Know Your Target Revenue
The difference between profit and loss can be razor thin in many industries, and your company needs to know exactly how much revenue it needs to generate in order to establish a positive cash flow. You should take your overhead into account, as well as other business expenses, then determine how much revenue you’re bringing in from your revenue streams.
Once you know how much you’re being paid by customers, you can easily adjust your targets for future years by percent. For example, if you bring in one million dollars in 2020, you can adjust your forecast for revenue generated by, let’s say twenty percent. You now know you need to bring in $1.2 million to hit your forecasted goals. Wishes and hopes may lie, but the numbers never do. Simply stick to the figures you know to make accurate projections down the line.
” To calculate your target revenue, you simply multiply your target sales volume by the expected selling price. For example, if you have a target sales volume of 2,000 units and they sell for $100 a piece, then your target revenue is $200,000. ”
Determine a Minimum Number of Sales
Simply determining revenue projections isn’t enough to have a thorough understanding of where you company is and where it’s going. You’ll want to determine exactly how many sales you need to meet the revenue projections your company is setting for itself, again taking into account factors such as overhead and taxation. This process is simple but critically important; simply take your revenue gap – the extra revenue you plan to generate in the future – and divide it by the value of your average sale.
If you want an extra two-hundred grand next year, and your average sales point is $100, then you’ll need to sale an extra two-thousand units to meet your goals. Again, this step is obvious but it’s important to know exactly what your company is aiming for on all fronts. This information helps you project other key numbers into the future.
Identify Closing Rates
The next step in your SMART goals process is figuring out how many new opportunities you’ll need to meet the projections you’ve created. Working backwards is often valuable in this step. For example, we’ve established that you need two-thousand customers to meet the goals you’ve set for yourself.
To keep things simple, let’s say your closing rate is fifty percent, but only fifty percent of opportunities even go for a close. You’ll need eight thousand customers in this scenario. Half of them will have an opportunity for you to close, that’s four thousand. Half of those will actually close, brining you to the two-thousand customers you need to meet your projections.
” A well-known industry analyst firm reports that best-in-class companies close 30% of sales qualified leads while average companies close 20%. ”
Understand and Implement the Marketing Funnel
Another way to think about setting goals and determining how many customers you’ll need is using what’s called a “sales funnel.” This is a concept where you map your customer lead generation and closing efforts. It’s a “funnel” because it’s made of levels which get progressively narrower as you move down the funnel, starting with awareness and ending with advocacy. There are five basic steps in most funnel, and they include awareness, consideration, conversion, loyalty, and advocacy. Here’s a detailed guide through the five funnel steps.
This is the broadest step in the process and one which relies the most on direct selling through ads and other mass communication. At this point, you’re simply notifying potential clients that your brand exists. This step can be as broad as possible but is more effective when there are some parameters and targeting mechanisms in your ads. For example, if you’re selling to a younger demographic, be sure to create content which speaks to them and will be seen on platforms younger people use, like YouTube and Instagram. Knowing your audience and the way to grab their attention is the key to properly completing this step.
At this point in the process, customers are heavily considering buying your product. If you have a sales team, your customers would be directed to them in order to close the sale, but if you don’t, your company will need to begin outreach to drive leads deeper into the marketing funnel. There are multiple strategies you can use to educate customers on why your brand outranks your competition or you can just sell them on general benefits of your product. E-mail is by far the most effective strategy at this point in time, as customers are more likely to read and engage with an e-mail than any other marketing tool. Retargeting is also effective, as it entails showing ads to those who have already visited your website.
This is perhaps the most crucial and specific step in the funnel process. This is moment when your potential buyer becomes an actual buyer, physically purchasing your product or service. There are some key aspects of this step you can take to maximize your conversion rate. First, try to eliminate any obstacles to making a purchase. If your buyer is ready to buy but doesn’t for some reason, identify the reason why and eliminate it, whether it be cost or questions of quality or customer service. Also consider offering an incentive. Customers are more likely to buy if you “sweeten the pot,” providing them with a small token which costs you little but offers them some peace of mind.
Now that you’ve established an existing customer base, the next step is to keep them coming back for more. To increase customer retention, you’ll need to stay in touch with customers using one of several methods. Loyalty programs are popular and direct; these are usually carried out with points which can be accumulated and used to buy other products from your company.
E-mail marketing is another great strategy which keeps your brand in your customer’s minds without coming across as too invasive of their privacy or daily routine. Whether you choose these methods or opt for another, it’s important to keep your brand in the minds of your clients even after you’ve made the initial sale.
This is it, the golden nugget of marketing. Advocacy is a marketing term which boils down to increasing and maintaining consistent, positive word of mouth from your established, loyal customers. This can be naturally occurring – and you’ve struck gold if it is – but can also be enhanced by providing surveys and referral programs.
Surveys are used to collect input from your customers and can be displayed online and in ads; they’re a great way to coax positive feedback from your customers in a way which you can directly control. Referral programs are simply rewarding your customers for bringing a new client to your business. These methods are effective for using your existing client base to “advertise” for you in a cost-effective and widespread manner.
Setting smart goals is not as difficult as it sounds.
Just keep in mind the projections you’d like to meet and the numbers available to you in determining how you’ll meet them. Next, utilize the sales funnel to guide your customers through the sales process and track your results, paying close attention to the strategies which work and altering those which don’t.