calculate SLA

The Guaranteed Easiest Way to Calculate SLA

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You’ve worked hard to build your organization, and now you want to see prolific growth from your sales and marketing departments. What you need is a way to measure their efforts so you can work on improving the right pieces of the sales and marketing puzzle.

One way to bolster cooperation between your sales and marketing teams is to create a sales and marketing service level agreement. This agreement acts as a contract between the two departments and sets them up for success through a series of goals and performance standards. These standards will require you to calculate SLA, but don’t let that scare you off – it’s a simple process.

What You Need to Know About a Marketing Service Level Agreement

calculate SLA

First, you should know that service level agreements are common in the service industry. They set the standards for accountability and results between two businesses, departments, or parties. Some common examples of service level agreements are:

  • Customer SLA: A customer SLA is an agreement between your organization and your customer. The agreement stipulates things like what it covers, how quickly you can perform services, and how often claims are made.
  • Internal SLA: An internal SLA is an agreement between one department and another in your organization. It may dictate terms like how quickly one department handles requests or what KPIs each department is accountable for.

While each of these types of service level agreements will be different, there are some common elements of SLAs that you want to consider:

  • Agreement summary: Every SLA will include an overview of the details. The details will typically contain things like what services you’re offering and how you plan to measure the results.
  • Goals: Your SLA will list out what the goals are, what is needed to achieve those goals, who is responsible for them, and what happens if you (or the other party) fail to meet the goals.
  • Cancelation conditions: Every SLA should have conditions for cancelation. This may work both ways, or it may be a condition that only works in one direction. It needs to be clear in your SLA, either way.

A marketing SLA can be for a service you offer to a client or it can be an agreement between two departments in your company with common goals, like sales and marketing. These agreements support your organizations’ long-term goals by ensuring you meet the standards of the contract.

The Easiest Way to Calculate SLA for Marketing

An SLA isn’t just a document you sign that says you’ll do a great job – it outlines exactly what you’re going to do and how well you’re going to do it.

4 Metrics You Need to Calculate SLA

The end goal of your marketing efforts is to close more business. This means you need to use your sales data to craft your marketing SLA. The four metrics you need to calculate SLA are:

  1. Total sales goal
  2. Revenue percentage from marketing leads
  3. Average deal size
  4. Average lead-to-customer close rate

For your sales goal, you’ll want to consider it in terms of your revenue quota. The revenue number needs to explicitly come from your marketing leads rather than your sales-generated leads.

How to Calculate SLA for Marketing

You’re trying to generate numerical metrics you can use to improve your marketing efforts. There are three calculations you can use to make the most of your marketing service level agreement:

  • Marketing-sourced revenue goal: Sales goal × revenue generated from marketing leads
  • Number of customers needed: Marketing-sourced revenue goal ÷ average deal size
  • Number of leads needed: Customers ÷ average lead-to-customer close rate

It’s good practice to routinely recalculate your SLA numbers. You may want to approach this monthly in the beginning as it will give you insight into what changes you need to make in your marketing efforts.

Evaluate Your Marketing Performance

If you’re going to calculate SLA regularly, you’ll want to measure your performance before making any new calculations. Three calculations you can use to measure performance are:

  • Lead-to-customer close rate: Number of marketing leads that became customers ÷ number of marketing leads
  • Sales deal size: Revenue from closed customers ÷ number of marketing leads that became customers
  • Revenue percentage from marketing leads: Total revenue closed from marketing leads ÷ total revenue closed

These calculations should be done often in the early stages of your marketing efforts. You can even find other ways to slice your data, like segmenting the data by region or services sold. This can drive the direction of your marketing and sales efforts.

How an SLA Calculator Can Help Your Sales and Marketing Team

When you want to make the most of your time, an SLA calculator is a quick way to get the numbers you need to improve performance. You don’t have to spend an enormous amount of time plugging numbers into calculations in a spreadsheet. You can plug them into a calculator in just a few seconds.

Using an SLA calculator means you’ll need to have access to certain information. For an internal SLA between your marketing and sales department, you can use a calculator to model your sales funnel.

The data you’ll need to put together your sales funnel includes:

  • Annual revenue goal
  • Average deal size
  • Months per year
  • Working weeks per year
  • Number of MQLs reviewed per week
  • Percentage of MQLs converted to SQLs per week
  • Percentage of SQLs contacted per week
  • Percentage of SQLs converted to opportunities per week
  • Percentage of opportunities converted to customers per week
  • Percentage of prospects/visitors to leads conversion rate
  • Percentage of leads to MQLs conversion rate
  • Percentage of MQLs to SQLs conversion rate
  • Percentage of SQLs to opportunities conversion rate
  • Percentage of opportunities to customers conversion rate

For reference, MQL is a marketing-qualified lead and SQL is a sales-qualified lead. You’ll want to outline the parameters for these in your marketing service level agreement.

Why You Need to Calculate SLA Today

Without measuring your performance and putting rigorous standards in place, you’re really just throwing things at the wall and hoping they work. Calculating SLA gives you measurable indicators for both your marketing and sales departments.

Calculate your marketing service level agreement and put together a model for your sales funnel to see the most lucrative results from your marketing efforts.

Looking for an easy-to-use SLA calculator? SAP BW Consulting, Inc. has the perfect tool for you to calculate an SLA for your sales and marketing teams.

 

Calculate Your  Service Level Agreement (SLA)

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Lonnie Ayers

About the Author: Lonnie Ayers is a Hubspot Certified Inbound Marketing consultant, with additional certifications in Hubspot Content Optimization, Hubspot Contextual Marketing, and is a Hubspot Certified Partner. Specialized in demand generation and sales execution, especially in the SAP, Oracle and Microsoft Partner space, he has unique insight into the tough challenges Service Providers face with generating leads and closing sales using the latest digital tools. With 15 years of SAP Program Management experience, and dozens of complex sales engagements under his belt, he helps partners develop and communicate their unique sales proposition. Frequently sought as a public speaker in various events, he is available for both inhouse engagements and remote coaching.
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He also recently released a book "How to Dominate Any Market - Turbocharging Your Digital Marketing and Sales Results", which is available on Amazon.

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