We recently released a tool for our RFMS clients to help them more easily see their sales conversion rates and to drill down into conversion data by business and by salesperson.

The response has been interesting, and for some is best summed up in two words: shock and disbelief.

Shock, because as retailers we assume we are converting the majority of opportunities that come our way; I have heard retailers guess at conversion rates as high as 70% and 80%. Disbelief, because most retailers have never had an accurate view of their conversion rates, and the first response is to conclude that there is something wrong with the reporting.

As disappointed as we might be to discover that our conversion rate is much lower than

expected, it’s not a reason to despair; what we have discovered is a river of gold running through our business that we can tap to dramatically improve it.

The Reality of Numbers

Let’s look at last year's numbers for Bob’s Floor Emporium:

Based on these numbers, we can estimate that Bob had 1667 sales opportunities, 917 of which went unconverted.

Tapping the River of Gold

What happens if Bob improves tracking and follow-up of sales opportunities, and increases his conversion rate from 45% to 50%? The results are dramatic.

Assuming Bob’s overheads don’t increase, where does the additional $92,000 go? Straight to his bottom line as profit.

“Assuming Bob’s overheads don’t increase, where does the additional $92,000 go? Straight to his bottom line as profit.”

Move From Passive to Proactive

Conversion rate is one of the most important performance indicators for your business. Almost invariably it will be lower than you expect, and much lower than you would like to think. You and your team are investing time and money in providing a pleasant retail environment, samples, and a measuring, quantifying and quoting service. Yet your conversion rate, a key measure of the value of your investment, is, at best, a guesstimate that will likely overstate it.

Getting an accurate view of your conversion rates and drilling down into them is the first step in transforming your business, regardless of the economy. Understanding the value of the business you are missing out on is the first step in the journey to making your business a proactive sales machine rather than a passive business winning jobs on price alone.

“Your conversion rate, a key measure of the value of your investment, is, at best, a guesstimate that will likely overstate it.”

Methodology

When it comes to conversion rates, there will always be minor variations caused by timing. Don’t get distracted by these minor variations; the secret to measuring your conversion rate is regular measurement using the same parameters every time. You won’t change your conversion rate overnight; you are looking to see a trend of improvement.

“Be prepared for pushback from your salespeople; they believe their conversion rate is higher than it is, so they will be similarly shocked by the reality.”

Be prepared for pushback from your salespeople; they believe their conversion rate is higher than it is, so they will be similarly shocked by the reality.

As well as the raw conversion rate (50 sales out of 100 quotes is 50% conversion), you want to measure conversion by value ($30,000 of sales out of $100,000 quoted is 30% conversion). This comparison alone tells you volumes about your business and your salespeople.

Getting the Data

Every business owner has access to the data needed to calculate their current conversion rate and how much each percentage-point improvement in conversion is worth. For many, however, the process will be manual, time-consuming, and prone to error.

If you are going to operate an effective sales organisation, you need a management system that is a single source of reliable truth, and non-negotiable systems and processes that allow you to tap your river of gold. If you would like to see what RFMS might do for your business, we will be happy to show you.

Chris Ogden is a consultant and Managing Director of RFMS Australasia (RFMSanz.com), a supplier of IT solutions for the flooring industry. Chris has an extensive background in all aspects of the flooring industry, and he can be contacted at cogden@rfmsanz.com.

Find Your River of Gold