Do You Have A Lead Problem or a Sales Problem?

Written by Devon Eddy
Published on December 20, 2020

Maybe your business has plateaued or maybe it's simply not scaling as quickly as you’d like it to.  If you’re here, it’s because there’s a breakdown along the lead-to-customer journey and it’s slowing the growth of your business.

Where's the Breakdown: Lead Problem OR Sales Problem?

You can easily expose whether you have a lead problem or a sales problem by identifying and measuring Key Performance Indicators (KPI's) along the lead to sale process. For the many contractor type businesses, there is not a ton of repeat business customers. This means that transforming lead into sale as efficiently as possible will help your business grow profitably as you scale while still being able to offer competitive prices to your customers.  For businesses who depend on repeat business, customer retention becomes an added top priority. For customer-retention businesses, having a full book of business means that they can continue to serve their existing customers if they practice great customer service and follow-through.

Identifying Lead & Sales Key Performance Indicators (KPIs)

It’s important to know your Key Performance Indicators (KPIs) anytime you are looking for a potential breakdown in your business. They give you insight into how to turn your business into a well-oiled machine and will easily expose inefficiencies in your processes that are potentially holding your business back.  For the sake of identifying if you have a lead or sales problem, we’ll first need to establish a couple of data points for both leads and sales. In order to do so, the proper systems must be in place for measuring performance.

How to Get Your Systems in Place To Properly Measure Performance

  • Call Tracking

One thing you will need to do this process effectively is to already have some sort of lead tracking in place.  Without this in place, it’s impossible to track which leads came from where, how many were received, and how they actually performed for your company.  For home service companies, the perfect solution to this is call tracking software.  They allow you to buy tracking numbers that you can assign to different sources.  These softwares can then effectively report on these sources and even send their data into a CRM so you can measure how that lead performed all the way to sale.  We use and love CallTrackingMetrics to accomplish this for our clients, but Call Rail is another great solution.

  • Customer Relationship Management (CRM)

Once you have call tracking in place for your various lead sources, you’ll then want to integrate this system with your CRM.  There are a number of ways to do this depending on the CRM, but most CRM’s & call tracking software mutually connect through Zapier which acts as a relay to connect these two systems.

I’d like to take a moment here to recommend some CRM’s based on your needs.  We’ve worked with a number of clients sending leads into their CRM’s, setting up their CRM’s and working setting up our own for various businesses in a number of different types of business.  I don’t claim to be an expert in this but, I’ve found that the best way to find a CRM, that works well for a certain type of business, is to search around online forums in your niche or Facebook groups. Find out what other people are using that they love and take recommendations from people in niches similar to yours. Unfortunately with CRM’s, often times you won’t realize you’ve made a terrible choice until you’ve spent weeks trying to refine the system.. So getting advice from others in your field is usually a great place to start.

Once you have a CRM in place, you will either need to connect your Call Tracking Software unless the CRM you chose has an effective calling system built into the system.  To do this you’ll bring over the lead source into the deal that is created in your CRM which will allow you to track and report on that lead source throughout the sale.

8 Important KPI’s For Any Home Service or Contractor Type Business

With the above system in place, you will now be able to effectively report on the effectiveness of the different leads you get.  You’ll want to go through the following exercises for each of your lead sources. These are key indicators throughout your business process from when the lead comes into the business to when the sale is made. Furthermore, by being able to calculate these KPIs, you can determine exactly where in the process of lead to sale you're having difficulty and need to bring in reinforcement.

1. Lead Cost

Explanation: This is the first number you’ll want to gather to establish a baseline of how much each lead from a source costs, if it ranges, and be able to take the average.

How to Calculate: Amount Spent on that lead source / Number of leads over a given time period. Alternatively, certain lead sources will give you a fixed value per lead.

Example: $5,000 / 100 = $50 per lead

2. Contact Rate

Explanation: This is the rate at which you are able to contact your leads.  Lower contact rates indicate you may have recycled leads, are not receiving real-time leads, or possibly have bad contact info in your system.  Good contact rates will give you a gauge of good lead quality unless the next metric "Conversion to appointment" is bad, meaning there is an issue with the appointment setting or intent of the lead.

How to Calculate: The number of contacted leads / Number of total leads being measured

Example: 80 / 100 = .8 (80% contact rate)

3. Conversion to Appointment

Explanation: While this is more of a sales metric, it is important to gather at this stage in case this is a problem area.  If you have a low conversion rate to appointment, it is a clear indicator that one of the following are taking place; 1. You're getting lower quality leads 2. You're receiving non-exclusive leads or 3. There may be an issue with reaching or converting leads into a contact or appointment.

How to Calculate: The number of appointments set / Number of total leads being measured

Example: 25 / 100 = .25 (25% appointment rate)

4. Appointment to Sale Conversion Rate

Explanation: This is a great metric to keep an eye on in order to see a true closing rate for appointments that turn into a sale.  This gives you one of the most valuable performance metrics for yourself or your sales reps.  This allows you to get a good baseline of how you should be performing, see how other top-performing companies in your niche are doing, or if you have a good measure of past performance at your company, you can use that.

How to Calculate: Deals Closed / Number of appointments

Example: 10 / 25 = .4 (40% closing rate)

5. Lead to Sale Conversion Rate

Explanation: Lead to sale conversion rates gives you a more wholesome metric to look at by combining everything into one metric.  This is a good number to look at regularly and if you notice irregularities, it's time to dig deeper to expose the underlying issue.

6. Average Sale Amount

Explanation: This is an important metric to measure as part of your sales performance.  Depending on your business, this will tell you how reps are doing with upsells or if there are any issues with them bidding low on projects.

7. Cost Per Customer

Explanation: This is a metric that will tell you exactly how much you are paying to acquire an actual customer.

How To Calculate: Total revenue received for deals matching a specific lead source / Deals Closed

Example: $5,000 / 10 = $500 CPA

8. Return on Ad Spend (ROAS)

Explanation: This is perhaps the most important marketing metric and will guide you to make decisions on scaling out more effective contractor marketing and cutting ineffective marketing and lead sources.  You can also take this one step further by incorporating your profit margin in, if you know it.  This way you can see the profitability of different lead sources as they fit in with your other business expenses.

How To Calculate: Total Revenue Received in a given lead source in a given time / Amount spent on lead source in a given time

Example: $25,000 / $5,000 = 5 (500% ROAS).  *If you would like to incorporate profit margin, you would replace "Total Revenue Received" with a "Profit" metric.*

Why KPIs are Important for Your Business

As your business grows and scales, you’ll inevitably have to give up control in certain areas where you might have previously had a complete handle of.  As you bring people into your business and scale growth, you’ll start to lose site of the big picture, without these types of checks in place.  Knowing your KPI’s along each step of the way will not only help you see how your business is really performing, but it will help expose issues in processes and promote accountability across your entire organization.   While our focus is on generating high-quality leads and not necessarily business reporting, we love helping our clients get a handle on these KPI's because we see time and again how the leads that we generate win in almost every single metric.  If you know this is what your business needs, we'd be happy to help how we can and make some recommendations. Give us a shout at hello@leadsforward.com or if you think you might be a fit for our contractor lead generation services head over to our demo request page.

 

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