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Tracking Conversions to Achieve Your Business 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.

When answering this question, there are two considerations.  Expenses are your first consideration.  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.

Next, you need to calculate your current conversion rates. In order to keep this example easy, suppose that all of your leads come from your website. 

Now, let’s say that for every 1000 visitors, you “convert” 2.5 into sales leads. You have a .25% conversion rate.

This is the calculation you can use to determine how many visitors you will need to your website to meet your income 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.

Yikes!  That is a lot of visitation!  Not to worry, there are things that can be adjusted.  You can change your price. You can change your visitation, or you can change your 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.

I could live with that change! 

If you want to decrease the number of visitors you need even more, try increasing average sales 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.

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This entry was posted on Wednesday, March 17th, 2010 at 5:34 am and is filed under business consulting. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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