If you’ve been an entrepreneur for long, there are certain metrics (measurements) you practically live by.
You know them like the back of your hand.
For us designers, it could be something like average dollars per project, average dollars per month, or average dollars per client. These kinds of metrics help us measure success and sustainability.
For example, if I need $1,000 each month to survive, and I know that I have an average dollar per client amount of $500, then I know I need to find at least 2 active clients per month. (PS: if you work in some other currency, swap out “dollars” in this post for your currency of choice.)
The business metric your not watching
But today, I want to talk about one super-important business metric that you may not be watching–one that could completely turn your business around.
If you agree or disagree on the importance of this metric, please let me know by leaving a comment.
So what’s the all-important metric you may not be watching?
Dollars per lead.
In case you’re not sure what a “lead” is, it’s when a potential client or customer contacts you. Different businesses have different check points that determine exactly what a lead really is.
For most designers, it means a client gets in touch with them either through their contact form, or by calling a telephone or skype number.
Portfolio = lead generator?
A lot of designers work hard on their online portfolio in hopes that it will generate leads and ultimately sales for their business.
But most designers quickly find out that just because a potential client contacts you doesn’t mean they’re automatically going to hire and pay you.
Enter one of the most important metrics you may not be watching: dollars per lead.
It may take, for example, an average of 5 potential clients to contact you before you finally close the deal. Then, let’s say that client pays you $500 (just to stick with the analogy earlier). Your dollars per lead is actually only $100.
If you then know that you need to make $1,000 each month, you know your web site has to generateat least 10 leads each month for you to make the money you need.
But it’s an often-overlooked metric by a lot of new entrepreneurs.
So what does that mean?
Now that you realize you’ve been overlooking this extremely important metric, what’s next?
First, figure out what your target dollars per lead amount is.
Second, assess your current target income rate in relation to dollars per lead (don’t get hung up on math terms here like “ratio.” Just figure out how many leads you need to get in order to make the amount of money you need each month. See a few paragraphs above for an example).
Third, work on your web site, business card, cold-call, etc. until you hit or beat your lead generation goal.
So if you’re building a web site and you know that one out of every 100 visitors contacts you about your services (a lead), and you need 10 leads per month, you have to generate at least 1,000 unique visits to your web site every month in order to hit your target.
It’s a simple numbers game.
And that’s all business really is: a numbers game. If you can make the numbers work, you’re in business.
If the numbers don’t work, you go out of business.
Simple as that.
Watching that extremely important metric
So, have you been watching yourdollars per lead metric? Do you know where your business stands?
If not, start today. Do the math, play the numbers game, and figure it out.
It’s worth your time.
If you’ve already to got it figured out, or want to add something to this post, please leave a comment! I’d love to hear from you.