Understanding Sales Conversion Metrics

How effective is the sales function of your business? One way to answer that question is to calculate conversion metrics for every step of your sales cycle. These numbers are not tied to any numbers on your balance sheet or income statement, but they can help you produce a better return on your sales and marketing expenses. 

Your Sales Cycle

The sales process is different for every business. If the dollar amount of the customer purchase is small, the sales cycle needs to be short or it won’t be efficient. For larger purchases, the sales cycle might be longer. 


The first step in determining conversion metrics is to outline the steps a typical prospect takes before they become a customer. 


Here are a few examples: 

Retail Example

  1. Prospect walks into the store.
  2. Sales clerk interacts.
  3. Prospect selects item(s).
  4. If they’ve chosen clothing, they may visit a dressing room and try it on.
  5. Prospect stands in the checkout line.
  6. Customer completes purchase.

Ecommerce Example

  1. Prospect visits the website and uses search or navigation.
  2. Prospect views lists of products.
  3. Prospect views the product page.
  4. Prospect places product in cart.
  5. Customer completes checkout.

Service Example

  1. Prospect sends an email requesting more info or an appointment.
  2. Customer service/sales clerk responds to the email.
  3. Prospect makes an appointment.
  4. Salesperson and prospect meet.
  5. Salesperson performs follow-up activities.
  6. Prospect agrees to a price/purchase.
  7. Client signs contract and pays the initial deposit. 


For each step in the processes above, the prospect won’t always proceed to the next step. Conversion is measured at each step with the percentage of prospects that move forward. 


Not all steps are worth measuring. Sales and marketing personnel must agree on when a prospect becomes a viable lead. Measurements should occur from lead to customer. 


Let’s expand on the service example: 


  1. Prospect sends an email requesting more info or an appointment.
  2. Customer service/sales clerk responds to the email.
  3. Prospect makes an appointment.


The first meaningful conversion can be calculated between steps one and three. Let’s say during the month of December, the company received 100 emails from prospects requesting more info, and of those, 50 made appointments. The conversion rate is calculated as follows:

# Appointments made (step 3) / # prospect emails received (step 1) = 50/100 = 50% 


To improve the 50 percent conversion rate, ask yourself what can be done between steps one and three to improve the prospect-facing activities. 


Here’s another example:


  1. Salesperson and prospect meet.
  2. Salesperson performs follow-up activities.
  3. Prospect agrees to a price/purchase.
  4. Client signs the contract and pays the initial deposit. 


The second meaningful conversion rate in the service sales process can be calculated between steps four and seven. (You could also measure 3-4, 4-6 and 6-7.) Let’s say 40 appointments were kept and 30 became clients. 


# New clients signed (step 7) / # salesperson and prospect meet (step 4) = 30/40 = 75%


To improve the 75 percent conversion, ask yourself what you can do in steps four through seven to improve the prospect’s experience. 

Actionable Sales Intelligence

As you measure these results over time, are your conversions improving or declining? Is one salesperson closing more business than any of the others? How can you improve each step so conversions are increased? You will have more questions than answers when you first start calculating these numbers. You will also likely have many ‘aha’ moments of insight you can use to improve the prospect’s journey. 


If conversion is extremely low in the first few steps, it could be that marketing is not sending you qualified leads. In that case, marketing needs to improve before conversion can improve. If conversion is low in the final few steps, follow-up activities may need to be strengthened. 


In any case, measuring conversion throughout your sales cycle will pinpoint the weakest areas so you can improve. When you can increase your conversions, your marketing and sales costs will decrease, and you will become more effective. 


And if we can help you with any of these measurements, please reach out any time! 

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As a service-based business owner, managing finances effectively is key to growth and profitability. When looking for financial support, you may come across terms like "outsourced accounting" and "fractional accounting." While they may sound similar, they serve different purposes and offer unique benefits. Understanding the differences can help you decide which approach best suits your business needs. What is Outsourced Accounting? Outsourced accounting refers to hiring an external firm to handle bookkeeping and financial reporting tasks on an ongoing basis. This solution is ideal for businesses that need consistent, reliable financial management but don’t require a full-time, in-house accounting team. Key Benefits of Outsourced Accounting: Cost-Effective: More affordable than hiring an internal accounting department. Scalability: Services can be tailored to your business size and needs. Access to Expertise: Work with professionals who specialize in bookkeeping, payroll, and tax preparation. Technology-Driven: Many firms use cloud-based software like QuickBooks Online for efficiency and real-time reporting. What is Fractional Accounting? A fractional accounting firm provides higher-level financial strategy and decision-making support, often acting as a part-time CFO or controller. This approach is best for businesses that need more than basic bookkeeping but don’t yet require a full-time financial executive. Key Benefits of Fractional Accounting: Strategic Financial Oversight: Helps with budgeting, forecasting, and financial planning. Higher-Level Expertise: A fractional CFO or controller can provide insights beyond day-to-day transactions. Customizable Support: Businesses can engage a fractional firm for a few hours a week or month based on their needs. Growth-Focused: Ideal for scaling companies needing financial strategy without the full-time cost of an in-house CFO. Which One is Right for Your Business? The choice between outsourced and fractional accounting depends on your business size, complexity, and financial goals. Choose Outsourced Accounting if: You need reliable bookkeeping, payroll management, and financial reporting but don’t require deep financial strategy. Choose Fractional Accounting if: Your business is growing, and you need financial leadership, cash flow management, and strategic planning without the cost of a full-time CFO. The Best of Both Worlds Some firms, like First Steps Financial, offer both outsourced accounting and fractional CFO services. This allows businesses to start with outsourced accounting and scale up to fractional services as they grow, ensuring they always have the right financial support. Both outsourced accounting and fractional accounting firms can play a crucial role in your business’s success. The key is understanding where your business stands today and what level of financial expertise will help you achieve your long-term goals. If you’re unsure which option is best for you, First Steps Financial can help! Contact us today to discuss your needs and find the right financial solution for your business.

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