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Episode 8: How to Create a Sales and Marketing SLA

Your company needs to have a clear revenue goal. But unless your teams know how to contribute to it, your goals aren’t going to do you a whole lot of good. 

So you'll need to help marketing and sales each understand their role in achieving that goal. And the best way to do that? Implement a service level agreement, or an SLA, between the two teams.

An SLA means Marketing promises a certain number of leads to Sales, and Sales promises to contact those leads within a certain timeframe.

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Episode Transcription

Hi, I’m Jorie, your favorite host of Skill Up,  the show where you’ll learn how to take your sales, marketing, and service skills to the next level.

Let me throw out some numbers, right upfront. Sixty-nine percent of high performing companies put communicating business goals company-wide as the most important and effective way to build a high performing team. 

How about this one. Only 7% of employees know what they need to do to contribute to company wide goals.

You don’t have to be a numbers person to know that's a huge disconnect. Your company needs to have a clear revenue goal, but unless your teams know how to contribute to it, your goals aren’t gonna to do you a whole lotta good. 

So you'll need to help marketing and sales each understand their role in achieving that goal. And the best way to do that? Implement a service level agreement between the two teams.

OK, so what exactly is a service level agreement, or an SLA?

An SLA is an agreement between a service provider and its customer that guarantees a certain output. 

When it comes to sales and marketing, we’re talking about a two-way agreement. Marketing promises a certain number of leads to sales, and sales promises to contact those leads within a certain timeframe.

With an SLA in place, marketing and sales become jointly accountable for delivering the revenue your company needs. And that enables you to hit your company wide goals.

To create the simplest version of an SLA. You need to know three things. 

One, the average conversion rate from lead to opportunity. 

Two, the average conversion rate from opportunity to closed sale. 

And three, the average value of a sale. 

With these three pieces of information, you can calculate how many qualified leads marketing needs to send to sales in order for your company to meet its revenue goal.

Here's Mark Roberge, who was the founding member of HubSpot's own sales team, but has since left us to become a senior lecturer at Harvard Business School. 

ROBERGE: At first, when we started this a HubSpot, um, we did a pretty good job. We knew that when we gave a hundred leads a month to a mid-market salesperson, that they connected with half of them.

Uh, did 30, uh, discovery calls, converted, uh, to 15 demonstrations and closed five customers for roughly $800 of monthly recurring revenue. Like clockwork, right? So you look at that across 10 or 12 reps, and that's easy math to say, listen, we've got 10 sales people. Each of them needs a hundred marketing qualified leads each month, so you need to deliver a thousand leads per month for that team, and that's, that's like top five or 10% that's pretty good. 

Now in that context, sales does not get off the off the hook. If marketing is going to step up and be that accountable to their deliverable, then sales needs to have the same level of accountability.

And essentially what we created was a pretty simple dashboard that was like, it was called the "Don't Be on It Dashboard." Right? So really simple. It's like anytime a lead wasn't called within 24 hours, boom, your name showed up with the number of leads that fall under that category. Anytime a lead that had been in the cycle for two weeks, that wasn't called five times, then boom, that would show up on the dashboard.

So you're really just codified and programming in all the expectations of behavior that you had of your, you expected of your salespeople to work those leads with the right amount of rigor and the right amount of expertise to get a certain conversion amount against it.

First things first: Helluva speaker that Mark Roberge, right? Ok, getting sidetracked.

Notice how Mark used those conversion rates to calculate how many qualified leads marketing needed to produce.

In this case, it was a thousand. Then, marketing promised to deliver that many leads each month. And sales promised to contact those leads within a certain timeframe. In this case, 24 hours. 

If these were the numbers for your company, your SLA would look like this: Every month, marketing will deliver 1000 qualified leads to sales and sales will contact each of those leads within 24 hours of receiving it.

That's the most basic form of an SLA, and it's a great starting point. Let’s bring Mark back for a second, though. Because while this basic form of SLA is, as he puts it, top 5%, it can still be improved upon. 

ROBERGE: Obviously not all leads, even MQs, are created equal. And what happened was, um, you know, when we measured the marketing team and they got behind on that SLA in a given month, um, they started to tweak the calls to actions that they went after, right?

So as an example, we counted a, um, a VP of marketing that came to the site from a mid market company and downloaded ebook. We counted that as an MQL. That's a great lead VP of marketing mid market company comes and downloads an ebook. Right? 

Now you've got a VP of marketing that comes to the website and requests a demo. That's a great lead too. Now, which one do you think closed at a higher rate? Clearly, the demo request, it was about three times higher. 

And which is easier for marketing to get to convert on the site? An ebook. Right. It's a lot easier to get a visitor to come to a website and download an ebook than it is to request a demo.

So even in our top 5% SLA approach around MQLs in a marketing generated leads there was clearly misalignment. And as the month went on and marketing fell behind on their SLA, all the calls to actions changed to ebook downloads. And the sales team was like, where are the demo requests? Right? So we went back to the drawing board and thought about it.

And essentially what we did was we took a segment of leads and calculated what percent of them converted to a customer and how much those customers spent on our software, right? So we knew when a midmarket VP downloaded ebook 1% of the time that converted to a customer and they bought $100,000 worth of software.

And we also knew that when a VP level executive at a midmarket company requested a demo that converted at 3%. And they also, uh, purchase $100,000 worth of software. So if you multiply those two numbers together, you get a lead value at the time of conversion. 

You know that an ebook download on average is worth $1,000 to the company, and a demo request from a VP is worth $3,000.

And now it was no longer a get a thousand MQL calls, it was generate $300,000 of lead value. And if you need to get there through a thousand demo requests or 3000 ebook downloads, I don't care. Do it either way. And we give the correct credit to marketing for getting that higher value lead. So there was a profound moment that we were able to put in marketing on a revenue quota, just like sales. And have` that level of accountability.

So again, lotta numbers. But it’s not as complicated as it seems. 

If you have your leads organized into the two by three matrix from last episode, then you already have your hand raisers, who close at a higher rate than other leads, separated out. 

With hand-raisers out of the way, calculate the close rates for each of the remaining six buckets in your lead qualification matrix. Then, funnel that information back into your SLA requirements.

The results might look something like this: Every month, marketing will deliver $100,000 in lead value to sales. And sales will contact every marketing qualified lead within 24 hours of receiving it. 

See how that’s a bit more specific from the previous example?

But there’s one last hiccup to talk over. And that’s timing.

ROBERGE: Now you can't have marketing run the super campaign in week one, get to the 100,000 and go to sleep for three weeks. I just don't have the salespeople that call those leads. And you're gonna waste a bunch of them. Similarly, you can't have marketing go to sleep for the first three weeks of the month and then run a super campaign at the end. I got reps sitting around for three weeks doing nothing. 

So you know, when you have five salespeople, six sales people, not as big a deal, but when you're going to start to scale, when you're going to start to grow, you know, you've got to have a much more precise engine to hug that line really closely and make sure that the lead capacity you're sending to your sales team matches the sales capacity you have to receive it.

Implementing an SLA is a recipe for growth. So you need to be looking forward and preventing problems before they start. 

As marketing gets better at delivering the right number of leads every month, they'll need to also get better at delivering those leads at a sensible cadence.

For sales, the SLA requires contacting leads within a certain amount of time. Determining this timeframe is one of the most delicate parts of designing the terms of an SLA.

Marketing's deliverables are calculated using math. You look at how much revenue you need in a month to meet your company's goals, and you figure out exactly how many leads you need to hit that goal. 

But how quickly should sales contact those leads? The correct answer is as quickly as possible. And even though that isn't specific enough to go into an SLA, that should always be the goal your teams have in mind.

Why? Because the faster you contact your leads, particularly those hand raisers, the more likely they are to close. Here's Josh Harcus, founder of Hu-iify and author of A Closing Culture. 

MARCUS: In fact, give you some real hardcore data on this. Most companies call MQLs or leads is kind of what the overall study states within 42 hours of them becoming a lead.

Studies show, if you call someone within five minutes versus waiting just versus, if you call them within five minutes versus waiting 24 hours, you increase the chances of closing them a thousand times, not 1000% a thousand times. So just that move alone, knowing that all of your competition is most likely calling leads within 42 hours.

In one year, we 6X-d our revenue. And it was because even down to customer success. We were completely aligned to every lead needs to be called within five minutes.

So in the beginning, if you're a newer company, you likely haven't gone through the analysis yet. But you can come up with some guesses and look at patterns. Work to put the infrastructure in place and then start measuring.

But remember, even having a basic SLA will set you apart from the competition. So start with an SLA that requires marketing to deliver a certain number of leads each month, and requires sales to contact those leads within a specific timeframe. 

This is how you’ll focus your teams on pipeline creation. And if you can get your SLA to that point, you'll give your marketing team a lot more flexibility in the number of leads they need to send to sales. 

Your sales will enjoy a steady stream of higher quality leads and you’ll discover what it really means to sell efficiently at a higher velocity.


Next episode, we’ll look at how you can keep both teams accountable to the SLA.. and solve problems that come up along the way. And to do that, we’re going inside one of HubSpot’s own Smarketing meetings. 

We’ve never released audio from how we put these meetings together. So you’ll get first listen to all that and more, coming up next.

Oh yea, see you there.