Sales Funnel: How to Reverse Engineer Quota

Sales Funnel: How to Reverse Engineer Quota, Reverse Sales Funnel

Delivering quota every month is often a mystery for most companies. Some months the sales team hits quota, some months it does not. So, why the inconsistency? Most sales and marketing leaders do not work together to determine what is needed at each stage of the funnel from both functions. In contrast, effective sales and marketing partnerships reverse engineer quota by building a sales funnel to operate and optimize against. Both functions then know what they need to deliver every month to hit quota. The five key components of the sales funnel are:

  • Marketing Qualified Lead (MQL) – An MQL is a prospect who has taken some action to express interest in understanding how to solve a problem. For example, starting a trial, requesting a demo, downloading an asset, etc.
  • Sales Accepted Lead (SAL) – A SAL is a lead that meets predetermined criteria to enter the sales team’s queue. For example, the SAL meets the company’s contact information, geography, etc. requirements.
  • Sales Qualified Lead (SQL) – A SQL is a lead that meets sales’ minimum requirements for engagement. For example, authority and need are known. These leads are qualified by sales development.
  • Sales Qualified Opportunity (SQO) – A SQO is an opportunity that meets sales’ minimum requirements for a qualified opportunity. For example, authority, budget, need and timeline are known.
  • Deal – A Deal is a signed agreement that is closed within a specific period; e.g., month or quarter. Deals are often expressed as a number or as a percentage; i.e., win rate.

The sales funnel also includes five key assumptions. They include:

  • MQL-to-SAL – MQL-to-SAL is expressed as a percentage. It reflects the number of leads that will actually meet predetermined sales accepted criteria.
  • SAL-to-SQL – SAL-to-SQL is expressed as a percentage. It reflects the number of leads that will actually meet the minimum sales qualified requirements.
  • SQL-to-SQO – SQL-to-SQO is expressed as a percentage. It reflects the number of qualified opportunities that will be converted from meetings set by sales development.
  • QAO-to-Deal – QAO-to-Deal is expressed as a percentage. The goal of the percentage is to accurately reflect the number of deals that will be generated from qualified opportunities generated.
  • Average Deal Size (ADS) – ADS is the average dollar amount of each sales contract for a specific period of time. For example, if ten deals closed in April worth $50,000 in MRR, the ADS is $5,000 in MRR.

Example: An account executive’s quota is $10,000 in MRR every month. Based on the assumptions below, sales and marketing should commit to delivering 125 MQLs, 25 SALs, 20 SQLs, 10 SAOs and two Deals at an ADS of $5,000 to hit quota. Assumptions can be based on historical data or educated guesses. That said, to create greater consistency and predictably, actual numbers should be used to manage to and optimize against the sales funnel with adjustments being made weekly or monthly depending on the sales cycle.

Sales Funnel - How to Reverse Engineer Quota

A sales funnel can be easily and quickly built with Microsoft Excel or similar spreadsheet application. If you need help, please email me – I would be happy to help you.

All contents copyright © 2016, Josh Lowry. All rights reserved.

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3 Responses to Sales Funnel: How to Reverse Engineer Quota

  1. Kim Bueno says:

    I love the mathematical approach discussed in this post. Taking the guessing (subjectivity) out of sales and marketing is really smart.

    Like

  2. Sterling Garrett says:

    The sales training business is loaded with clichés and one liners. It is good to see someone who has a real grasp of the subject matter. Thank You

    Like

  3. Melissa Woolston says:

    Excellent article, very well written and to the point!

    Like

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