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Understanding Sales Conversion Metrics

How effective is your sales function in your business? One way to answer that question at a deep level is to calculate conversion metrics for every step of your sales cycle. These numbers are not tied to any numbers on your balance sheet or income statement, but can help you realize a better return on your sales and marketing expenses.

Your Sales Cycle

The sales process is different for every business. If the dollar amount of the customer purchase is small, the sales cycle needs to be very short or it won’t be efficient. For larger purchases, the sales cycle might be longer.

The first step in determining conversion metrics is to outline the steps a typical prospect takes before they become a customer. Here are a few examples:

Retail example.

  1. Prospect walks into store.
  2. Sales clerk interacts.
  3. Prospect selects item(s).
  4. If clothing, they may visit a dressing room and try it on.
  5. Prospect stands in checkout line.
  6. Customer completes purchase.

Ecommerce example.

  1. Prospect visits website and uses search or navigation.
  2. Prospect views lists of products.
  3. Prospect views product page.
  4. Prospect places product in cart.
  5. Customer completes checkout.

Service example.

  1. Prospect sends email requesting more info or an appointment.
  2. Customer service/sales clerk responds to email.
  3. Prospect makes appointment.
  4. Salesperson and prospect meet.
  5. Sales person perform follow-up activities.
  6. Prospect agrees to price/purchase.
  7. Client signs contract and pays initial deposit.

For each step in the processes above, the prospect can fail to proceed to the next step. Conversion is measured at each step with the percentage of prospects that proceed to the next step.

Not all steps are worth measuring. Sales and marketing personnel must agree on when a prospect becomes a viable lead. Measurements should occur from lead to customer.

Let’s expand on the service example.

  1. Prospect sends email requesting more info or an appointment.
  2. Customer service/sales clerk responds to email.
  3. Prospect makes appointment.

The first meaningful conversion can be calculated between steps one and three. Let’s say in the month of November, the company received 100 emails from prospects requesting more info and 50 made appointments. The conversion rate is calculated as follows:

# Appointments made (step 3)  / # prospect emails received (step 1) = 50/100 = 50%

To improve the 50 percent conversion rate, ask yourself what can be done between steps one and three to improve the prospect-facing activities.

Here’s another example:

  1. Salesperson and prospect meet.
  2. Salesperson performs follow-up activities.
  3. Prospect agrees to price/purchase.
  4. Client signs contract and pays initial deposit.

The second meaningful conversion rate in the service sales process can be calculated between steps four and seven. (You could also measure 3-4, 4-6 and 6-7.) Let’s say 40 appointments were kept and 30 became clients.

# New clients signed (step 7) / # salesperson and prospect meet (step 4) = 30/40 = 75%

To improve the 75 percent, ask yourself what you can do in steps four through seven to improve the prospect’s experience.

 

Actionable Sales Intelligence

As you measure these results over time, are you improving or declining for each conversion? Is one salesperson closing more business than any of the others? How can you improve each step so that conversion is increased? You will have more questions than answers when you first start calculating these numbers. You will also likely have many “aha” moments of insight you can use to improve the prospect’s journey.

If conversion is extremely low in the first few steps, it could be that marketing is not sending you qualified leads. In that case, marketing needs to improve before conversion can improve. If conversion is low in the final few steps, follow-up activities may need to be strengthened.

In any case, measuring conversion throughout your sales cycle will pinpoint the weakest areas so you can improve. When you can increase your conversions, your marketing and sales costs will decrease, and you will become more effective.

And if we can help you with any of these measurements, please reach out any time.

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The “Dirty Dozen” IRS Tax Scams

Each year, the IRS unveils its list of scams that target unsuspecting taxpayers.  Below are five of the most common tax scams impacting taxpayers today, as well as tips to not become a victim:

  1. Fake Charities are created to exploit natural disasters and other situations such as the current Covid-19 pandemic. Criminals set up fake charities and solicit donations by telephone, text, social media, or email.  The fake charity might have a familiar-sounding name, tricking the taxpayer into thinking they are donating to a reputable charity.  When requested, legitimate charities will provide their Employer Identification Number (EIN), which can be used to verify their legitimacy by using the IRS search tool: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search
  2. Immigrant/Senior Fraud scammers target groups with limited English knowledge as well as senior citizens. The taxpayer may receive a threatening phone call from someone pretending to be an IRS representative.  The caller might threaten jail time, loss of driver license, or deportation if their demands aren’t met.  The first contact that the IRS makes with a taxpayer will typically be through the mail – they will not initiate communication by phone.  Legitimate IRS employees will never use scare tactics such as threatening to revoke licenses or have a person deported.
  3. Offer in Compromise “mills”—an Offer in Compromise (OIC) is an agreement between the taxpayer and the IRS to resolve a taxpayer’s tax debt. Taxpayers should be wary of misleading and aggressive sales claims that a company can settle tax debt for “pennies on the dollar” or that they can secure larger offer settlements, which often cost the taxpayer thousands of dollars in vendor charges.  Taxpayers should first check if they qualify for an OIC by using the IRS online pre-qualifier tool: https://irs.treasury.gov/oic_pre_qualifier/.
  4. “Ghost” Tax Return Preparers will prepare a taxpayer’s return but refuse to sign the return as the paid preparer. Not signing a return is a red flag that the preparer may be looking for a quick profit by promising a big refund or charging fees based on the size of the refund.  A “ghost” preparer may require payment in cash only, make up income to qualify the client for a tax credit, claim fake deductions to increase the size of the refund, or list their own bank account instead of the taxpayer’s for direct deposit of refunds.  Avoid falling victim to an unscrupulous tax preparer by choosing your preparer wisely and reviewing their credentials and qualifications
  5. Unemployment Insurance Fraud typically involves individuals obtaining state or local assistance that they are not entitled to, often by coordinating with or against employers and financial institutions. This can entail multiple types of fraud, including identity-related fraud, employer-employee collusion fraud, misrepresentation of income fraud, and more.  There are a number of financial red flags to indicate unemployment fraud, including (but not limited to):
  • Unemployment payments coming from a state other than the state where the customer supposedly resides/previously worked;
  • Multiple unemployment payments made within the same disbursement window;
  • Unemployment payments being made in the name of someone other than the account holder;
  • A higher amount of unemployment payments in the same timeframe compared to other similar customers

Stay alert to these situations to protect your financial health. For more on the Dirty Dozen, here is the IRS web page:

https://www.irs.gov/newsroom/irs-dirty-dozen-list-warns-people-to-watch-out-for-tax-related-scams-involving-fake-charities-ghost-preparers-and-other-schemes

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The Power of Thank-You Notes

As we approach the holiday of giving thanks, it’s the perfect time to think about how we can use thank-you notes in our businesses and lives to express our gratitude to others.

When to Say Thank You 

There are many opportunities in business to say thank you:

  • When a client or associate sends you a referral that results in business
  • When an employee goes out of their way to fix a problem or make a customer happy
  • When a customer makes a large purchase
  • When a vendor over-delivers
  • When someone sends a gift
  • After a speaking engagement or an event when someone has hosted you
  • When someone provides advice that has been helpful, whether face to face or in a book or article
  • When someone does a favor or something nice that you’d like to reward

Keeping thank-you notes top of mind will help you think of more opportunities to use them.

What to Say in Your Thank-You Note

You don’t have to be a professional writer to make a thank you note sound good. Just write from the heart. Let the recipient know what you are thanking them for. Express a detail about the item or activity involved. And then thank them again.

If you are unsure about what to say, write a draft first that you can edit. Then transfer the version that you are happy with to your stationery. It’s far better to hand-write your thank-you note than to use a computer-generated one.

Personalized stationery for thank-you notes is definitely recommended. They add a formal and professional touch to your thank-you note, enriching the experience for the recipient.

Sending gift baskets can be a good idea, but sending a hand-written thank-you note alone can be the most powerful action you can take, especially if it is not expected.

While many businesses send holiday cards each year, thank-you notes can be far more powerful. If your budget is limited, you might want to replace your holiday mailing with thank-you notes instead.

One more thing to consider NOT doing is making your thank-you note into an advertising event for your company. If you want to send promotional items such as t-shirts, mugs, or other items, do NOT do it with your thank-you card. Sending thank-you notes is not a marketing event; it’s a time for gratitude. Sending clients promotional items can be very welcome; just don’t do it at the same time.

Helping others feel gratitude is the fastest way to experience happiness. Sending thank-you notes is not only good business, it’s good for our health and wellness, too.

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What You Should Know About Required Minimum Distributions

With all the legislative changes related to retirement distributions over the last couple of years, it’s important to have a clear understanding of what to expect for the current year.  In particular, it’s critical to know what to expect with Required Minimum Distributions (RMDs) for tax year 2021.  RMDs are required distributions investors over a certain age must take out every year from their retirement savings accounts.

As part of the SECURE Act of 2019, the age when RMDs are required was increased from 70 ½ to 72 years.  Furthermore, as part of the CARES Act passed in 2020, the RMD requirement was temporarily waived.  So, what should you expect for 2021?

Unfortunately, there is no longer an RMD waiver for tax year 2021.  Therefore, anyone age 72 or older as of December 31, 2021 must take their RMD by year-end to avoid a penalty.  The only exception to this is if 2021 is the first year an individual is subject to the RMD requirement, in which case the due date is April 1, 2022.  The RMD rules apply to traditional IRAs, inherited IRAs, and employer-sponsored plans.

For inherited IRAs, the RMD rules for beneficiaries depend on when the original owner passed away as well as the type of beneficiary.  While non-spouse beneficiaries are generally required to withdraw the entire account balance of the inherited IRA within 10 years, spousal and other certain eligible beneficiaries may be allowed to take RMDs over their life expectancy.  The taxation of the distributions depends on the type of account – no taxes will be owed on inherited Roth IRA distributions (assuming the original account owner held the account for at least five years), while distributions from an inherited traditional IRA account would be subject to taxation.

It is important to understand the various rules surrounding RMDs to avoid the steep 50 percent penalty that kicks in if you don’t comply with the rules and/or handle your distributions accurately.  But what if you don’t need the funds?  While you are still required to take the distributions when you meet the requirements, there are some options available if you don’t depend on the money to meet your spending needs, including reinvesting the proceeds in another allowable account (to take advantage of continued growth) or taking qualified charitable distributions (QCDs) that allow for gifting of up to $100,000 annually to a qualified charity (the latter of which are excluded from your taxable income and not subject to tax).

Be sure to work with a tax or financial professional so you know what to expect and can plan withdrawal strategies that put you in the best situation possible!

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The Four-D Time Management Trick to Boost Your Efficiency

Time is our most precious personal resource; once we’ve spent it, we’ll never get it back. As busy entrepreneurs, we seem to have less time than anyone else, so it just makes sense to look for ways to use our time wisely. Here is one technique that has worked for many.

The Four D’s

When you think about it, there are only four actions you can take against any one of the many tasks you have on your plate:

  1. Do it.
  2. Delegate it.
  3. Delay it.
  4. Delete it.

As you approach each task on your to-do list, ask yourself which one of the four D’s is best.

Do It

The first option is simply to do the task yourself.  Get it done, checked off, and out of the way.  This is often the best option if it’s urgent, important, or you are the only one with the experience and training to do it.

It might sound counter-intuitive at first, but doing a task might not be the best option. Let’s look at the other three options before we decide.

Delegate It

If your to-do list is full of simple, routine actions, then delegating is a strong choice. Delegating is also a great choice for tasks that are beyond your skill set and that would take too much learning-curve time away from your core work. If you don’t have time to do everything yourself, then getting help is a smart alternative to doing it yourself.

Getting help doesn’t mean you have to hire a full-time employee. You can get help in a multitude of ways:

  • Engage a company to do a task. From walking dogs to managing Google Ad campaigns to handling your bookkeeping and taxes, there are companies like ours that would be delighted to take over your task for you.
  • Automation is a form of delegation. Can software do what you are doing?
  • Find someone on Fiverr.com or UpWork. You can hire someone for a five-minute task or a 5-day task. Find them on any website that lists freelancers for hire.
  • Plenty of people are looking for part-time jobs, just in case you don’t have enough work for a full-time person.

If you can write instructions about how to perform the task, you can delegate it. And if you’re worried about losing control or quality, simply add milestones where you check the person’s work. Initially, it might not be faster, but in the long term, it will pay off.

Delay It

If a task is not urgent or important, delaying it might be the right option. The problem with this option is that you have to handle the task at least twice: once when reviewing it and deciding whether to do it, and again when you finally decide to do it.  If you keep deciding to delay it, you’ve handled it more than twice. Not only can this take up precious time, it can be a drain on your energy as you see the incomplete task on your to-do list for a long time.

However, there are times when delaying a task is best:

  • Delay if it’s not urgent and you have other urgent items to attend to.
  • Delay if it’s not important.
  • Delay to prioritize other, more profitable tasks first.
  • Delay when the task is best done in batches. Here’s an example: Rather than answer each email as it comes in, think about blocking out three times a day where you check and clear your email. You can apply this time-batching concept to just about everything to gain efficiency: posting on social media (write and schedule a month’s worth in advance), returning phone calls, attending meetings (book them all on one day and keep other days clear), and running errands (delay until you have three to four errands, then do them all in one run.

Be careful of delaying a task over and over again.  Something else may be going on with your mindset:

  • The task may be uncomfortable for you (find someone that loves to do what you don’t and delegate), or
  • How to get started is ambiguous (get training or find someone experienced to shorten your learning curve).

Delete It 

Some tasks should never have been added to your to-do-list in the first place. When there is no return on investment for a task, perhaps the best choice is to delete it.

Take a look at some of the things you do out of habit. Does it still make sense to do that task, or is it simply done because it was always done that way?

Do, Delegate, Delay, Delete

Try the four-D time management trick for yourself to get an instant boost in efficiency and productivity.