Build the Business of Your Dreams
By Susan Tatum, on Wednesday, February 23rd, 2011
This is the fourth in a weekly series showing freelancers and business owners ways to spend an hour per week building a basic marketing program. Last week we showed you How to Make Companies Beg to Be Your Client. This week we show you how to figure out what your marketing needs to accomplish. These posts are meant to be short, sweet and actionable.
Very few – if any – freelancers or small business owners can afford to waste marketing time and money on anything other than generating new business. This makes setting your marketing goals pretty easy.
Marketing should either a) deliver more customers (in the case of an ecommerce or SaaS site) or b) deliver more good prospects (in the case of a lead generation site). To help you stay focused and make logical decisions, you need to put some numbers to it.
Your initial marketing goal is actually a factor of the following:
• How much you want to make in the coming year
• How much your average client or contract is worth
• How often you turn proposals into paying clients
• How frequently your raw leads become proposal opportunities
Time to do a little math. The following steps explain how this works. To make things a little easier, you can download a free copy of our How Many Leads Do You Need spreadsheet and plug your numbers in there.
1. Start with your sales goal. Let’s say your sales goal for this year is $100,000.
Annual Revenue Target = $100,000
2. Convert your sales goal to the number of new customers you need. Divide your annual sales target by your average contract value. If you don’t already have this number, you can get it by dividing your total sales from last year by the number of active customers. For this example, we’ll use an average contract value of $5000. That means you need to acquire 30 new customers in the coming year.
Annual Revenue Target = $100,000
Average contract value = $5000
Number new customers needed = 20
3. Now look at your closing ratio. When you find someone with a legitimate project and you get far enough along to submit a proposal, how often do you get the job? (At this point, it’s okay to guess). Divide the new customer target by this closing percentage to get the number of opportunities you need to achieve. Let’s say your closing ratio is 50%. That means you’ll need to produce 40 proposals.
Number of new customers = 20
Closing ratio = 50%
Number of proposals needed = 40
4. Finally, apply your lead-to-proposal ratio. Of all the leads you’re able to generate (through networking, advertising, referrals, whatever) what percentage become actual proposal opportunities? If it’s 20%, you’ll need to generate 200 leads.
Opportunities needed = 40
Lead-to-proposal ratio = 20%
Number of leads needed = 200
Now you know, if everything remains the same, your marketing efforts must generate 200 leads if you’re going to hit a revenue target of $100,000. You can make this your primary marketing objective: generate 200 leads.
If 200 leads seems like a lot, don’t worry. There are other ways to hit your revenue target. What would happen if you turned more leads into proposal opportunities? What if you got better at closing those proposals?
Go back to the spreadsheet and play around with increasing the percentages on your closing rate and your lead-to-proposal ratio. You might find you want to spend at least part of your efforts improving those numbers.
Now you know what your marketing needs to accomplish. Next week we’ll find out how well you’re doing so far.
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