Track Conversion Rates and Meet Your Sales Goals
How many leads do you need to make the amount of money you want to have in a year? As simple as this question might be, I’ve found very few people actually have this number in the top of their minds.
There are two factors to take into consideration. The first is your costs. You should make sure to have an accounting program advanced enough to help you analyze your costs and how they relate to your profitability.
The second factor is your ability to convert leads to sales (conversion rate). The better you can convert your leads, the more profitability you are capable of achieving.
Let’s take a look at the process more closely:
The first thing you will do is to work out what sales level you want to achieve each month. Let’s use $100,000 as the figure for our purposes.
Next, you need to calculate your current conversion rates. While this process can be used for any type of prospecting, for this example, let’s keep it simple and assume the only way you get leads and sales is through your website.
Suppose you convert 2 and a half out of 1000 visitors into paying customers. You have a .25% conversion rate.
Here is a formula to calculate the number of visitors your would need to meet your monthly sales goals. Let’s assume every conversion will actually purchase from you in order to keep it easy.
(Desired Sales / Sale Price / Conversion Rate) X 100
So, if you want $100,000 in sales and your average sale price is $20, with a conversion rate of .25%, the formula would look like this:
($100,000 / $20 / .25) X 100 = 2,000,000 visitors needed per month to achieve your sales goal.
Wow! That is a lot of visitation!
Luckily, there are a few adjustments you can make. You can increase the average sales price. Or, you can increase your visitors or the conversion rate.
Many begin by increasing the conversion rate. It is very possible to increase to about 2% from an original .25% rate.
Look at how that will affect the calculation:
($100,000 / $20 / 2) X 100 = 250,000 visitors per month to achieve your sales goal.
I could live with that change!
By increasing your average sales price to $47, you can improve your results even more:
($100,000 / $47 / 2) X 100 = 106,383 visitors per month to achieve your sales goal.
Everyone would rather work smarter than harder. Hopefully these examples drive home the importance of planning the leads you will need to reach your sales goals, and testing the factors you can change to become more efficient.
Marty Dickinson has been an small business owner and founder of HereNextYear.com for fifteen years, and has a passion for sharing small business success techniques with other business owners. Get your free white paper: “7 Ways Your Stone-Age Accounting System is Stealing Money From You Every Day … And, How to Get it Back This Year” and learn about an online accounting program that makes it simple to track your conversion rates.
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Tags: conversion rates, internet marketing, lead conversion, leads, market research, marketing, profit