Business owners underestimate the power of good quality proposals and a great conversion rate on their business.
A quote is not a proposal
A proposal, in my books, gets to the heart of your business, why you do what you do, and how you can serve your customer. A quote is simply a price for a transaction on your letterhead. It’s one of the first things your buyers experience, and will ultimately be what they base their buying decision on.
And if conversion rate is important to you, then so should powerful proposals.
In this article, I dive a little deeper into numbers than normal, but bear with me. Here’s what we’ll cover:
- How conversion rate impacts sales
- A case study of how increasing conversion rate can double revenue
- A few tools that can help you increase your conversion rate
I wrote this article because too many of our clients are using the ‘draft invoices’ section of Xero for their quotes.
And while this may be a step up from paper or a Word document, I still think with a little effort and an additional bit of software the quality of proposals, and therefore conversion rate should massively increase.
1. How conversion rate impacts sales
Let’s start with a simple formula.
Leads X Conversion rate = New Customers
You need to know all three numbers above, so you can measure the impact of implementing the suggestions below.
Start by working out how many new customers your business has onboarded over the past 12 months.
Then, I find that most business owners have an idea in their head of what their conversion rate is, but let’s go to leads for a moment.
Leads, in the calculation above, is how many customers have come to you, and asked to know more about how you can help them. This includes inbound and outbound marketing (you went to them too, and they agreed to meet).
To confirm your conversion rate, simply divide New Customers by the number of Leads over the past 12 months.
New Customers X Average Spend = New Sales
Here’s the next formula. Now I want to focus on the relationship between new customers and new sales rather than increasing average spend (although here’s how to increase spend: put your prices up!).
This is simply to help you join the dots.
Leads X Conversion Rate X Average Spend = New Sales
And if we remove the middle man, here’s the two formulas above, put together:
2. A case study of how increasing conversion rate can double revenue
Let’s look at a slight increase in conversion rate, all else remaining the same. We’ll look at a fictional web design business, ‘Inspire Web Design’ or ‘IWD’.
IWD met with 180 leads over the past 12 months (just 15 per month), signed up 55 as clients, and they spent on average $8,400 with IWD.
55 clients / 180 leads = 30.55% conversion rate
180 leads X 30.55% conversion X $8,400 average spend = $461,916 in new sales.
Let’s say that IWD focused on increasing their conversion rate through implementing powerful proposals and touching up their sales process. By implementing this, their conversion went from 30.55% to 55%. Still quite low, right?
180 leads X 55% conversion X $8,400 average spend = $831,600 in new sales.
By increasing conversion rate from 30.55% to 55%, the business almost doubled new sales.
3. A few tools to increase your conversion rate
There’s a few things you can do to increase your conversion rate.
The first, and non-negotiable one is to have a documented sales process. I’ve written a lengthy article on implementing a sales process – something that will produce results on its own.
The second is to touch up your proposals. I use the word proposal, because a quote is not a proposal.
There’s some amazing, easy to set up and use, cloud based proposal tools available that let you include video and images to support your proposals. Most have features such as options in your proposal, online acceptance and signing, custom domain & branding, and creating a proposal from a template or previous proposal.
Some great products that we’ve used for us or clients are:
Quote roller (we use this ourselves for our larger, custom projects)
Quotient (great for tradies)
You must spend a few hours setting it up, and even better – get a graphic designer on board to tailor a branded, well designed proposal for your potential customers.
All the best with your conversion rate, and do let me know your questions, comments and observations in the comments section below.