Recently, I was attending a conference and one of the men in our group had a marketing problem we were working on, and I went where I always go. What is the Cost per Lead and Cost Per Client of that campaign and how is the ROI? The other member of the group looked at me and said “Richard, I’ve heard you ask that question A LOT in the past and I rarely hear anyone answer you, can you tell me, how many people give you the answer?”
The truth is 1 out of 100, if that. Sadly, very few people know their business math. However, the member of the group to whom I asked the question actually did know the answers: $74.80 Eric Engel proudly proclaimed! I had never been so proud, since Eric has been part of our program for a very long time and he ‘gets it’. He understood the importance of knowing his business Today, I’m going to share with you a reason to know your business math that you may not have thought of. End of year planning.
As we look ahead, how will we know what to plan for, where should we start and how do we create the plan?
These are all very good questions. And Eric’s answer to these questions is at the core to all of it, “Know Thy Math”.
Let me give you an example of what my business manager and I did.
First, we identified what we wanted 2015’s gross sales to be. We knew what 2014 was and we could accurately project the balance of the year.
Second, we worked backwards. We identified how much each client was worth. You can do that by dividing the total number of clients served into the total revenue. In some cases you may have to break this down further, say by case type.
Third, we identified our Cost Per Lead. You can take your total marketing spend for the year and dividing the total number of leads into that number. This will give you your cost per lead.
Fourth, we identified our Cost Per Client. Again, we took our total marketing spend and divided it by our total number of new clients.
Fifth, we needed to look at our Perfect Client Life Cycle. This shows us how many leads convert to appointments, then show up, then hire, then pay their bill.
These numbers will allow you to set the correct targets to hit. As an example, let’s say your sales for 2014 were $750,000 and you wanted to reach $1,000,000 in 2015, could it be done? Certainly it could, it’s only a 33% growth rate. But how, that’s the question.
Well, if we know that each client is worth $5000 and assuming every client pays within 12 months (if this is not the case you’ll need to adjust accordingly), we know we’ll need 200 clients in 2015 or 16-17 clients per month to accomplish that goal.
Ok, now that we know how many clients we need, let’s plug that data into the Perfect Client Life Cycle. If we know that 50% of all prospects hire the firm once we meet with them, then in order to have 16 clients hire the firm we need 35 appointments that show. If 70% of the appointments set, actually show, we know we’ll need to set 50 appointments. If 60% of the leads set appointments, we know we’ll need 83 leads. Perfect. All we need is 83 leads each and every month to achieve our goal.
From here it is merely establishing the plan to accumulate the additional leads need to achieve the goal.
And that’s another blogpost!
Building a better business, one analysis at a time.
