Crazy, I know uh. Why screw with an organization like that. We’re trying to get sales and marketing on the same page, and now I’m telling you they need to be on separate fiscal calendars.
Yup, that’s what I’m telling you, and it’s BECAUSE sales and marketing are becoming closer. Sales is relying more and more on marketing for leads and top of the funnel support. Therefore, they have to be on different fiscal calendars if it’s gonna work.
Let’s break it down from a business perspective. Let’s say marketing has committed delivering 50% of your 2017 revenue goal. (That’s awesome, but it’s only half, let’s get it on marketing ;).) That means your salespeople are going to have to find 50% of the number.
For simplicity, let’s say that your revenue goal for 2017 is 1 million dollars and your average deal size is $10,000. That means your team is going to need 100 deals. Let’s assume your marketing team has a 50% SQL (sales qualified lead) conversion rate and sales then converts 50% of all the leads into opportunities. Let’s then say sales has a 30% close rate. That means marketing has to deliver 4500 SQL’s.
Anyone see what’s wrong here yet?
So, marketing accepts this number and sets out to impress. They start their inbound engine; they’re firing out emails, content, and boom, they get 375 leads that month, they’re on track. Or, are they? They do it next month and next month and next month until December, and everyone is excited until they’re not. Sales missed its number.
Sales missed it’s number because the average time to close wasn’t factored into the number. Yes, marketing delivered on the 4500 leads they committed to. However, the average sales cycle is 120 days long, which means any deal that came in after September won’t close until the next calendar year. Thirty percent of marketing’s contribution isn’t going to materialize until 2018.
I call this marketing lag.
Marketing lag is the time it takes for a marketing generated sales qualified lead to close.
Making matters worse, this doesn’t even incorporate time to revenue. If your business has a 30, 60, 90, implementation period or time to revenue period, you might as well push back marketing’s influence another thirty to ninety days. Now we’re talking getting just four to six months of marketing impact in the fiscal year. Yeah, not what you were expecting uh? I didn’t think so.
Marketing needs to be on a fiscal calendar that aligns with at least the bookings number if not the revenue number.
Goal: 1 million in bookings
Marketing/Sales Mix: 50/50
Average Sales Cycle: 90 days
Average Time to Revenue (after close) 30 days.
In this example, marketing needs to be on a calendar that starts 90 days BEFORE the sales fiscal year to capture bookings and 120 days before to capture marketing-generated revenue. This has you starting to count marketing’s contribution in September/August of the preceding year.
In this model, marketing starts their 2017 lead engine September/August first. They deliver 375 leads a month starting in September; these leads start closing in January and generating revenue in February. The opportunities created in October, start closing and generating revenue in February/March. The leads from November, yup start closing in March and drive revenue in April. By the time marketings fiscal calendar ends in August, the leads created that month have a high probability to close in that calendar year, giving sales the final push they may need.
Far too often, I’ve had to tell companies almost an entire year in advance; they weren’t going to make their number because the bookings/revenue plan was based on marketing and sales working from the same fiscal calendar. It’s easy to forget the impact the sales cycle has on converting marketing’s efforts.
Move marketings fiscal calendar back by the number of months it takes to close a deal once it gets into the pipeline. Put marketing ahead of sales. It takes time for opportunities to close. It takes time for a lead, once it becomes an opportunity to close. Make sure you build that time into your sales and marketing plan.
Don’t let marketing lag mess with your business. It’s always better to be ahead of where you need to be, than behind.
Marketing and sales work in different parts of the sales cycle, and the more you bring them together, the more it is important to separate them, at least their measuring cycles.