Every business has specific metrics that illustrate the financial success and stability of that business. Numbers like profit/loss, total revenue, accounts receivable/payable and total sales. Your business probably tracks all of these in some fashion.
While these numbers are critically important to managing your business, they don't necessarily tell the whole story. These are "Big Picture" numbers. And when you only focus on big picture numbers like this you tend to always be looking in the rear view mirror and not on the road ahead.
You absolutely should know how much revenue you generated last month and last quarter and how profitable you were in those same months. However, that's in the past. You also must identify the actions you need to take today and tomorrow to get your business where you want it to be three months -- and three years -- from now. This requires you to measure and manage certain metrics on a more granular level, which tend to be more actionable.
We're going to discuss five common inbound marketing and sales metrics that, if measured and managed properly, will allow you to:
- Make accurate projections based on past trends
- Invest your marketing dollars more wisely
- Set benchmarks to measure results against
- Take real action that leads to incremental positive changes
Any type of green industry business can track metrics like these, whether you're a full-service landscape contractor or a software provider like a GoiLawn or DynaSCAPE.
We categorize these metrics by three of our important lifecycle stages--leads, opportunities and customers.
A lead is interested in what you offer and has “raised their hand” by filling out a web form, responding to a direct mail piece, calling based on a recommendation, etc. They've shown potential interest in doing business with you, although the lead may or may not be ready to buy right now.
Without a steady flow of new leads, you have no sales. The importance of measuring all activity at the top of the sales funnel should be obvious--this is where the sales process begins.
If your business attracts new leads through your website then your visit-to-lead ratio is very important. This is a measurement of the number of website visitors that convert into a lead. If, for example, for every 100 visitors to your website, two convert into leads, that would be a 2% visit-to-lead rate.
Looking at the screenshot to the right, you can see that 551 contacts, or leads, have been generated from the 23,000 visits to this website which translates into a 2.4% visit-to-lead rate. If we could just raise this rate by 10 to 20 percent (bringing it closer to 3%) it would significantly impact the number of leads this business generates, as well as the ultimate number of opportunities and customers further down the funnel.
We track these numbers using HubSpot's analytics tools but you could also track this using Google Analytics.
Cost per Lead (CPL)
Your cost per lead (CPL) is critically important to understand. You can't determine return on investment (ROI) if you don't know your CPL. This number will influence and guide all of your marketing decisions. If you spend $2,000 on a direct mail campaign and the same amount on a paid search campaign, wouldn't you like to know which performed better, without making assumptions?
This number provides you insight into which marketing channels and lead sources are most important to your business.
Check out the screenshot to the right comparing visits and leads from two different marketing channels (social media and paid search) over the course of one month. What if I told you that the cost per lead from social media was 80 to 90 percent less that of leads from paid search? Not only that, but social media generated more traffic, more leads and had a higher visit-to-lead ratio. Don't you think that would be valuable information that should absolutely influence future marketing decisions?
If I'm opening my wallet I want numbers and data like this supporting my decision.
Leads become opportunities when the formal sales process begins, which for a service provider like a landscape contractor, could mean the prospect has requested an estimate and formal proposal or you've scheduled a consultation with your prospect. For a software company this could mean a prospect has requested a demo or free trial. An opportunity is one step closer to doing business with you.
In a perfect world you would know your lead-to-opportunity ratio and visit-to-opportunity ratio, but you can't get hung up on every metric. So, as it relates to opportunities, I'm going to suggest that your closing ratio is the most important metric to track. Determine your closing rate by dividing your total number of new sales by the total number of new opportunities. If in the past three months you closed nine out of your 25 new opportunities, that would be a closing rate of 36% (9/25).
Of the five metrics we're discussing in this article, closing ratio is the most commonly tracked among green industry companies. This number can provide you with important insight into your sales process and overall health of your business.
You all know what customers are. They're the folks putting food on your table.
Your lead-to-conversion (LTC) rate is important because it allows you to forecast sales based on the amount of leads in your sales funnel right now.
Let's say your business averages 30 new leads each month and your LTC rate is 15%. You could expect four to five new customers for every 30 new leads. Let's also say that this number of leads over the past three months has dropped from 30 to only 20 new leads each month (maybe you cut marketing/ad spend). Based on real data you can't assume this will translate into another four or five customers. Historical data tells you that you are most likely going to fall short one or two customers. That impacts your future revenue, cash flow...everything, really.
Cost of Customer Acquisition (COCA)
Like cost per lead (CPL), your cost of customer acquisition (COCA) provides undeniable insight into what marketing channels are most effective at providing a return on your investment. With this insight you will have, not only the knowledge, but the confidence to make smart decisions in how you allocate your marketing resources.
Let's go back to the example above comparing the cost per lead of the social media and paid search campaigns. I already mentioned the cost per lead from social media was 80 to 90 percent less that of leads from paid search. Let's say both campaigns ultimately generated three new customers each. Based on each campaign's total spend (not to be revealed here), I know the COCA from the social media campaign was 1/3 that of the paid search campaign.
If you're a business owner, and have that data at hand, don't you think you would shift some dollars in your marketing budget? Of course you would! And that's what tracking these metrics is all about. You're looking forward, not backwards. You're using real data to inform decisions that will ultimately impact your business and bottom line.
Tracking these marketing and sales metrics requires diligence. It also requires analytics software like Google Analytics or, for even deeper understanding of marketing spend and ROI, HubSpot's software and analytics tools.
As famous management consultant, Peter Drucker, said, "What gets measured gets managed."
If your green industry business is hungry for this type of analytical insight and marketing and sales integration, give us a call to discuss how we can help you. Reach us at (800) 681-9169 or fill out our handy contact form.
We've also created a monthly Marketing Scorecard that you can download and use to begin tracking these important metrics. This is a basic Excel spreadsheet that you can customize for your unique business. Download it by clicking the image below.