We all know that too much planning is wasteful. The weather can change, new trends may affect how you work--the list goes on. But some high-level planning is required. You need to come up with a marketing budget. You need a hiring schedule. Otherwise, you wouldn’t be prepared for the major events that happen in your business year.
With most new customers coming from online channels, your website performance can be a great indicator of your overall business performance. So, can you predict your online traffic and, therefore, your business volume?
If you’re in the service industry, chances are your traffic is seasonal. People don’t think about (and search for) lawn care in the winter. They prepare for the summer in the spring, do some maintenance until fall, and do some winter preparation before it gets too cold. Your traffic probably looks like this (you can export this directly from Google Analytics):
If this is what last year looked like, this year will probably be similar. If you break it down by month, maybe your traffic looks like this:
So how does this help you in planning for the year?
Let’s turn this into some actionable information by translating this into a prediction for the new year. There are a few ways we can do this.
- Add a growth percentage: If you’re working with a marketing company, your traffic is going to grow this year. Put down a 5-10% growth rate to be on the conservative side. Now you’ve got your “projected monthly traffic”.
- Add a web conversion rate: Out of 100 people that visit your website, how many of them call or email you about starting service? 1? 7? You can multiply this percentage by your traffic numbers to get a “web leads” number.
- Add a “web vs other” rate: How many leads do you get from the web vs other sources? Is it 75% web? 50% web? Use this percentage to get a “total leads” number.
- Add a sales conversion rate: Out of 100 leads that call or email you, how many of them turn into new customers? 30? 50? Use this percentage to get a “total sales” numbers.
- Add an average customer value: What is the average sale price of your products? Multiply your web sales by this number to get an “total revenue” number.
- Add it all up: You should have total revenue for every month now--add this up and you’ll get your projected revenue for the year!
Here’s what that looks like in table format:
This projected revenue number can help in a number of ways. You can determine your marketing spend, your personnel spend and hiring strategy, your profit, etc.
You can also use it to determine where to focus your marketing or training efforts. If you run through this process with a 30% sales conversion rate and then with a 50% conversion rate, maybe that is a $10,000 difference in total revenue. With that information, maybe you can spend $2,000 on bringing in a consultant to teach your CSR’s how to be improve their sale closing skills?
What if you raise your website conversion rate from 7% to 10%? That could be huge. With the jump in leads, you could see a $300k increase in revenue, even with the 30% sales conversion rate.
This method of predicting your revenue isn’t perfect. If you wanted to fine-tune it, you could add a customer attrition rate, different product buckets with different average sale prices, or other details specific to your goals. But even if you don’t, you’re armed with a high-level view of how the different facets of your business affect your bottom line.
The next step is to make the decision on where to start making improvements. Time to get started!