Why Should You Know Your Conversion Rate?

I want to tell you a story ….

Once upon a time there was a door-to-door salesman selling vacuum cleaners who knocked on a door. The lady of the house came to the door, listened very politely to the sales pitch and said “no thank you”. The salesman gave her a big smile and thanked her very much for her time. The lady couldn’t help but notice how happy this chap was, even after her “no”. Her curiosity got the better of her and she asked him why such a big smile and happy attitude after she had just turned him down.

He smiled and replied, “well madam, it’s very simple, you are my 9th ‘no’ of the day”. Even more puzzled, she had to ask what an earth was he talking about. “Why so happy when 9 people have said ‘no’ to you?” And he replied “because I know that out of every 10 people I speak to, I always get one ‘yes’, and that means if you are my 9th ‘no’, my ‘yes’ is next!”

Some of you may have heard this before. It’s a really great simple story that highlights the importance of knowing your conversion rate. That is, how many conversations you need to have with potential clients before you make a sale (get the yes).

When I was running my import business, I was very aware of all the basics of sales, I knew the 4 golden basics: lead generation, sales conversion, number of transactions and price.

For some reason when I set up my coaching business, wanting to help and make a difference in the world, all that went out of the window. Somehow I forgot the basics of marketing and sales, the simple maths if you like, and thought I would put up my website and have clients calling me up and wanting to work with me.

The leads, the conversions, the number of transactions and price didn’t matter, the only thing that mattered was that I was there to help. It didn’t take me long to realise how wrong I was, that if I carried on with that way of thinking I would soon have to go out and get a job because there would be no business.

So it was back to basics for me. And what I realised was that any truly established successful business, whether it’s a bank, a factory, a hairdresser, an electrician or a holistic therapist, is aware of these basics and uses them to their advantage.

And so let’s use the conversion rate highlighted in the door-to-door salesman story as an example. Why is it so important to know your conversion rate? Well, as highlighted in the story, it is a great tool to help you stay focused and motivated when you get a “no”. If you know that you have to speak to 10 people to get 1 sale, then the 9 “no’s” won’t feel like rejections or failures, but they will be your stepping-stones to that “yes”.

The other very important reason for knowing your conversion rate, is to be very clear on how many conversations you need to set up to make your financial goals.

So for example, if you are aiming to bring in 2000 Euros per month and a service you sell costs 250 Euros per month, you will need to sell 8 services to make the target. If your conversion rate is 1 in 10, that means you will have to have at least 80 sales conversations to hit your target.

Another advantage of knowing your conversion rate is to improve it! Obviously the higher your conversion rate, the more sales you are going to make, so you need to know where you are now. If you find that your conversion rate is say 1 in 15 or higher, it would be an excellent investment of your time and/or money to find ways of improving it.