Tracking your conversion rate is extremely important to help you to understand how you’re turning leads into paying clients. Even if you don’t get excited about data as much as I do, you still need to know about your basic sales performance. Why is that? Here’s a simplified explanation to give you a better picture.
You can’t realistically expect to convert every single lead into a paying customer, so you need to have a well-functioning process to know where to shift your focus. Once you know that, it will minimise the risk of missed opportunities and will also speed up your sales cycle. In simple terms:
less time spent on figuring out how to make money by doing what you truly love.
But before we jump into the ‘how‘ let me quickly explain (in a simplified way) the different types of conversion rates that you should be tracking.
Depending on what you’re selling, you might come across many different terms related to conversion rates. As an impact-driven entrepreneur, you’re likely to be providing services or services sold as products. I will use this angle to help you understand what conversion rates to look for. In case you’re selling only products online then here’s a comprehensive guide for you to read through.
Service based conversion rates
The most basic conversions to track for service-based businesses:
- Qualified lead conversion
- Query to client conversion
- Lead to client conversion
- Lead to hot lead conversion
Qualified lead conversion
This shows how many initial requests and queries are coming from potential customers. You want to make sure you spend most of your time on potential clients so this phase is when you qualify your lead. For example, if I reach out to you explaining what type of services I can support you with, that would not count as a qualified lead for you. In case you were looking for scaling up your business and you reply to me, you will count as a qualified lead for me. So it goes both ways and it’s called Inbound and Outbound sales = receiving queries and reaching out to potential clients.
Query to client conversion
Ideally, you want to be receiving irrelevant queries all the time. If for example you are providing life coaching services and you keep getting requests for business consultancy then something in your marketing messaging is really wrong. Make sure that you clearly articulate who you work with, what you do and what type of problem you’re solving. Tracking your query to client conversion means that you know exactly out of how many initial requests you end up landing a paying customer.
Lead to client conversion
This one is similar to the query to client conversion but in this case, you are tracking how many of your qualified leads end up purchasing from you. Going back to the initial example: if I reach out to you about my services then you will not be counting that query as your Lead to Client conversion. However, if you arrange a call with me and you tell me about your services and I purchase from you then I become not only a qualified lead for you but also a client.
Lead to hot lead conversion
This is something I love teaching to my clients to make sure they work in the most efficient way. Once you qualified a query and you know that you’re talking to a potential customer, you want to check how “hot” that lead is for you. A hot lead means that a potential client is highly likely to make a purchase from you. The Pareto principle (the 80/20 rule) is a great way to pinpoint your hottest leads. And by hottest, I mean the ones that are at least 95% likely to convert into paying clients. Understanding what percentage of your overall leads are hot will truly help you to focus on what to improve, how to move your leads quicker & better plus it might also show you a specific niche. In my case, the majority of my hottest leads are qualified coaches. I could only figure this out by tracking my queries from day 1. Now I can target my audience better and shift my focus quicker.
How to track your conversions
Now that you know the most important metrics to track, you’ll need some basic math skills to start calculating your conversion rates.
What you want to measure are:
- the total numbers at each stage (how many queries, how many paid clients etc)
- the percentage of how many leads move along your sales cycle
- the percentage of your total paying customers compared to the overall requests
To calculate your Lead to Hot Lead conversion rate you would need to divide the number of hot leads by the number of your qualified leads. If you have a total of 20 active leads and you have 8 potential clients that are very likely to purchase from you then here’s your calculation:
8 / 20 = 0.4 * 100 = 40%
In this example, 40% of your qualified leads convert into hot leads.
Make sure you track all possible journeys and spend some time identifying any patterns or anything that stands out. You might notice that your average conversions from Query to Lead and from Lead to Client are very similar or you see a very low rate from Lead to Client. If the latter is the case then you know your main improvement area is to close your clients and turn them into loyal customers.
To help you start tracking your performance, I’ve created a simplified template for you that will automatically calculate your conversion rates so you don’t need to worry about your math or adding formulas. With this template, you can see your monthly and annual performance as well. The Instructions tab will also explain to you how to use this document.
I’m wishing you successful moments and many revelations about how to serve your audience better.