Do you know where your business comes from? It seems like a simple question, but it can get complicated quite quickly – mainly because most business owners don’t really know. They may trot out the standard 3 options: networking, word of mouth and advertising. But often the next thing will be ‘I don’t know what else’. And that’s a problem. Because without knowing where your business is coming from, how can you possibly hope to generate more of it? Today, we’ve got a few secrets to help you do just that.
Start Measuring
This is something you can do right now to start understanding your leads better. Go ahead and open up a spreadsheet, and write down a list of all of your customers, past and present, from the last year. Then a few tabs over, make yourself a key, with each of your top 5 (pick your own number here folks) lead generation strategies labelled a different colour. Now go back to that list, and colour code where each lead came from. If you can’t remember, try going back through your records and finding out, or leave it without a label for now.
If you get down the list and find a customer who came to you another way, add it to the key with a new colour. Now take a look at the whole list – which colour is the most dominant? That’s your most successful lead generation strategy. It seems simple, but mapping out where your customers came from can give you a real insight into where you should be focussing. It can also be quite surprising!
Once you’ve done this step, don’t abandon that spreadsheet. Keep it going, and every time you gain a new customer, add them to it with the right colour code. You can even set another spreadsheet up for leads that haven’t turned into customers yet, or ones that didn’t, so you can start seeing patterns there too. And if you don’t know where a lead came from – ask them! Start asking every customer where they heard about you, where they found your information, and record it.
Calculating Conversion
Of course, leads don’t mean much to your business unless you can convert them into customers. You could get thousands of leads from a single advert, but if those leads don’t result in sales, you’ve done something wrong and wasted your time and money on that advert. To counter this, you need to understand your conversion rate. This is simply the ratio of leads (potential customers) to transactions (real customers).
A lot of business owners I speak to find this an intimidating thing to work out, and so just don’t do it. but it’s a really basic calculation to do and can give you a lot of information about your marketing and sales efforts. All you have to do is divide the number of customers who actually purchase from you by the number of customers who enquired and multiply but 100. So, the formula looks like this:
# transactions / # leads x 100 = % conversion rate.
That can still look about as clear as mud to some, so let’s look at a practical example. Say you run a business with a shop-front. In one week, 879 people visit your shop, and 143 of them buy something. So your formula would look like:
143 (customers) / 879 (leads) x100 = 16.25% conversion rate.
Generally, the higher the conversion rate, the more profitable the business. So once you’ve used that formula to work out your conversion rate, you’ve got a good idea of where you stand. Now, all you need to do is start increasing your activity in the areas that provide the most leads, of the right quality, and track how your conversion rate changes.
