Aaron Hoos

I received this excellent sales funnel question from a blog reader a couple of weeks ago. I’m posting the question and answer (slightly edited) here because I think it’s a question and answer that every business owner can benefit from knowing. Thanks again for the question!

The Question:
How do you determine if you have enough opportunities in your sales funnel to hit your fiscal year goal?

Aaron’s Answer:
If you know what your average conversion rate is, and if you know what your average per-customer spend is, you should be able to calculate your answer easily.

• Your average conversion rate is the number of Prospects in your sales funnel compared to the number of those Prospects who actually become Customers. For example, if you have 1000 Prospects and 100 of them become Customers, then your conversion rate is 10%.
• Your average per-customer spend is the amount of money each Customer spends on average in a given period of time (in this case, your fiscal year). For example, if each of those 100 customers (from the above example) spend a varying amount of money but it averages out to $1000 per Customer in a fiscal year, then your average per-customer spend is $1000.

Here’s what you do next:

Using the above numbers, along with your fiscal year financial target, you are going to do some simple math in order to know how many people need to be in your sales funnel (as Prospects) in order to reach your financial goals.

First, divide your fiscal year financial target by your average per-customer spend to find out how many Customers you need. (For example, if you need to make $100,000 per year and each Customer pays you $1000 in a fiscal year, you know that you need 100 Customers).

Then, divide the number of Customers you need (which you just identified in the above step) by your conversion rate to find out how many Prospects you need. (For example, if your conversion rate is 10%, then 100 Customers divided by a 10% conversion rate is 1000 people needed in your sales funnel).

That’s it! In the example above, if you want to earn $100,000, and each Customer pays $1000, then you need 100 Customers. In order to get 100 Customers, you need to have 1000 Prospects.

If you want to go deeper, you can divide the results you’ve just achieved into smaller goals to get quarterly, monthly, and weekly goals. I think those might be more helpful. And, if you want to grow your business, consider these tips to increase your conversion rate or my popular blog post 99 ways to optimize your sales funnel and grow your business.

Disclaimer: There are other factors to consider: Outside risks (like the economy) can have an impact. So can seasonal fluctuations if you’re measuring in the middle of a fiscal year. Also, your sales funnel’s conversion period can play a role in determining how accurate your numbers are. Every industry is different and these things need to be considered and factored in, even if it’s just as a rule of thumb.

Check out some of my other Aaron’s Answers blog posts. If you have questions you’d like to ask, feel free to email them to me and if I think all of my readers will benefit, I’ll post them here. Don’t worry, I’ll keep your info anonymous.

“There are lots of different things you can do online… When do you use them and how do they all work together?”

I’ve had three people ask me that same question recently so I thought the topic deserved its own blog post! The people who asked me were a realtor, the owner of a bacon factory (I’m not kidding), and a trainer/educator at my client’s office.

Here’s my answer to them (but slightly generalized for everyone). Now, I should clarify a something first: This isn’t the only way to piece your content channels together, and you can certainly add or take away as necessary. I’m just outlining the basics for someone who wants to get started. I’ve seen this work effectively for all kinds of different businesses.

OVERVIEW
You want to have several different content channels because each one acts as a sort-of “interface” with your prospective market and each one has its own purpose in your sales funnel.

START WITH A WEBSITE
Create a central place to drive your traffic. This site can be fairly static (i.e. you can update the content but you don’t have to do it daily). It should be the place where prospects ultimately go to convert into customers. This can be a somewhat salesy site and acts very much like a brochure and salesperson.

NEXT START A BLOG
Now you need something to showcase just how smart you are while it also works as a search engine optimized magnet of readers. Update your blog regularly — perhaps once a day or a couple times a week.

THEN OPEN AN ACCOUNT ON TWITTER
Open a Twitter account. Tweet daily. Follow your prospects. Listen to them and communicate with them.

THEN CREATE A FACEBOOK PAGE
Create a Facebook business page for your business or brand. Start sharing information about your business. Engage fans. Post pictures and video. Start discussions.

NOW TIE IT ALL TOGETHER
Once you have all four of these content channels created, it’s time to tie them together. Here’s what you might consider:

1. Put a link on your blog, Twitter account, and Facebook page pointing to your website.
2. Connect your blog to your Twitter account so you send out an automatic tweet every time you publish a blogpost.
3. Connect your blog and your Twitter account to your Facebook page so that you gather all of your communication points into your Facebook interface.

Now you have four very different content channels that work together to bring in leads, turn them into prospects, and ultimately into customers. They work together to capture the attention of leads and to convince prospects to buy. In most cases, your blog and your Twitter account will capture their attention. Then your Facebook page and your blog and your Twitter account will slowly convince them that you are the right vendor for their needs. Then your website will provide the way for them to buy from you. (That doesn’t mean they’ll visit your content channels in the exact order I’ve described — they might hop around — but I believe those are the roles that each content channel plays in your sales funnel).

And you can build from here: Maybe you serve a business niche so you want to add LinkedIn. Or maybe there’s a forum where you can post links to some of your sites. Or maybe you serve a local market and want to use Foursquare as a way to get some location-based marketing.

But don’t get too carried away too early. Start with the four I’ve described and build from there!

The Question (posed on LinkedIn):

I foolishly indicated that I am looking to replace a particular service provider due to their failure to live up to a level of service that might be acceptable. I have been inundated with emails from people trying to market their products / services.

Most of these appear to have been written by the same person – they contain the same phrases, just in a different sequence. “Leverage our capabilities”, “Maximise your sales paradigm”, “Dynamically enhance your business intelligence”, “Industry focussed eco-system”, “Ramp up your business processes”.

In most cases, I have found that the people that use these phrases clearly don’t actually know what their product does, as they are unable to re-phrase the text in plain English. Is it a case that they want to give the impression that they are clever? (Or do they really believe that they do know what they are talking about?)

Aaron’s Answer:

Once upon a time there was a marketing team that wanted to go with a really simple sales proposition — “Increase sales” — for their company’s product. It made sense and they knew it would resonate with the target audience.

Then the marketing manager got it and said “our customers will respond better if we stick the word ‘your’ in there. Make it ‘Increase your sales’.”

Then the director of marketing reviewed it and said “We do more than just increase sales. Please change it to ‘Increase the effectiveness of your sales’.”

Then the VP of Sales and Marketing said “It’s too long. Can we just say ‘Increase your sales effectiveness’?”.

Then the CEO said, “I don’t want us confused with a sales-coaching company. Let’s change ‘effectiveness’ to ‘intelligence’.” So it becomes “Increase your sales intelligence.”

Then the legal department said “We can’t say ‘Increase’. It has to say ‘Enhance’… ‘Enhance your sales intelligence’.”

Then the product people make a frenzied Friday afternoon call and they are furious because the marketing people have limited the product’s benefits to sales when, in fact, the product does so much more. Thus, it gets changed to ‘Enhance your business intelligence.’

And just before the marketing plan was implemented and all the ads were printed, a hotshot stakeholder on the fast track through the organization got the CIO to call the CFO to tell the CEO to tell marketing that the word “dynamically” would really make the phrase stand out against the competition.

Thus, “increase sales” becomes “dynamically enhance your business intelligence”.

And that is the story of how a compelling and clear marketing proposition becomes a stupid one.
-Aaron Hoos
http://aaronhoos.com

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