Math of sales: Calculating sales outreach for B2B businesses

• TLDR: Key takeaways for estimating sales outreach
• Many first-time founders significantly underestimate how much outreach is required to hit their revenue goals and have no easy way to calculate this number.
• By using rough industry metrics around cold outreach engagement (positive reply rates, net new meetings, number of opportunities that make it to the proposal stage, etc.), founders can get a much better idea of what they need to aim for.
• A baseline for these metrics also allows founders to measure their sales progress every week to understand if they are on track and immediately identify when they are falling behind.

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In Fixing Seed-Stage sales, I covered how founders and first-time sellers often mistake activity for progress by not properly qualifying opportunities.

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For this post, I'll start right at the moment after you’ve had the first meeting with your investors and all parties have agreed on a revenue goal for the fiscal year. (For most Seed-Stage startups, that number is $1M ARR or total bookings.)

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The majority of enterprise B2B founders can take that revenue goal and divide it by four quarters or 12 months to figure out roughly how much new business they need to close to hit or surpass that target. Where the wheels tend to fall off is when you ask founders how those quarterly or monthly goals translate into the number of prospects they need to reach out to — in other words, how many net new meetings they need each week to be on pace.

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For example:

• If you need to close $1M and your ASP is $100K = 10 deals that year
• If you need to close $1M and your ASP is $25K = 40 deals, which is very different.

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A simple sales calculator for enterprise B2B companies

To help founders get an idea of how much weekly, monthly, and quarterly outreach they need to be doing to hit their given revenue milestone, I’ve created this simple calculator based on industry averages for Enterprise B2B companies doing cold outreach.

If you input your revenue goal and ASP, the calculator shows you roughly how many prospects you’ll need to reach out to in a given quarter to stay on track when it comes to the required number of net-new meetings, demos, proposal reviews, deals closed/won, etc.

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Here are the sales funnel assumptions I’m making for cold outbound outreach in the enterprise B2B space:

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Positive Reply Rate: 2%

• Those who replied and are interested in connecting
• I’m purposefully painting a bleak picture here with the 2% statistic (and it will be bleak for most founders in the beginning!). But this is the biggest lever for you to adjust — get this up to 20% or beyond and life gets much easier.
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Discovery meetings/demos: 70%

• % of positive replies that scheduled and attended a meeting
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Technical deep-dive meetings: 50%

• This assumes that half of the discovery meetings will be unqualified, will drop out, or ghost you.
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Proposals reviewed: 50%

• This assumes that half of the opportunities that made it to a technical deep-dive meeting will be unqualified, drop out, or ghost you.
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New business closed/won: 20%

• This assumes that you will close 20% of all qualified opportunities (from tech deep dive through proposal)

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For example, let’s say you cold outreach 1,000 individual prospects following the math above:

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Total outreach: 1,000

Positive Reply Rate: 20

Discovery meetings/demos: 14

Technical deep-dive meetings: 7

Proposals reviewed: 3 (round down; better to be pessimistic 😎)

New business closed/won: 1

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This would give you a 15% overall close rate for all qualified opportunities (new business closed / technical deep dives), which is a rough industry standard for many enterprise B2B companies, with 20%–30% close rates being world-class.

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Breaking down your required sales outreach is no different than breaking down a study schedule for a test (GMAT, LSAT, SAT, etc.). You want a target score and you have a limited amount of time until test day (in this case, the end of the fiscal year) to achieve it. So, you might break down your study schedule into manageable chunks:

• Those who scored 700+ on the GMAT studied for a total of 170 hours or more.
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  Let’s assume you have three months to study, that’s 57 hours a month, 14 hours a week, or two hours a day. Therefore, if you’re only studying 10 hours a week, you’re behind. If you’re studying 20 hours a week, you’re ahead!

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Of course, there are several other factors to consider and the example might seem simplistic, but the underlying logic is the same.

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If you can’t run a fairly simple process for how many net new meetings you need every week to hit your overall revenue target, then how do you know if you’re on track?

Finally, before you dive-in to the calculator here are a few important notes:

• These metrics are based on industry averages, but also my own experience as a seller at MongoDB and now helping our portfolio companies conduct outreach. Each company will have different reply rates, meeting rates, etc., based on their sales process, the number of sales reps they have, and multiple other factors. There are no golden standards for outreach, so if you’re able to get a 40% positive reply rate while others get 3%, then you’re ahead of the game and can adjust the numbers in the calculator accordingly.
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• If the number of required net new discovery meetings looks impossible to attain (and for some of you it will be), that’s a good indicator that you may need more horsepower, i.e., you need to hire your first sales rep or multiple sales reps to reasonably distribute that volume. Or, you need to think about adjusting your ASP or narrowing your ideal customer profile (ICP) for higher positive reply rates.
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• Finally, the best way to reduce the number of prospects you need to reach out to and discovery meetings you need to have is to tighten up your ideal ICP and make sure your messaging, value proposition and the pain being solved or opportunity being unlocked is extremely relevant to them.

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One of the top reasons I’ve seen startups struggle is by not being systematic enough about their sales outreach process and vastly underestimating how many people they’ll need to talk to every week, month, quarter.

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My aim in creating this tool is that by providing a range of total outreach required, working backward from your revenue goal and ASP, founders will quickly understand how much outreach is needed that quarter and be able to adjust their pace, volume or accuracy to stay on track.