For any of you that have the goal of growing your customer base; understand the statement of ‘Leads don’t pay the bills, conversion does.’ I have had many conversations over the years with business owners and salespeople where we apply this formula called the 5 ways. All businesses want three things and more of it: more customers, more revenues, more profits. That’s it. But how many businesses can specifically clarify how to get there based on their current numbers? The answer is, not many.
We look at customers, revenues, and profits as an outcome. Customers is an outcome of leads x your conversion rate. Revenues are an outcome of your customers x your average dollar sale and number of transactions. And your profits, is simply your revenues x your margins.
Now and most importantly there is a certain order of these 5 ways: leads, conversion, average dollar sale, number of transactions, and margins. If you get the wrong order, you’re going to be behind the eightball. Most people say leads are number one. Wrong. Number one is margins. Why? If you do $1 million in revenues with 25% margins, you’re putting $250,000 in the bank. When you sit down with a coach or accountant and go over your P&L, adjust some line items, and your margins improve to 30%, now you’re putting $300,000 in the bank on $1 million. That has nothing to do with leads. That just has to do with being intentional and reviewing your numbers.
Number two most important is what we’re talking about today and that is conversion. In addition, number three is average dollar sale, number four is number of transactions, and number five, which most pick as the number one in the 5 ways is leads. It’s number five because leads don’t pay the bills, conversion does.
So, my first questions to you today is how many of you know these numbers in your business? If you don’t, that’s the first thing to address. With that in mind, let’s attend to the next question concerning the 5 ways. How many different strategies do you have to generate leads? A few are marketing, referrals, strategic alliances, and networking. The big question is, are you measuring each one of those strategies to know exactly what your conversion rate is on each? If you’re not, you’re already dropping the ball.
We need to know our conversion rate to know where the money’s coming from. We must identify the most successful strategies, which are going to give us the most clients, before we go on to average dollar sale, number of transactions, and margins. If any of you are running around looking to accumulate more leads without an intentional focus on conversion, you are simply leaving money on the table.
I’ll tell you a funny story. When I was a new coach, I met an electrician who kept telling me he needed leads. I asked him what he was doing to accumulate leads. He was networking, had a monthly newsletter, and was on different social media channels. He was doing all the things to accumulate leads. I then asked him, “Great, what do you struggle with?” He shares, “Oh, yeah, right, I need to fix that.” I didn’t exactly know what that meant, so I jokingly I asked. “If you pull your drawer out right now, would you have a stack of proposals that you haven’t followed up on?” He shares, “Yeah, I need to get better at that.” What he would do, is he would get the lead, send them a proposal, but he would never call them back to see if they wanted him to come out. I shared, “How about you just hire some high school kid, give them a script, have them call, and ask, “we have your proposal here and we can come out next Tuesday between 2 and 4 or Thursday between 10 and 12. What works best for you?” Give them the either or. This strategy would increase his conversion rate quite easily. His response was, “I can’t have someone else do it, I would have to do that myself.” Hmm.
Three years later, I conducted a workshop, and I was sharing this story and a woman shares, “Oh my god, that just happened to me.” Really? Interesting. I said, “Do you happen to know who it is?” Yes, “I actually have his business card right here.” It was him. Three years prior this man is telling me how much he needs leads. By the way, he didn’t hire me. Three years later he was still doing the same thing. Chasing leads with no systematic conversion strategy. He simply never got it.
So let me be clear. Leads do not pay the bills, conversion does. Figure it out. Test and measure. Come up with strategies. Need a little assistance? Give me a call. I’ll walk you through the process.
COACH MICHAEL DILL is an Award-Winning Certified Business Coach, global speaker, and published author. He is a proud ActionCOACH Franchise Partner as well as the President of Power & Ice Wealth Creation—a strategic leadership company that works with business owners, leaders, teams, and entrepreneurs to both develop a systematized and structured organization while accelerating their mindset, efficiencies, and effectiveness to grow both personally and professionally to achieve extraordinary results. He brings more than 40 years of business and entrepreneurial experience in his leadership, team training, and mentoring practice.
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