Reverse Engineer your Business Growth
Let's say you have a business and you want 100 more customers this year. Most folks will simply hope that they get 100 more customers and continue their same activities. Others might be a bit more ambitious and double down on their sales and marketing efforts, but even these folks may have a hard time hitting their goal. While they have good intentions, they're not calculating what needs to happen in order to achieve their goal.
Let me explain, if you want 100 more customers, it turns into a math equation, that we should reverse engineer. For this example, let's say you own a bookkeeping company and you want 100 more customers. Below are several helpful metrics we need to review.
Lead to Customer Rate
We need to know your lead to close rate, to figure out how many leads you need to obtain 100 customers. For simplicity sake, let's say your lead to close rate is 10%. Thus, you need 1,000 leads next year to have 100 more customers. I got this by taking 100/.10 = 1,000.
Website Visit to Lead Rate
After we determine the lead to customer rate, we need to figure out your website visit to lead rate. A helpful tool for this is Google Analytics, which I wrote about in this blog post. Through Google Analytics we're able to track lead metrics such as contact form completion and you can even partner with companies like CallRail which will measure calls your getting from your site. In this case, let's say for every 100 website visitors you receive 3 leads, resulting in a lead rate of 3%.
From here you divide 100 (customers) by 10% (close rate) and divide by 3% (website to lead rate) to determine how many visitors you need to your site in a given year. In this case 100 / 10% / 3% is 33,000.
There we have it, we need 33,000 visitors to your site. Now, how do we get 33,000 qualified visitors to your site? My recommendation is both Google search and Facebook advertising. Let's assume through each of these you can drive traffic at $2/click, which is pretty reasonable and fair. (however this will vary per industry). If we play this scenario out, that means if we invest $66,000 over the year, we should be able to drive 100 new customers.
Is that profitable for the business?
It depends how much each client is worth for your business. Let's assume you have a bookkeeping company and charge each client $5k / year, which is a little over $400 / month. In this case, $5,000 * 100 new customers is $500,000 from a $66,000 investment. Sounds pretty good right?
Once you get going, you can optimize each metric to work in your favor. For example:
Lead to Customer Rate
In time you'll develop best practices on now to close the sale and you may increase your lead to close rate to 15% (from 10%). This could simply be done by following up with each lead as soon as it comes in, vs letting it sit for 12 - 24 hours.
Website Visitor to Lead Rate
You may also work with your web designer to tweak your site to drive even more leads. This may be through prominently placing your contact form, adding a phone number to your site for folks to call, or adding a messenger bot. If you did these things, let's say your visitor to lead rate doubles to 6% (from 3%).
Going back to our equation, that means we only need 11,000 people to our site to get 100 customers. This is achieved by taking 100 customers / .15% (close rate) / 6% (website to lead rate) = 11,000.
To make things more interesting, since we only need 11,000 people to the site within the year, we may not have to pay as much per click, and could get this traffic at $1.75 / click. This brings the investment to $19,250, while still yielding $500,000 in annualized revenue. Awesome stuff huh?
The point of this blog post is to think of the growth target you which to achieve and reverse engineer to map out what needs to happen. By doing so you can take action and make this a reality. Normally if someone suggested to simply drop $20k in advertising for business growth, the idea would seem crazy - especially if you're a small business.. But when you map it out like this, and check your metrics along the way while you're advertising, you'll be the one growing your business.
Now this scenario is purely fictional but the rates are not uncommon, my recommendation is to test a small advertising budget to get the rates mentioned. Once you have these rates, you can reverse engineer your growth and invest more heavily in advertising.
For anyone who needs help with this - feel free to reach out :).