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Measuring Return on Investment for Small Businesses

Way to calculate your lead gen roi
Measuring Return on Investment for Small Businesses

It takes a lot of guesswork and several trial-and-error tests to find a form of lead generation that works for you. As no two businesses are exactly alike, their lead generation methods should also be different.

Measuring the return on investment for your small business can cause more than a few headaches. Let’s kick this off with a quick example of how you would approach your return on investment analysis!

Your company is based in Sydney. It’s a high-end contracting business, specialising in extensive home repairs and remodelling You participate in a trade show in Melbourne and secure 4 out of the 10 quality leads collected.

Was the trade show really worth it? How can you calculate this? Let’s say you figure that it wasn’t. What could you do in the future to better predict quality lead generation?

Let’s take a look!

 

This is how you can determine Lead Generation ROI

Until a few years ago, lead generation marketing used to play second string when compared with traditional marketing. Advertisements on television and in print reach a wider audience so it seemed more likely that these ads were responsible for a company’s success. As lead generation became easier to conduct and track, marketers and salespeople soon found that meeting face to face with clients was bringing in more solid leads and repeat customers.

The way of creating business opportunity leads was changing.

Lead marketing can help you fill holes where traditional marketing cannot. Still, there are a few things you need to consider when deciding on different forms of lead generation marketing such as:

  • Define the average sale revenue your company earns.
  • If you have 10 qualified leads, about how many of them will your salespeople turn into customers?
  • Determine your usual sales cycle.

Let’s go back to our example.

Your average job earns you roughly $10,000. You run a website and attend trade shows to show off your work. On average, you and your salespeople close roughly four out of every 10 qualified leads that come your way, and your business cycle lasts about six months.

Therefore, your employees earn about $40,000 for every 10 solid leads that come your way. If you have a sales staff of four and you want them to make about $160,000 per quarter, then each person is going to need about 16 solid leads in six months.

While this may not sound like too difficult a task, remember your sales team only does well if you already have those leads.

determine lead generation roi

Photo: CC-BY 2012 Pop Culture Geek

The best sale activities

Lead generation requires work from sales people as well as marketers in order to truly be effective. Remember, each of your four sales employees must hit $160,000 every six months, which means that they each need 40 solid leads in order to average their four sales.

So what lead generation is your company doing?

Trade Shows

These let you show off or demonstrate your product or service to a wide range of buyers while putting a face to the company. Buyers are more likely to trust your company if they see you as less of a company and more of a person.

Online sign-up forms and info requests

Buyers in need of more information can sign up for your mailing list or receive more information.

It’s important that you devote some time to keep your newsletter relevant to your prospects. Also, your staff should reply to queries in time and manner to be consistent with all the work you’ve done during the Trade Show.

Free offers

Some buyers will happily give you their email addresses if you in return provide them with a free eBook or a trial period of a premium account or software. In this case, you might publish a short eBook on simple DIY home repairs. This will be your Lead Magnet.

All of the lead generation options might be enough to sustain your sales team as long as your teams work together.

But, do you want it to be just enough?

If you want to take your return on investment to the next level, your teams should not only work together. They will have to collaborate as a single and powerful sales closing force!

 

A qualified and resourceful staff

Teamwork is key in lead generation, but let’s first look at how to track the effectiveness of each.

You will define success differently for each group of employees.

The Sales Team

An effective salesperson has both the time and the skill to make contact with those 10 leads and meet the four sales average. First look at where your sale employees’ time is going. Are they on the phone promoting your business or at trade shows showing off what your product does?

Track the amount of time it takes one sales person to close one sale. To give yourself a better idea of lead generation comparison, track the time of an employee closing a lead from multiple sources.

The marketing team

This team should be sending as many leads as possible to your sales team so they need to find new ways of reaching out to potential customers.

Using tools like Google Analytics, they should be monitoring lead generation success on your website.

Your marketing team should be very knowledgeable in regards the latest trends in the marketplace and in the use of new automation tools.

There should always be a structured channel of communication between your teams and some standard operating procedures set in place. This would also include at times your IT team in case you have one.

After a while, you can start analysing how your teams work together.

Some sales teams can find and close sales without any help from marketing, but others cannot. In some cases, sales and marketing teams butt heads, each thinking their way of lead generation is better.

Retargeting works best if these two teams work together. When potential sales are hesitant about buying, sales and marketing teams should have cohesive plans for retargeting leads and bringing them back into the sales funnel.

 

What this means for ROI

As stated, calculating a true ROI for any lead generation effort is difficult. The best thing you can do is meet with both teams, determine which types of marketing bring in the best leads. Make sure you have enough in your budget to support those marketing efforts.

With each passing quarter, you should be able to evaluate your teams’ successes and failures, which will help you better see what is and is not working.

Beware though, this process will take a lot of trial and error. But, if you know how long it takes your team to generate a truly qualified lead, you will have an easier time figuring out a solid budget needed to continue that great lead generation process.

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