article aims to provide a detailed guide on determining the number of Marketing Qualified Leads and the budget necessary to reach these goals, using a hypothetical example to clarify the process.

A marketing qualified lead is generally defined when for example a prospect visits your web site and fills out a form for further content or contact from your organisation. They can either be contacted directly by sales or put through a automated lead nurturing process that scores the interaction and is further qualified before forwarded for sales qualification.

A lead, for example, is a visitor to your website.

Example: A Technology Company's Approach

Let's consider a hypothetical B2B technology company, CyberTech Inc., with an annual sales target of $4.7 million. Here's how CyberTech Inc. would approach this challenge:

1. Average Sale Value: CyberTech Inc. calculates its average sale value at $225,000, which falls in the middle of their typical deal size range ($100K to $350K).

2. Total Sales Required: To meet the $4.7 million target, CyberTech Inc. needs approximately 21 sales, calculated as $4,700,000 / $225,000 ≈ 20.89, rounded up to 21.

3. MQLs to Sales Conversion Rate: With a conversion rate of 5-15%, they need between 6.7 to 20 MQLs per sale. For 21 sales, this means they require between 140 and 420 MQLs. If you use a CRM you can determine your conversion rate from a report from the system. If you are not currently tracking this assume somewhere between 5-15% for the sake of the exercise.

4. Cost Implications: The cost per MQL, based on industry benchmarks and agency use, ranges from $200 to $500. Hence, the total MQL cost ranges from $28,000 to $210,000.

So that is a big range !. Unfortunately if you don't have accurate data in your CRM and marketing systems then this causes the large range. If you know your average conversion rate and your average MQL cost then you are in a much better position.

5. Lead to MQL Conversion Rate and Lead Generation Requirements: Assuming a 33% conversion rate from lead to MQL (based on industry data) the total number of initial leads required ranges from approximately 424 leads for the lower MQL threshold to about 1,272 leads for the upper threshold.

As we need 21 sales lets do a double check to see if the maths adds up. The industry benchmark for lead conversion in B2B tech and services to a sale is 2.5% (source Ruler Analytics). So lets take the mean of 424-1,272 leads which is 848, multiply that by 2.5% and we have 21 sales, viola !, our goal.

Again you can tighten up this range if you have accurate data in your CRM and marketing systems.

The other factor that effects this is the length of the sales cycle which can add complexity to the calculations. You can account for this in you own formula but to make this article accessible I have chosen to assume there is a pipeline carried over from the previous year that would close at the required monthly run rate.

Integrating This Approach into Your Business Strategy

Let's adapt this example to guide B2B technology companies in establishing their MQL and budget requirements:

Establishing Sales and MQL Targets

1. Set a Clear Sales Target: Define a specific annual sales goal, considering past performance and market potential. As the CRO or Sales Director this might be determined for you but at least challenge the target if you are not given the appropriate marketing budget to generate the required MQLs.

2. Determine the Average Deal Size: Use CRM data to calculate the average value of past deals.

3. Calculate the Required Number of MQLs: Based on the MQL to sale conversion rate, estimate the necessary number of MQLs to achieve your sales target.

Budgeting and Resource Allocation

1. Estimate MQL Cost: Consider both the agency costs and internal expenses to determine the cost per MQL.

2. Allocate Budget for Lead Generation: Based on the lead to MQL conversion rate, allocate sufficient resources for generating the required number of leads.

Using Historical Data and Industry Benchmarks

1. Analyse Historical Data: Utilise your CRM to understand past sales trends, deal sizes, and conversion rates.

2. Research Industry Benchmarks: Gather data on industry-specific conversion rates and MQL costs for a more accurate budget estimation. I referenced a few sites but Ruler Analytics was quite good.

Adapting to Business Realities

1. Consider Internal Constraints: Factor in any limitations such as budget cuts or reduced workforce that might affect your lead generation and conversion capabilities.

2. Revise MQL Targets Accordingly: Adjust your strategy or spend based on historical contributions from your sales team and the current business environment.

For B2B technology companies, setting realistic sales targets and budgeting effectively for MQLs require an understanding of both internal capabilities and external market factors. By analysing historical data, staying informed about industry benchmarks, and adapting to internal constraints, businesses can develop a robust strategy for achieving their sales goals. This approach not only enhances the efficiency of the sales process but also ensures a more data-driven and realistic pathway to business growth and success.

It's more work up front at the start of the year but it beats coming up with excuses when you are behind at the end of the year. I knocked up this hypothetical example in about an hour so I estimate it would take a sales or marketing leader no more then 2-4 hours in planning at the start of the year to work out the required MQLs.

Head over to other blog articles on this site and I will show you how to formulate the campaigns and employ digital marketing to generate the leads. You can also decide whether you wish to pursue Lead Generation or Demand Generation dependent on the product or service you provide.

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