Part of running a successful business is knowing your numbers.
To forecast where your money will come from, and how you will bring revenue into your business, you need to know some basic numbers. This means you need to know what you are earning and spending, as well as how many people you are connecting with and ultimately bringing on as clients. It’s all quite basic when you think about it, and once you know it, you will earn more money.
I always forewarn my students when we are about to do math! In the business world, you can succeed or fail in business just based on whether you do the math or not.
Don’t fret if you didn’t do well in math at school, though. It’s not really that challenging to do ‘business math’ – but you do have to know a few basic concepts, and how they relate to what you are doing – in order to use them to make your business better.
Forecasting your revenue is one of the biggest – where will your money come from? how many clients? what is their rate? how often do you have to bill them?
Think about it this way – if you are working by the hour with a few clients, you may have a hard time forecasting how much money will come into your business. But if you have a standard retainer or package price, and you know you have to work with 10 active clients, it is much easier to know what will be coming in. This is the stage you should get to – being able to dictate what you need to have come in – and then work towards it (if a client leaves, you need to be able to replace them easily!)
In terms of networking, math is also required knowledge. Knowing how many people you need to be in contact with before you get a sales conversation – and a new client from that – is essential. It’s the same type of forecasting, except it’s with people instead of money.
Try this exercise:
Look at your last 10 sales conversations. How many of them resulted in new clients? Whatever that number is, that’s your conversion rate (is it 2? 5? 9?). Hint: the higher this number is the better!
Knowing your conversion rate (or closing rate) should tell you how many people you need to speak with in order to sign a new client. If you need 3 new clients, and your conversion rate is 30%, then you need to have 10 sales conversations.
10 sales conversations = 3 clients
BUT – how many people did you have to make contact with in order to get those 10 conversations? That’s the other number that people often forget about. It’s your connection rate. Maybe you had to speak with 100 people to get those 10 conversations. If that’s the case, then it takes 100 connections for you to get 3 new clients.
100 connections = 10 sales conversations = 3 clients
Now you know how many people you need to reach or connect with in order to bring in a new client.
As I said earlier, the higher your conversion rate the better.
Working with these numbers so that your conversion rate increases – ie, you do better at closing the sale on the call – is the easiest way to improve your numbers, and by extension, bring on new clients. Then you can make fewer contacts to get better results.
So, more like this:
50 connections = 10 sales conversations = 5 clients
100 connections = 20 sales conversations = 5 clients
Look at your results – the key with knowing numbers is knowing how to work with them to improve your conversion rates – strive to get more conversions in your sales conversations.
Strive to get more sales conversations from your connections. You can work the numbers any way that makes sense for you – but know that you have better control of it when you are monitoring your results. It will also make your networking easier and more fun!
Tracey D’Aviero is a veteran VA and Founder of Your VA Mentor. Tracey trains and mentors professional women and men who are brand new to the VA industry or who have been struggling to make their business successful. Her mission is to educate professionals on how to build and grow successful and profitable virtual businesses in the VA industry by implementing systems and smart principles. Contact Tracey for speaking engagements, group training or private coaching at www.yourvamentor.com.