The most important number for you to wrap your head around in business is your conversion rate because it is the key to accelerating your growth.
(This is a bit of a sneak peek at the types things I will touch on during the Free Webinar on Saturday, June 22nd)
If you ever wondered why your business is not moving in the direction it should, it is most likely because you do not understand this number.
Conversion rate, in it’s simplest terms, is how many people you need to talk to in order to convert one person into a sale. Once you understand this formula, the growth of your business becomes a lot easier to manage scientifically instead of emotionally.
There is no ego or emotion in data – just the facts.
Conversion Rate is:
- The number of people who take action on the goal you have set out of the total number.
- If 3 people visit your website and one person opts into your newsletter then your conversion rate is 33% or 1/3
- If you talk to 10 people about your product or service and 2 buy, your conversion rate is 20% or 2/10
- If you speak to 100 people, and 25 buy, your conversion rate is 25 out of 100 or 25%.
Let’s take it a bit further and talk about how it can impact your sales volume:
You must know what the value of your average sale is.
If ten people walk into your business or visit your website and one person buys a widget for $100 then your conversion rate is 1/10 or 10%, and your average sale is $100.
If you want to sell $1000 then you need ten people to buy. If only 1 in ten buys, you need 100 people to come in your store or visit your online shop in order to get ten sales. (10% of 100 = 10)
If your average sale stays at $100 and you close ten sales you will then make $1000.
What if you want to make $100,000?
You would then need approximately $2000 a week in sales. $2000 x 50 weeks = $100,000.
If you need $2000 a week in sales, and your average price point is $100, you need 20 people to buy. If you close at a rate of 10% then you need 200 “prospects” in order to get your 20 sales.
If you take that 200 people a week number and break it down to a daily factor, you need approximately 40 a day (Mon – Fri), and if you continue to convert at a rate of 10% you should close $400 in business each day.
When you break it down daily, it becomes easier to think about how do you attract 40 people a day instead of just looking at how do I make $100,000.
You feel more in control and more able to meet your goals.
You can also change the variables.
If you change your price point to $200 instead of $100, you only need half as many people to buy.
And, if you can convert 2 people out of ten instead of one, you only need half as many people again.
This is what I mean by understanding your numbers and how they work.
Your average sale and your ability to convert prospects into buyers is critical for attaining your goals in your business. You ability to measure how you do this is key to your business success.
Please leave me a comment below and answer these two questions:
1. Does this formula help you?
2. How do you track this now in your business?