One of the biggest challenges that face many businesses today is the continued supply of good lead flow. I have spoken to literally thousands of business owners that have a common thread of wanting more leads and to eliminate the sporadic one week good then next month bad rollercoaster they experience. I mean you know you have a good product/ service, if only you could just get in front of people… right?

Believe me, you are NOT alone. The majority of business owners suffer the same fate. It’s interesting when I dive in a little deeper as the next most common thread is that people are simply not sure how to get leads and how much they should pay to get that lead. The end result is an adhoc approach to marketing usually producing average results and a hole in the pocket…

“However, never fear Smith is here” (if you’re old enough to know the show Lost in Space you’ll get it, for everyone else it was a crazy older dude saving everyone on a space mission)

See by understanding the four key metrics below you’re about to get whats probably the BEST learning I’ve had in the past 5 years and what changed the way I look at marketing forever. AND most importantly, allowed me to scale my business to 7 figures and now on track to 8 over the next few years…

Ok ready to dive in, here you go:

– Client life cycle – This is how long your client stays with you for. In some cases dependant on the business type and transaction type this may have an extended time period. For example Real Estate agents see this cycle to be at least 7 – 10 years. In other businesses this maybe 1 month, so dependant on what that it is for you one of the approaches to consider is extending this further so the client says with you longer regardless of what industry you are in. You want to have that client life cycle extended as a key driver to better your metrics. Just imagine that client purchasing from you for 10 years, over and over, wouldn’t that be cool? This means for you less clients but more longevity… perfect right?

– Client life value – it’s a fancy word on how much money your client spends with you over their client life cycle. Example $5000 over a 3 year period. You also want to work this metric out in Gross ( the gross revenue generated from that client) which in this case is $5000 and then the NET amount ( what is left in profit after all expenses, taxes etc are taken out) which maybe $5000 X 20% = $1000 NET. Got it?

– Conversion rate – This is related to a sales metric and tells a story of both the quality of your prospect and your sales pitch and ability. It’s a percentage of how many leads you need to present your wares to in order to covert them into a paying client. As a business growth expert I spend a lot of time with my clients focusing on this metric. Small incremental improvements can have a significant shift on the bottom line here. For example a 25% Conversion rate equals 1/4 leads turn into a client. If you increase that by 5% to 30% in actual fact you are 20% better on the 25%. 25 % + 5 % ( 20% of the 25% ) = 30%. This can result in a significant change for you.

– Client Acquisition cost – The key to the kingdom lies right here… Here’s what I mean. If you know that the client is spending $5000 with a 20% NET profit = $1000 NET, now you know how much you can afford to spend on the client acquisition. Let me put it into an easy explanation. If you went to a casino and they said put down $100 to return $1000, would you ? Of course you would, it’s a 10X gain. So if they said $200 for $1000 would you ? Of course you would, it’s a 5 X gain and so on. This figure is subjective however understand that this is the KEY metric to understand.

See I have sat in front of many many business owners and argued the point against their “lack of” mentality or their fear around spending money on marketing ( BTW this is very common as we weren’t educated or bought up to risk money) OR should I say what looks like a risk for the business owner that doesn’t understand these key metrics.

I’m hoping you’re really getting what I’m trying to get across here… this is the holy grail!!! Once you know the metrics – BOOM! now you know the formula. The one thing I MUST ask you to grasp is start with the END goal.i.e how many clients do you want?

Here’s a sample of the equation:

Client Life Value $10,000 @ 50% = $5000

Client Life Cycle 5 years OR $2000 per year as an example with $1000 profit

Conversion rate 20% or 1/5

Client Acquisition Cost – $ 100 – $1000 at least

Average Lead spend ( Client acquisition cost divided by conversion rate)

Example 1: $1000 profit per year X 5 Years. You spend $100 Client acquisition cost = $20 per lead X 5 leads or 20%

Example 2: $1000 profit per year X 5 years $1000 Client acquisition cost = $200 per lead X 5 leads or 20%

Either way is still great…

It’s not a matter of “is there enough leads” it’s a matter of “how many do you want”… Let me prove it. Facebook alone has over 15 million people in Australia alone, how about I add Google , Instagram, Linked In and a few more to the equation?

Is that enough of a lead source for you?

Start with the END goal.

Do you see this is GOLD!! Now you can STOP the guess work and start to scale your leads massively. Now that we understand the theory, lets get to the practical application and what to do to get this happening…

– Record all your data and break it down in that order
– Set a budget that you are happy to spend to generate leads (make sure you calculate how many leads you want to have. Remember earlier I said start with the end goal = number of clients)
– Test, test , test. gathering as much data is the key to understand what incremental improvements you need to make
– Adjust your lead flow to suit your business
– Refine and work on reducing lead acquisition cost and increase conversion %

I can share with you that understanding this formula can lead to a weight off your shoulders. I have worked with hundreds of business owners to help understand and implement the above, and the results have been phenomenal.