The answer to every seller’s dream is more volume. “If we only had more leads, we could have more top of funnel, which produces more opportunities, …….”
We have the algorithms that help us identify what we need to achieve our goals. Simplistically, “X top of funnel produces Y revenue.” For whatever revenue goal we have, we calculate the top of funnel required to achieve that goal. If we want to double our revenue, we have to double top of funnel. If we want to quadruple revenue, we quadruple top of funnel.
Math works!
From this basic equation, we know what we need to do to achieve any revenue goal we set for ourselves. And we can extend the math. We can look at the relationship between the number of leads to produce the required top of funnel. And we know the number of outreaches that produce the leads that produce the top of funnel that produce desired revenues.
As simple and predictable this model may be, there are lots of challenges to it. And there may be better ways to shift the numbers in this equation to our favor.
For the moment, let’s look at one thought experiment:
Let’s assume, to achieve our revenue goals, we have to produce 10 wins.
We have a 20% win rate, so we need 50 qualified opportunities in our healthy funnel.
Let’s assume we have roughly a 3 month sales cycle, so every quarter we have to create 50 new opportunities to continue to achieve our goals. And let’s say to create those 50 new opportunities, we have to have 100 leads. Basically, 50% of the leads we work convert into qualified opportunities. And let’s say, 10% of our outreach, creates those 100 leads, so we need an outreach of 1000 to generate those leads.
Then we apply that model to look at what’s required to double our revenue.
| Current Revenue Model | 2X Revenue Model | |
| Outreach | 1000 | 2000 |
| Leads | 100 | 200 |
| Pipeline Generated | 50 | 100 |
| Win Rate | 20% | 20% |
| Wins/Revenue | 10 | 20 |
The math works, nothing particularly surprising. What we see is to double our revenue, we have to double work effort. We have twice as many pipeline opportunities we need to manage. Assuming our AEs aren’t just sitting around twiddling their thumbs, that we have managed them to be very efficient, we need to add more AEs to do the work. Likewise, assuming our SDRs aren’t spending all their time in the kitchen drinking coffee and sharing stories, we have to add more SDRs to do the work. And let’s assume, ChatGPT manages our outreach, and there is virtually no increases in outreach costs (you might challenge this).
And this is the way 100s of organizations have built their scaling models. As long as these ratios stay constant, the scaling in resources and costs to produce our revenue goals is perfectly predictable. Now many of you are starting to see flaws in those assumptions, but let’s put them to the side for a moment.
What if we were to do one thing, increase the win rate? Let’s look at the impact of doing this.
| Current Revenue Model | Improved Win Rate Model | 2X Revenue Model At Improved Win Rate | |
| Outreach | 1000 | 500 | 1000 |
| Leads | 100 | 50 | 100 |
| Pipeline Generated | 50 | 25 | 50 |
| Win Rate | 20% | 40% | 40% |
| Wins/Revenue | 10 | 10 | 20 |
Simply by increasing the win rate, we don’t have to generate as much pipeline, leads, outreach. In comparing the Current Revenue Model with the Improved Win Rate Model, we see the amount of work required to produce the same revenue is 50% of that in the current revenue model. Alternatively, keeping the same cost of selling, we have the potential of doubling our revenue.
Some might argue, “Sure Dave, but you have doubled the win rate, doesn’t that drive an increase in our costs of selling?”
Absolutely not!
We are already investing the resources and money to find these deals. We are investing the resources and money in competing for the deals we have qualified. The key question becomes, “How do we win more of the deals that we have qualified and are already working on?”
And most of you will recognize the assumptions I’ve made are idealized. These models assume strict linearity. But we are seeing it’s much tougher to find prospects. What used to be produced in 1000 outreaches, now needs 4-5 times the outreaches to produce the same number of leads. And we are seeing the number of leads required to produce the pipeline required is far more than what we have traditionally experienced.
As a result, to achieve our goals of 2X, 4X, 10X revenue, too many organizations are finding the work needed to produce those results is skyrocketing beyond their capabilities to scale. Even accounting for technologies, tools, and methodologies, so many organizations are finding they no longer have the funding to support the work that needs to be done to achieve revenue targets and goals.
Sales math works, but the “constants” in the sales math equations are not constant. Win rates can be change–positively and negatively. Average deal value, selling cycles, top of funnel requirements, lead conversion, outreach conversion, costs of selling, everything can and will change. If we want to shift the numbers to our favor, before we do our sales math, we have to look at the “constants” in our equation, focusing on how we can change these numbers. Once we do that, then we can run our equations.
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