Aaron Hoos

It’s the end of July. Time to fill out your Monthly Sales Funnel Check-up. (Just because it’s the summer, doesn’t mean you should take time off from your sales funnel).

Wondering what the heck a Monthly Sales Funnel Check-up is? Read the first Monthly Sales Funnel Check-up blog post that kicked it all off!

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.

It’s the end of June. Time to fill out your Monthly Sales Funnel Check-up. (Are you noticing a difference in your business?)

Wondering what the heck a Monthly Sales Funnel Check-up is? Read the first Monthly Sales Funnel Check-up blog post that kicked it all off!

It’s the end of May. Time to fill out your Monthly Sales Funnel Check-up. (Are you checking these against the ones you’ve done in the past?)

Wondering what the heck a Monthly Sales Funnel Check-up is? Read the first Monthly Sales Funnel Check-up blog post that kicked it all off!

When I was in high school, my friend’s family owned the very first computer store in town. I was always sort of impressed that they had a lock on that market. I imagined a business without competition to be the highest level of business achievement – a sort of entrepreneurial nirvana.

Then, to my surprise, I learned that they were helping someone else start a computer store in the same town. In other words, they were helping to create their own competition! I didn’t understand it at all. When I asked my friend’s dad about it, he said that competition is good for business. Although he didn’t go into detail, it was a lesson I never forgot (I even remember the exact moment when he told me – it was in the kitchen of their house – it was a watershed moment for me).

It took me years to learn why competition is a good thing, but I now realize that it is essential to a strong, prosperous business. Here are my top 6 reasons why I embrace competition:

REASON #1: COMPETITORS DEFINE YOUR BUSINESS

Competitors help you to figure out what you do. If you are starting a business and you examine how your competitors define themselves, you can identify a point of difference that they are not addressing.

It’s like being lost and using a couple of fixed objects to help you figure out where you are. Your competitors are those fixed objects and you can easily find your way in the marketplace when you compare yourself to your competition.

Creating a business that has too much identical competition (everyone sells exactly the same thing at exactly the same price – real estate agents are a good example) will eventually result in a price war with your competitors. But if you look at your competitors as a starting point and then you define yourself carefully, strategically, and in a different way from the rest of the pack, you’ll help to attract the right people to your business (people who might not be attracted to your competitor). You won’t have to compete on price because your competitors are different from you.

For more information about differentiation and competition, read my blog posts: Equal is not good enough and Mine is bigger than yours — competitiveness and marketing content.

REASON #2: COMPETITORS KEEP YOU HUNGRY

A couple of years ago, I met someone who owned a business that was in-demand and the only kind like it in the entire state. The guy charged insanely high prices and 100% interest on unpaid debts. He could make his own schedule and he didn’t need to provide good customer service. Sounds awesome, at first – you can do what you want and you basically have a licence to print money. But eventually, some other entrepreneur will spot the opportunity in that market and see that he or she could make a financial killing while charging less AND providing exemplary service… and suddenly the first guy’s business is in trouble.

When I was a freelance writer, I would sometimes get frustrated at the low-priced freelancer writers who would charge next-to-nothing, undercutting my prices. On more than one occasion, it caused me to look at my prices and sometimes consider lowering them. (Fortunately, I never did). I realize now that those low-priced competitors kept me hungry and I worked harder to out-work and out-earn those competitors. I’m glad for them now.

REASON #3: COMPETITORS COMPEL INNOVATION

In economics, inflation is kind of like a swarm of termites. You don’t see them but they eat away at the stuff you own. Inflation causes upward pressure on prices so that $1.00 tomorrow is worth less than $1.00 today. In other words, if you’re standing still in your finances, you’re actually going backwards.

It’s the same in business. If you want to create a product or service, build a sales funnel, automate it, and then go sip margaritas on a beach, think again. Your business is “standing still” (not innovating) and your competition will outpace you with newer, faster, shinier products and services. While you’re asking the lifeguard to put sunscreen on the places where you can’t reach, your competitors will be inventing a better mousetrap. Before you know it, your business will sputter and die because no one wants your clumsy old offering.

Your competitors are innovating, so you need to as well. Their very existence forces you to get creative, invest in your business, and reach for more. That’s great for your customers and for your business’ longevity. Read more about innovation at my blog post: My best advice on innovation. And this blog post provides an interesting take on innovation: Want a competitive advantage? Offer the same products as everyone else!

REASON #4: COMPETITORS BECOME CASE STUDIES

In your own business, every interaction in your sales funnel is a piece of data that you can analyze to make your business better. You watch for patterns, for sudden changes, and for opportunities. You put all of these pieces together, you compare it with your metrics, and you can make huge, positive changes in your business.

But if you raise your head out of your sales funnel for a moment and glance across the street at your competition, you’ll learn quite a bit, too. Yes, you won’t have all of the facts or metrics, but you can put together an awful lot just by looking in their windows, browsing their website, mystery shopping them, and listening to both happy and disaffected customers.

Watch for competitors’ marketing campaigns that have a huge impact. Analyze the types of people going through your competitors’ doors. Find patterns among the disaffected customers who decide to switch providers and buy from you instead. By simply watching your competitor, you can learn so much from them to benefit your own business. They become a living, breathing MBA case study to make you a smarter entrepreneur.

Want a place to start? Why not do some really simple competitive research to figure out how to price your products or services. Learn more about it at this blog post: How to easily discover the best price for your product or service.

REASON #5: COMPETITORS RAISE MARKET AWARENESS

Imagine a town in which there are only two companies providing window cleaning services. They both market their services aggressively and have their own point of difference. Simply by advertising the benefit of cleaner windows, they highlight the problem of dirty windows in the market’s mind and the market will search for a window cleaning company – even if it’s not the one whose advertising initially prompted their awareness.

It’s the principle of 1+1=3. Competitors’ marketing will attract new Leads (and sometimes YOUR Leads) to the competitor, but it will also alert the general marketplace to the general problem or need. People from the marketplace will look for a solution or fulfillment and may end up in your sales funnel as a result (all because they became aware of the problem or need from your competitor’s ad). Note: I’m not suggesting that you don’t leave all of the marketing to your competition. However, I think that competitors who advertise in the same market will have a greater cumulative effect than if they each advertised in their own market).

REASON #6: COMPETITORS CAN BECOME COOPERATORS

I love motorsports, especially NASCAR. One of the things that makes the sport great is when two competitors will work together to push ahead of everyone else. Overall, they are still ruthless competitors, but for a brief moment they can put aside their differences to eliminate the rest of the competition.

The same thing can happen in business, too. You can work together with a few carefully chosen competitors to win more customers and outpace other competitors. Now, please note: There are laws about collusion and I’m not suggesting you circumvent those laws – you’re not doing this to raise prices across the board or to destroy a few competitors. There are ways to legally cooperate with your competitors for mutual benefit. For example, you can share the costs of joint advertising to reach different markets through the same channels. Or, you can send each other potential customers who may be a better fit for the other than for you. When I was a freelance writer, I competed against other freelance writers, of course. But when a Prospect wanted to buy from me and I discovered that they were not a good fit (perhaps I didn’t have the bandwidth to help them, or maybe they were in an industry I knew nothing about), I had a few carefully chosen competitors who I felt comfortable recommending them to. And the relationship worked both ways – those competitors knew who I was interested in working with and they would send people to me.

WHAT THIS MEANS FOR YOU

First, welcome competition. If there are no competitors in your marketplace, be wary. Dare to invite competitors to your marketplace! Get to know your competition as individuals, but also get to know their businesses. Use competitive analysis to learn as much as you can about them. Find out how you can help them (and take the first step to do so) and you may see some reciprocation. And always keep an eye on your competition to motivate you to stay hungry and stay innovative!

Hey, this blog post gives another reason to love competitors: 4 ways to insert yourself into your competitor’s sales funnel and steal their customers.