What’s the Difference Between a “Lead” and a “Prospect”?

In sales and marketing, it’s important to understand the difference between a “lead” and a “prospect”.

That’s because each of us in sales and marketing has a finite amount of time and resources that we can devote to business-building, and “leads” and “prospects” have very different likelihoods of converting to new business.

In classic CRM (customer relationship management) parlance, a “lead” is basically anyone that we can sell to. If you know the name and contact information for an individual, that individual is essentially a “lead” for you. In contrast, a “prospect” is a lead that has been qualified.

What does qualified mean?

To qualify a lead, one must answer the following questions:

  1. Does this lead have a need for the product or service that I offer?
  2. Can this lead afford to pay for the product or service that I offer?
  3. Is this lead the decision-maker within the organization?


If you can answer “Yes” to all these questions, then you can move the lead to “prospect” status. (As you can imagine, time spent with Prospects is far more valuable than time spent with Leads, so assigning the proper classification is very important.)

Leads never convert to new business

A lead will never convert to new business without first transitioning to the prospect phase. A prospect will convert to new business based on your close rate.

What is meant by “close rate”?

“Close rate” is a measure of the percentage of prospects you meet with that convert to new business. For example, let’s say you meet with 10 prospects and as a result, 6 of them become clients of yours. Your close rate would be 60%. Since your time is valuable and you have only a limited supply of time, it makes sense that you would want to increase, or maximize, your close rate. One way to do this is to make sure that you only spend time meeting with qualified prospects. You can accomplish this by asking the three questions above and paying careful attention to the answers. Another way of increasing your close rate is by honing your sales pitch — your “message”.

We’ll cover that topic in another article.

About the author

Andrew Lehrfeld is Principal at Internet Presence LLC, a company specializing in improving online presence for small businesses and professional services firms. Andrew has been developing effective websites and improving online presence for companies, organizations, and individuals for over 20 years.