Lead Metrics You Can’t Afford To Ignore
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Let me guess.
You feel like tracking lead metrics is only important for large corporations with complex sales processes. As a small B2B business owner, you need more leads to justify the extra admin, right?
No matter your business size, tracking your lead generation metrics is crucial for understanding if your strategies are working and helping you reach your goals.
In this post, we’ll dive into important lead metrics worth tracking for small B2B businesses.
Whether you’re starting out or you’ve been in business for a while, understanding these metrics and how they impact your lead generation efforts will help you make better data-driven decisions.
And the best part?
You don’t need to invest in a CRM or any other software. Using a simple tool like Google Sheets is all you need to track the metrics that’ll grow your small business.
Ready? Let’s go!
Performance Metrics: How Well Are Your Leads Converting?
Your performance metrics are the bread and butter of any lead generation campaign. Analyze them, and you’ll get the inside scoop on how well your efforts are hitting the mark or falling short.
It’s like having a trusty GPS that guides you to your destination with ease.
Traffic to MQL Conversion Rate
What is a conversion rate? It’s the percentage of leads that take a desired action.
- Subscribing to an email list
- Filling out a contact us form
- Downloading an ebook
- Booking a meeting
It’s the ultimate end goal that measures the effectiveness of your marketing efforts. If you notice that a part of marketing has a low conversion rate, you can weed out those roadblocks, improve the flow of leads, and convert more prospects.
How Do You Measure Conversion Rates?
Step 1: Determine the action you want to track
For example, your goal is to attract 10 new leads from your cold outreach campaign.
Step 2: Set up a tracking system to measure the results
Some of the ways you can track actions include:
- URL parameters
- Meetings booked
- Goals in Google Analytics
- CRM / Outreach Platform
Then, you’ll measure the percentage of leads that completed the conversion goal.
Here’s what this might look like in real life:
You send 500 emails to potential customers, and 10 people click the link to set up a follow-up meeting. That means you achieved your goal of attracting 10 new leads to your business, and your conversion rate is 2%.
MQL to SQL Conversion Rate
Before diving into this lead metric, let’s unpack what is an MQL and SQL.
- MQL (Marketing Qualified Lead): A lead who has shown interest in your product or service and has been qualified by your marketing collateral, or some other method. For example, the lead has filled out a form on your website or attended a webinar.
- SQL (Sales Qualified Lead): A lead who meets your internal qualifying criteria. And has expressed enough interest that the opportunity should be passed to the sames team. For example, you’ve had a meeting with the lead.
As you can see, MQL to SQL is a crucial lead metric for small B2B businesses.
It measures the quality of leads generated by marketing and their ability to turn them into sales opportunities.
If your conversion rate is high, that’s a sign your marketing efforts are targeting the right audience with the right message, resulting in better quality SQLs.
When you have this alignment between sales and marketing, it drives growth and increases profitability.
A good B2B MQL to SQL conversion rate benchmark to aim for is 13%. If you’re well above that then the marketing team should consider passing opportunities to the sales team earlier. And if you’re well below 13% then there’s some room to improve.
How Do You Calculate Your MQL To SQL Conversion Rate?
To calculate the MQL to SQL conversion rate, divide the number of SQLs generated by the number of MQLs generated and then multiply the result by 100 to get the conversion rate as a percentage.
Here’s the formula:
MQL to SQL Conversion Rate = (Number of SQLs generated / Number of MQLs generated) x 100
For example, if you generated 100 MQLs in a month and out of those, 20 turned into SQLs, then your MQL to SQL conversion rate would be:
(20 / 100) x 100 = 20% MQL to SQL conversion rate.
Time-to-conversion is an essential lead metric for small B2B businesses.
It tells you how quickly leads are moving through your sales funnel and identifies any friction points.
How Do You Calculate Time-To-Conversion?
There are two ways you can track time-to-conversion.
Method #1: CRM
If you’re using a CRM, you can leverage your data to measure the time between two events, e.g. the first visit to your website and becoming a customer.
That’ll give you the average time for a lead to convert.
Method #2: Google Sheets
This method is more time-consuming, but it’s doable if you’re working with a small number of leads.
You want to track the total time a lead spends moving through your sales funnel and becoming a customer.
Here’s a formula to calculate time-to-conversion:
Time-to-Conversion = Date of Conversion – Date of First Interaction
The date of the first interaction is the day the lead first engages with your brand, such as filling out a form or downloading a piece of content. The date of conversion is the day the lead becomes a paying customer.
Tip: Regardless of your goal, the secret to keeping your time-to-conversion lead metric in check is streamlining your funnel touchpoints. The fewer touchpoints you have, the smoother and quicker the journey from lead to conversion becomes.
Proposal-to-Close and Meeting-to-Close
The proposal-to-close metric tracks your sales team’s effectiveness at closing deals after sending proposals to potential customers.
Noticing a low proposal-to-close rate? That’s a sign your sales process is leaking. You may need to revisit how you qualify leads or put together better proposals.
To track, divide the total number of proposals sent by the number closed and multiply by 100 to get a percentage.
For example, if you sent 10 proposals in April and 3 became paying customers, your proposal-to-close rate is 30%.
You can use the same formula to track the meetings-to-close metrics.
By analyzing this metric, you can see how many meetings it typically takes to close a deal. Over time, you may notice patterns or trends affecting your sales closing percentage.
When you have access to this data, it can help identify areas for improvement, such as improving the quality of leads before setting up meetings, refining the sales pitch or process, or providing additional training for the sales team.
Marketing Spend: What’s Your Return On Investment?
You can’t keep your head in the sand if you want to run a profitable B2B business.
It’s crucial to understand how much revenue your lead generation efforts are generating so you can either double down or adjust your strategy.
That’s where cost metrics come into play.
Return on Investment (ROI)
Return on investment (ROI) is the holy grail for any lead generation campaign.
It’s the single most important lead metric that answers the burning question:
Are you seeing a positive return?
Let’s look at an example.
You invest $10,000 in a lead generation campaign, including advertising costs, content creation, and marketing automation software.
At the end of the campaign, you generate 50 qualified leads, of which 10 become paying customers with an average lifetime value of $5,000.
How To Calculate ROI For Lead Generation
To calculate the ROI of this campaign, use the following formula:
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
So, in this case:
- Gain from Investment = 10 paying customers x $5,000 lifetime value = $50,000
- Cost of Investment = $10,000
Therefore: ROI = ($50,000 – $10,000) / $10,000 = 4
This means you achieved an ROI of 400% on your lead generation campaign. For every dollar you invested, you generated four dollars in return.
Cost Per Lead (CPL)
Cost per lead (CPL) measures the total cost of generating one lead for your business. It helps you understand the cost-effectiveness of your lead generation efforts and allocate resources accordingly.
The lower your CPL, the more you can increase your ROI and revenue in the long run.
How To Calculate Cost Per Lead (CPL)
To calculate the cost per lead metric, do the following:
Cost per Lead = Total Campaign Cost / Total Number of Leads Generated
For example, if your lead generation campaign costs $10,000 and you generated 500 leads, your cost per lead would be:
Cost per Lead = $10,000 / 500 = $20 per lead.
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is how much it costs to acquire a new customer. The lead metric takes into account all your sales and marketing expenses, such as salaries, ads, commissions, and overhead costs.
Why would you want to measure CAC?
To make sure your sales and marketing tactics bring in enough revenue to cover their costs and generate a profit.
Plus, when you identify the channels and strategies bringing in the leads, you can focus your resources and increase profitability over time.
How To Calculate Customer Acquisition Cost
To calculate the customer acquisition cost, divide the total cost of sales and marketing activities by the number of customers acquired during a specific time period.
Here’s the formula:
CAC = Total Sales and Marketing Cost / Number of New Customers
For example, if you spend $100,000 on sales and marketing activities in a quarter and acquire 20 new customers during the same period, your CAC would be:
CAC = $100,000 / 20 = $5,000
Lifetime Value (LTV)
You want your customers to stick around for the long haul, right? Of course, you do!
…But what happens when a customer churns before you’ve recouped the investment required to earn their business in the first place?
One of the best ways to mitigate this risk is by measuring customer lifetime value (LTV). It’s a metric that tells you how much money a customer is likely to spend with your business over the course of your relationship.
Think of it like a mystical crystal ball.
It can predict which customers will be highly valuable to your business in the long term and which aren’t worth the upfront investment.
When you know your LTV, you can focus your lead generation efforts on acquiring and retaining those high-value customers, leading to more revenue and a healthier business over time.
How To Calculate Customer Lifetime Value (LTV)
To calculate the lifetime value (LTV) of a customer, you need the average revenue per customer (ARPU), the average customer lifespan (ACL), and the gross margin (GM) on your products or services.
The formula for calculating LTV is: LTV = ARPU x ACL x GM
For example, if the ARPU of a customer is $500 and the average customer lifespan is five years, and the gross margin is 50%, then the LTV of that customer would be:
LTV = $500 x 5 x 0.5 = $1,250
This means that the lifetime value of that customer is estimated to be $1,250 over a five-year period.
Want to know how healthy and profitable your business is? Then you need to pay attention to the LTV: CAC ratio.
It’s a must-track metric that looks at your LTV (the average gross margin per customer over their lifetime) and your CAC (how much your business spends on acquiring a new customer).
By calculating, monitoring, and optimizing your ratio, you’ll have a good idea of how effective your marketing efforts are and be able to predict your growth potential and long-term profitability.
Finding the right balance between LTV and CAC to maximize your profitability and ensure sustainable growth.
What the different LTV:CAC ratios mean for your business
- LTV: CAC is even: A 1:1 ratio means the cost of acquiring a customer equals their lifetime value – in other words, you’re breaking even. Well, sort of. You’re probably making a loss once you factor in other business expenses like taxes or shipping.
- LTV is lower than CAC: It means you’re spending more to acquire a customer than you’ll ever make from that customer. To put it bluntly, you’re making a loss per acquisition.
- LTV is higher than CAC: It means you can expect to make more from the customer than what you spent to acquire them. A good benchmark ratio for most industries is 3:1 or 4:1.
- LTV is much higher than CAC: If your ratio is 5:1+, it indicates you’re growing fast and potentially under-investing in marketing.
How To Calculate LTV:CAC Ratio
Once you have your LTV and CAC calculated, finding your ratio is easy.
All you need to do is divide LTV by CAC.
For example, if your LTV is $4,000 and your CAC is $2,000, then your LTV: CAC ratio would be 2:1.
Channel Metrics: Which Channels Produce The Best Leads?
The last group of lead metrics we will look at are channel metrics. These indicators focus on the performance of your individual marketing channels.
Lead Generation Quality By Channel
Lead generation quality by channel is a metric that measures the number of leads generated from different marketing channels, such as email, social media, advertising, or content marketing.
It helps identify which channels deliver the most valuable leads and which ones you need to work on or drop from your strategy.
For example, you may find that social media marketing generates lower-quality MQLs in comparison to email outreach and referrals.
As a result, you decide to allocate more resources to your cold outreach campaign, create a referral program and reduce your time on Linkedin.
Cost Per Qualified Lead By Channel (CPL)
Cost Per Qualified Lead (CPL) by Channel is a metric that measures the cost of acquiring a qualified lead through different marketing channels.
While it’s possible to generate a high volume of leads, if they aren’t converting into SQLs – there’s a problem.
By understanding the CPL for each channel, you can allocate your marketing budget more effectively, focus on the channels that yield the highest ROI, and optimize your marketing strategies for better B2B lead generation.
How To Calculate Cost Per Qualified Lead By Channel
To calculate the cost per qualified lead (CPL), determine the total cost of each marketing channel. This includes all expenses, such as advertising, content creation, and labor costs.
Then divide the total cost by the number of qualified leads generated from that channel.
The formula for calculating CPL is: Total Cost / Number of Qualified Leads
Remember: Qualified leads have shown genuine interest in your product or service and have the potential to become customers.
The Bottom Line: Track These Lead Metrics to Improve Your B2B Business Results
No matter where you are in your business journey, it’s never too late to start tracking your lead metrics.
The sooner you start collecting data, the better you’re equipped to:
- Optimize your marketing efforts.
- Improve customer acquisition strategies.
- Optimize your time and resources.
- Increase your revenue.
And ultimately, generate more leads that will convert into customers.
What lead metrics are important to your business?
Did I miss anything? I’d love to hear your thoughts on anything I missed. You can contact me on our contact page.
Look forward to hearing from you!