Fun with Numbers, Part 4

Yesterday I wrote about average sale price for your paint contracting business. Today we are going to look at increasing the closing rate and the impact that can have on your advertising budget.

Again, we are assuming the following:
You want to increase revenues by $100,000
Your closing rate is 33%
Your average sale is $3,000
Your average lead cost is $100
Which means you must sell 33.3 more jobs, generate 100 more leads, and spend $10,000 more on advertising

A 10% increase in the closing rate would result in a closing rate of 36.3%. This would reduce the leads needed to 91.7 and reduce the ad budget to $9,170. As in previous examples, a small improvement in one area can result in widespread improvements in the business.

There are numerous ways for improving the closing rate: learning and using better selling techniques, offering more value to the customer, or lowering prices. This last is not recommended as it will decrease the average sale and likely offset the higher closing rate.

One of the most effective means for increasing the closing rate is higher customer retention and more referrals. These can also help lower the cost per lead. Again, an improvement in one area has a ripple effect.

A simple spreadsheet can be constructed to look at different scenarios. This will allow you to see how changing one number will impact the others. (Or you can purchase a pre-programmed Excel. See the first article in this series.)

The important point in this series is knowing your numbers and understanding the information that it conveys. While this series has focused on sales and advertising, knowing your numbers will allow you to better understand all areas of your business.

During this series I have looked at the individual numbers and how an improvement in one area will impact the others. Tomorrow I will show how a small improvement in each area will have a significant impact.

© BEP Enterprises Incorporated 2008