Do you know the number of leads you need to generate to reach your income goals? This may seem like a simple question, but I haven’t found a lot of folks that have the answer.
When answering this question, there are two considerations. First, there are your expenses. You should make sure to have an online 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 more efficient you are at converting leads, the more income you will be able to make.
Let’s take a look at the process more closely:
The first step is to determine your monthly sales goal. For our example, let’s say you want to make $100,000 in sales a month.
The next step is to work out what your conversion rates are. 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. That’s a .25% conversion rate.
Here is a formula to calculate the number of visitors your would need to meet your monthly sales goals. To keep this example simple, we will assume every “conversion” described above will ultimately purchase from you.
(Desired Sales / Sale Price / Conversion Rate) X 100
Therefore, if you have a $20 average sales price, a conversion rate of .25%, and you want to achieve sales of $100,000, your calculation would look like:
($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. The average price can increase. Or, you can increase your visitors or the conversion rate.
For most people, the best place to start is conversion rate. By testing various options and changes, it is possible to improve a .25% conversion to about 2%.
Look at how that will affect the calculation:
($100,000 / $20 / 2) X 100 = 250,000 visitors per month to achieve your sales goal.
That’s a nice change!
You can improve things even more by raising your average sale to $47:
($100,000 / $47 / 2) X 100 = 106,383 visitors per month to achieve your sales goal.
Today, it’s all about working smarter, not 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.
Get more small business success strategies and claim 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” to learn about an online accounting program that makes it simple to track your conversion rates.
Mail this post