How Tracking Conversion Rates Can Help You Meet Your Sales Goals

How many leads do you need to make the amount of money you want to have in a year? As simple as this question might be, I’ve found very few people actually have this number in the top of their minds.

There are two things to consider regarding this question. First, there are your expenses. You should make sure to have an accounting program advanced enough to help you analyze your costs and how they relate to your profitability.

The second factor is your ability to convert leads to sales (conversion rate). The better you can convert your leads, the more profitability you are capable of achieving.

Let’s take a look at the process more closely:

First you need to settle on a sales goal for each month. For our purposes, let’s use $100,000 as your monthly sales goal.

The next step is to work out what your conversion rates are. In order to keep this example easy, suppose that all of your leads come from your website.

Suppose you convert 2 and a half out of 1000 visitors into paying customers. You have a .25% conversion rate.

Here is a formula to calculate the number of visitors your would need to meet your monthly sales goals. Let’s assume every conversion will actually purchase from you in order to keep it easy.

(Desired Sales / Sale Price / Conversion Rate) X 100

So, if you want $100,000 in sales and your average sale price is $20, with a conversion rate of .25%, the formula would look like this:

($100,000 / $20 / .25) X 100 = 2,000,000 visitors needed per month to achieve your sales goal.

Ouch! That’s a lot of visitors!

Not to worry, there are things that can be adjusted. The average price can increase. Your can improve your conversion rate or you can multiply visitors.

Many begin by increasing the conversion rate. It is very possible to increase to about 2% from an original .25% rate.

Take a look at the difference that makes to the number of visitors you need to achieve your goals:

($100,000 / $20 / 2) X 100 = 250,000 visitors per month to achieve your sales goal.

I could live with that change!

By increasing your average sales price to $47, you can improve your results even more:

($100,000 / $47 / 2) X 100 = 106,383 visitors per month to achieve your sales goal.

If you are like most, you would rather make smart changes to improve your sales success rather than work harder. Hopefully these examples drive home the importance of planning the leads you will need to reach your sales goals, and testing the factors you can change to become more efficient.

Marty Dickinson has been an entrepreneur and owner of HereNextYear.com for over a decade, and has a passion for sharing small business success techniques with other business owners. Claim your free white paper: “7 Ways Your Stone-Age Accounting System is Stealing Money From You Every Day … And, How to Get it Back This Year” and learn about an online accounting program that makes it easy to track your conversion rates.