The Big Idea:
Optimizing your website’s conversion rate can have an absolutely enormous impact on your company profits – far bigger than most people realize. In this post, we do the simple math that shows why investing in website experience can drive massive returns.
If you run a remodeling company and you have a website, you’re probably missing out on a ton of no-incremental cost leads, and sales. The science of conversion rate optimization is well known, and we’ll talk about it a lot in the Crush blog, but I thought it might be useful to really quickly run through the math to show you just how much you might be missing. It’s probably a lot more than you think.
Here are the variables you need:
1) Unique visitors per month: How many unique people visit your site every month?
Your marketing and/or IT people locked in the windowless room should be able to pull this for you.
2) Website Conversion Rate: How many of those people fill out a form or call, divided by the number of unique visitors from #1 above.
If you’re calculating this rate correctly, it will be in the low to mid-single digits for most websites. If you’re under 2% you have a significant problem, and if you’re over 10% there is probably something unusual about your situation. 5-7% is generally a benchmark for “good.”
3) The rate at which new website leads turn into sales.
You don’t really need to worry about all of the intermediary metrics like set rate, issue rate, etc., for this one, unless you want to. Knowing that 300 people fill out a form or call from the website in a month and that 78 sales result from those 300 leads for an average 26% close rate is good enough. You also don’t need to worry about differences in verticals if you don’t want to. Just the raw, full-funnel conversion of website leads, to sales.
4) Your average sale in dollars.
This should be pretty self-explanatory.
Unique Visitors x Website Conversion Rate = Leads Per Month
Leads Per Month x Close Rate = Number of Sales Per Month
Number of Sales Per Month x Average Sale = Average Revenue Per month
You now have the average number of dollars in revenue your website generates every month.
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How To Do The Calculation:
To illustrate the concept, let’s plug in our values from the example above and see what it looks like.
10,000 Unique Visitors x 3% conversion rate = 300 leads
300 Leads x 26% net close = 78 sales
78 sales x $9,000 average sale = $702,000 in new revenue per month
Now – Adjust that conversion rate by a measly 1%, and watch the magic unfold.
10,000 Unique Visitors x 4% conversion rate = 400 leads (33% lead increase!)
400 Leads x 26% net close = 104 sales (26 new sales!)
104 sales x $9,000 average sale = $936,000 in new revenue per month
Your monthly sales just grew by $234,000 – but it’s actually even better than that because all of those new sales added zero extra marketing cost. So if your normal marketing cost is 15%, you drop $35,100 straight to your bottom line as extra profit, on top of your normal profit margins each month. That’s an extra $421,200 in EXTRA PROFIT a year.
But wait… hold onto your hat, because it’s about to get bananas.
Unless you needed to grow your fixed costs like rent, insurance, and office salaries to handle the extra 26 jobs a month, all of the money that normally pays for those things now drops to your bottom line as well. If your fixed costs are, say 35% of gross sales, you would then drop another $81,900 PER MONTH to your profit. (26 sales x $9,000 average sale x .35 fixed cost expense = $81,900 extra profit per month)
I’ll be the first to say that there are some assumptions in there, and maybe your fixed costs do need to grow somewhat to accommodate another 26 projects a month, but do the math for your own company. It may seem absolutely unbelievable, but the math works – and math doesn’t lie.
The impact on your profitability could far exceed what you might expect.
Leave a comment below or let us know what it would look like for your business if your website conversion rate went up – say 3% – which is a realistic goal in almost every case.
