In May 2010, I sat across from a client and we were having a tough conversation. We had been running a lead generation and appointment setting program for a year. While some early deals were starting to bubble up, the program hadn’t yet paid back against the investment. The board was putting pressure on our client, the director of marketing.
This is a common conversation, as marketing directors try to balance the demands of their board with the dynamics of the industry.
This client made the decision to stay the course for several reasons:
While the first year value of closed-won deals is a pretty exciting trendline against investment, the most important part is the break-even timeline. We started the program in June 2009 and the breakeven happened 18 months later in November 2010.
To calculate the breakeven of a lead generation program, I recommend using the following formula where “x” is the average sales cycle. Make sure to think about sales cycle length for outbound generated deals and not just deals from referrals and inbound leads that tend to close faster.
1 year+ average sales cycle = 1.5x for breakeven
6 months to 1 year sales cycle = 1.5x to 2x for breakeven
3 months to 6 months sales cycle = 2x to 2.5x for breakeven
Under 3 months sales cycle = 2.5x to 3x for breakeven
These are conservative numbers. However, if an investment is going to be made in lead generation, it is a leading investment. Give it time to yield and don’t pull the plug too early!