When I first started working with business owners on their digital marketing campaigns, I was amazed to learn that many of my clients weren’t hurting for leads when they first called me. No, they had too many leads – they wanted less. Their sales teams were wasting too much time chasing down leads that were either dead ends or small potatoes. High-quality leads, meanwhile, were likely getting left on the table, or at least not getting properly nurtured.

Unless you’re just starting out, chances are that you’ve run into this problem. Who do you blame? Your marketing team for funneling too many low-quality leads to sales? Your sales team for not being able to tell the difference or follow up adequately? Everyone? No one?

Assuming that your marketing and sales teams are adequately staffed and competent, then chances are the fault lies with poor communication and structure. If marketing doesn’t know which and how many leads to turn over to sales, and if sales doesn’t know what to expect from marketing, and if none of these expectations are tied to revenue goals, then everyone is operating in the dark. Of course something’s going to go wrong.

To make things right, there are three things you need to define: your revenue goals, your MQLs and your SQLs. First, definitions:

Marketing Qualified Leads (MQLs)

An MQL is a lead that your marketing team feels is more likely to become a valuable customer than other leads. Like we discussed above, not all inquiries are quality leads, and not all leads are worth chasing. Part of the marketing team’s job is to figure out which leads are worth funneling to sales: those leads are MQLs.

Sales Qualified Leads (SQLs)

Once your sales team gets an MQL, they’ll still need to do some discovery to determine if that lead is 1. of value and 2. likely to convert. Once they figure that out, then they can start zeroing in on chasing the deal: that’s a Sales Qualified Lead.

What’s Revenue Got to Do With It?

Revenue is what pegs MQLs and SQLs to real, concrete targets to that everyone can be held accountable for the growth of business. It’s common for salespeople to have sales quotas. It’s much less common for the marketing team to have lead quotas. But both are important pieces of this puzzle because both contribute to overall revenue, even though the sales process is much more involved in the actual closing of deals.

First, determine your revenue target.

Come up with a realistic revenue target for your business for the year. Don’t be afraid to be a little bit aspirational (after all, you want to push everyone involved to be the best they can be) but make sure it’s achievable or else the rest of this process is just rhetorical.

Then, determine your SQLs.

You should have a fairly strong grasp of what kinds of leads are valuable to your business. Work with your sales team to really hone in on a persona that you’ll be targeting. What kinds of services do they need? How long do they usually take to convert and how much sales work does it take to close the deal on average? How much revenue comes out of these leads? These will become your Sales Qualified Leads.

Most importantly, you want to figure out your conversion rates. On average, how many of the leads that get passed on to Sales actually convert into paying customers?

Let’s take a look at this process using some small, easy numbers. Say your revenue target is $100,000 this year. Your sales team usually converts 1 in 4 leads (a 25% conversion rate) for an average of $100. In order to hit your revenue target, then, you’ll need 1,000 sales which at a 25% conversion rate means 4,000 quality leads from marketing.

At this point, compare these numbers to the cold hard facts. Your conversion rates are likely much lower than 25%, especially if you’re selling a high-value product or service. If this calculation shows you that your sales team needs to wade through an ungodly, impossible amount of leads just to meet your revenue target, then the problem isn’t with sales: it’s with the leads, which means you need to work on your marketing department.

So now, determine your MQLs.

Marketing qualified leads can be much more difficult to determine because they often require you to passively gather information on your customers. If you’re getting a lot of web traffic and you’re using a tool like HubSpot, which helps to profile your leads for you, then this process can be easy. But if you don’t have a lot of information on customer behavior, then you might end up making a lot of assumptions.

Refer back to your conversation with sales at this point. What made a good lead? Was it a certain demographic profile? A certain level of need? A certain behavior? Try to zero in on as many identifying factors as possible.

This guide from HubSpot has great advice on putting together MQLs using spreadsheets if you have the data necessary.

If you don’t, your best bet is to use the qualities of an ideal lead that you determined earlier to create some kind of “lead bait” or other differentiating factor.

Say you’re a roofing company and you really want to focus more on re-roofing and replacements. You know that there are plenty of signs that might mean you need a new roof but that most homeowners will opt for simple repairs first. So you create a premium web video series showing homeowners how to assess and replace damaged shingles. It’s free, but the homeowner has to answer a few questions on the state of their roof and provide an email address or phone number to access the content. Your MQLs could then be people who accessed the series who stated that they are the primary homeowners of homes with roofs over 20 years old. Not only are they great leads for sales to follow up with, but they already know and trust you from the web series.

Of course, that’s a fairly basic example, and there can be significant cost involved with creating this kind of lead bait. But if you don’t have significant statistics on particular lead behavior, then it’s a good place to start. At the very least, include qualifiying into early stages of your lead funnel, like contact forms, if your sales team is being inundated with unqualified leads.

Once you have your MQL in place, compare it to your conversion rate. If sales tells you they need 400 leads to hit their quotas, then hold your marketing team to a 400 lead quota. Tying sales and marketing goals together can help you to get a better idea of how the two different teams function together and push them both to do better.

Further Reading

This is just a basic introduction to SQLs and MQLs. If you’re interested in digging into the ideas and strategies behind these ideas, these posts might be useful for you:

Brian Carroll’s guide to creating a universal lead definition for your business

HybSpot’s guide to determining MQLs with hard numbers

Marketo’s library of resources on lead scoring

HubSpot’s guide to lead nurturing

Ready to start using MQLs and SQLs to create a smarter lead funnel? Confused? Infuriated? We want to know. Find us on Facebook and get in on the conversation.