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What Impacts Your Cash-Flow More Than Anything?

Timing.

And timing has two aspects to it.

The first is the timing of the prospects in your pipeline.

What is the best early indicator of your cash? The value of the interested prospects in your sales pipeline. I will show you how to get that figure.

Firstly, we will look at the numbers.

Number 1 – Possible Prospects in Your Pipeline

At the top of your pipeline are all the possible customers/clients.

This number shifts based on economics. For instance, imagine you own a restaurant. The number of potential customers eating out – in a pandemic – goes down. (And you can seat way less too).

However, the number of people eating at home (and not traveling) goes up!

You need to pivot fast. You must get home deliveries going. Then find creative ways to market to these “eating at home” customers.

The first number are the total possible clients in your area, for your business.

What is next?

Number 2 – The Number of Actual Prospects in Your Pipeline

Now you need a hard number. Who have you been in contact with?

This could be number of prospects reached through social media, direct mail, print advertising, and radio as examples.

This number is the top of your funnel.

We will go through an example…

You own a technology business. To reach a prospect you decide to run an email campaign.

Next, and this is critically important. You need to define and refine your Number 1 above – the number of potential clients for you.

Perhaps everyone could use some aspect of your technology services. That number is too big. You realize you have expertise in, say, non-profits and charities.

Great! Now get more specific. You want the ones of a certain size. It could be based on sales, or in this case, total revenue from donations. Or it could be employee size.

You buy a list of all organizations in your targeted niche from a company like InfoCanada.

Now you start connecting, and connecting, and connecting.

You see, you have to find out how many contact points it will take, on average before one of two things happen. (1) you reach a natural dead-end, or (2) you obtain a new client.

In other words, how many emails – three, maybe four – followed up with a phone call before you stop or convert.

Which leads to the third number…

Number 3 – Your Conversion Rate

How many people in your pipeline are pondering becoming your client?

There are actually two conversion rates here. The first is – the percentage of prospects who went from a name on a list to actually engaging with you.

The final conversion rate is the percentage of clients looking who become clients.

I will show you how this works:

Conversion rate #1
  1. Number of names purchased to email to – 1,000
  2. Number of prospects who looked at your offering –     300

Conversion rate number one –                                               30% (300/1,000)

 

Conversion rate #2
  1. Number of prospects who looked at your offering –     300
  2. Number of prospects who sign up –       50

Conversion rate number two –                                               17% (50/300)

 

Each tells a different story. Number 1 tells you how effective you are reaching the right audience. Number two tells you how good you are at converting an interested prospect to a paying client.

As in Comedy, Timing is Everything

Knowing the length of time, it takes for a name on a list to become a client is critical.

With it you can calculate the value of your sales pipeline at any point in time.

This is known as your sales cycle timing. It varies from industry to industry. A general rule of thumb is that the higher the value of what you are selling, the longer the sales cycle. It can even be years in some cases.

Before you get to the final number, you must know one more number. Your average sale!

Now you can create a cash-flow forecast with that solid dollar value of projected sales. You multiple the average dollar value of a sale, by the expected number of clients. You place that dollar value into the future month based on your average sales cycle.

Then you test, measure and tweak.

In Summary

Next week, I will write about the second aspect that affects your cash-flow timing.

Thanks for reading…