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“Know your numbers” is a fundamental precept of business. You need to gather your business’ data at every step of the way and in every interaction with your customers. With your partners too. Then you need to understand what the data means.”  ~ Bill Gates

I’ve often admired Bill Gates for these words as he has an innate knowledge of just how important knowing your numbers can be to your business…and it’s pretty hard not to pay attention to someone who has often been the wealthiest man on the face of this planet.

I’ve personally seen the power of ‘number knowledge’ throughout my own career. As a former consultant with one of ‘the big 4’ accounting firms I spent time touring both multinational and mom and pop shops, with the aim of executing turn-arounds and scalability plans.

In travelling around performing my work, perhaps the biggest issue I’ve come across is a pure lack of attention to really understanding the numbers and the impact they have operationally. This is the base upon which these companies have stood (in some cases for decades) and yet many haven’t taken the time to use the information appropriately despite having teams of people dedicated to collecting it.

The unfortunate part about this is that it has caused that base to be far more unstable than it ever should have been and the answer is nothing more than a very brief education on how to a) plan ahead b) read and analyze the information available from an operational perspective.

Today I want to walk through the plan ahead portion of business operation as it relates to running your SEO and Digital Marketing company.  More specifically I want you to understand the benefits of knowing how to determine the cost of a lead and making decisions with that information in hand.

In a business of any size it’s more important than ever to think about what you are spending and what you are getting out of it. Our world is one where we need to stretch resources even further and the digital marketing world is no different. In fact, the majority of digital marketers out there still have a 9-5 headache that gets in the way of the life they actually want to live so these words should resonate with you.  In your case planning ahead becomes even more important if you want to shed that job (and I am confident you can).

In the case of leads, being able to project the cost (or value) of a lead is ULTRA IMPORTANT.

Why is that?

Well, it’s because when you are out there generating a lead without knowing its value you are destined to spend your hard earned dollars incorrectly. It’s very easy to look at all the lead generation opportunities out there and to simply begin driving traffic any way you can (which I have seen many digital marketers do) but I’m here to stop you from doing that!!!

Simply put, if you know what a lead is worth to you then you know the MAXIMUM amount of money you should spend to obtain that lead. Spending anything less than that amount essentially equates to a profit (which is what will help you shed your 9 to 5 job or provide you the resources to grow your business).

Ultimately, when you know the amount you can spend to obtain a lead your focus shifts from a wide array of options to a much smaller group of options to achieve the result you want. This alone will save you both time and money.

Think of it like this. In your own life you want a new car, you want a bigger house, you want to travel the world etc.. It’s not likely that you’re just going out and buying them all at once.  It is more likely that you’ll focus on one and in doing that you’ll be way more likely to end up with what you want!

Spending on lead generation is no different. You can’t blow your stack on exploring every avenue to drive traffic. Instead, you focus on the one or two that give you the best return for the dollars you’re spending.

From an operational perspective you’ll be able to produce more for less with the additional focus…and since ‘multitasking’ is complete bull sh*t, you drastically reduce the chances that you’re spreading yourself and your dollars too thin.

Now, taking things one step further we can try to forecast the cost of a lead so that we don’t start our lead generation campaigns on the wrong foot. This planning stage will help to prevent you from wasting your time and money from the very beginning and it will allow you to focus on what really matters to you…the profits!

Here is a really simple example of the exercise we go through for all our lead generation campaigns. Keep in mind that people have their own opinions on how to do this but this method has been exceedingly effective for us at driving profitability and thankfully it doesn’t take much time or effort.

We begin with three pieces of information;

1) Our desired product/service pricing

2) Our estimates for the number of clicks we get for our campaign

3) Our estimate of the number of sales we expect at each level

Desired Product Pricing –  Initial Offer: $50, Core Offer: $100,  Upsell Offer: $200     

Estimated Number of Clicks – Initial Offer: 50, Core Offer: 25, Upsell Offer: 6    

Estimated Sales – Initial Offer: 25, Core Offer: 10, Upsell Offer: 3    

With these numbers you can figure out the conversion rate on each level of sales. For our example I’ve laid them out below (Sales/Clicks)

Initial Offer: 50%

Core Offer: 40%

Upsell Offer: 50%

Finally we can figure out our lead value and our cost per click by looking at our conversion rate at each level as I’ve done below for our example.

Lead Value: $165

Cost Per Click: $82.50

What exactly do these values tell us?

Well, right away we have provided ourselves with the planned MAXIMUM spend that we feel is appropriate to generate a lead for the business. We’ve also planned how much we can spend on each click of our online advertisement.

As long as our spending remains below these figures we are reasonably sure that we are not going to throw good money after bad.

Doing this exercise prior to the launch of any program allows us to set a benchmark to measure our work. If we find that our activities are costing us too much and aren’t generating enough leads to keep the costs as planned we are able to alter our plan to ensure that we limit our potential losses.

It is also a great indicator of whether or not we are effectively speaking to our target market (i.e. are we getting enough clicks from our ads?). If you aren’t getting enough clicks to keep your costs down then there may be a need for change in approach.  You can ensure you remain nimble and quick (which is everything in the digital marketing world).

All of this can be time consuming to put together but in true SEO Cheat Guides fashion we have created a quick and simple tool to calculate this for you. You can check it out here. All you need to do is play around with the sheet and you’ll see the value of a lead in your business.

Try the tool for yourself and compare what you are spending on your lead generation efforts versus what a lead is actually worth…you may be surprised!

Go ahead and set yourself above the competition by ensuring you aren’t spending all those hard earned dollars and your precious time on activities that don’t provide the return you deserve.

The more of those dollars you keep, the more resources you have to grow your business and enjoy life.

It is only a couple of minutes of planning and it can drastically change the course of your project. I’d say it’s worth the investment.

Keep on selling!

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