Issue link: http://read.dmtmag.com/i/620649
JANUARY 2016 14 THE JOURNAL How to Make Better Decisions in 2016 BY SCOTT STROUD MARKETING CONSULTANT You've likely been in this business for a long time, and it's probably safe to say you know what you're doing. There's no substitute for experi- ence, even intuition. But times and markets change, and staying engaged with homebuyers in a constantly evolving market will take us "where no man has gone before" and outside the frame of reference of past experience. To reach your sales goals in 2016, you'll need to learn to make data-driven decisions. Basing Decisions on the Right Data In our book, Managing Your Business With 7 Key Numbers (BuilderBooks.com), Jeff Prager and I outline how tracking just 7 key metrics can help you make better decisions of virtually every component of your business, from marketing through production and delivery. Those 7 Key Numbers are: 1. Number of Leads Generated 2. Number of Sales Made 3. Rate of Customer Retention (land lease; referralsrentals) 4. Number of Repeat Sales (Upsells and referrals) 5. Average Transaction Per Sale 6. Fixed Costs 7. Variable Costs If you're the owner of your business, you are already watching some of these statistics. Sales revenue and general costs are typically included on P&L statements or balance sheets. But look at the numbers that your accountant doesn't fol- low – the number of leads generated by your marketing and the average cost per lead; which marketing campaigns are producing those leads, and which lead sources are producing the most sales; how many of those leads become sales (your conversion rate); how many of those sales come from referrals… While our costs are firmly accounted for, the key functions that produce sales and revenues are too often left to guesswork – we assume we know the answers, but if we don't have a method or process in place to ac- curately track them, we can't really be sure. Assumptions can be costly. If you can't ac- count for where your leads and sales are coming from - which marketing campaigns or sources are actually attracting and capturing buyers - then you're likely to be spending money on advertis- ing that is under-performing. If you're not sync- ing the number of leads handled by each individual sales rep with the number of sales booked and delivered by that person, then you're top performers may be supporting a 'stinker' or two on the team, hampering their efforts and costing you sales and revenue. If you are leaving referral sales to chance, then you are definitely missing sales - probably enough to in this one area alone to take your business to the next level. Knowing these numbers and using them to guide your decisions can make the dif- ference between "doing okay" to truly thriving. The 8th Key Number There is one more number that makes the other seven come alive as a powerful planning tool: your profit goal. Whether you are the owner of your business or the newest sales rep on the team, you should have a goal - a specific number - that indicates exactly how much money you our your company intend to make, after costs, this year. Note: "As much as I can" is not a goal; you will fail. You'll fail first because you have no tar- get programmed into your brain to achieve, and also because an ambiguous goal won't help you identify the tools and processes you'll need to ensure you actually are achieving every sale you can. "Hope", as they say, "isn not a strategy." You must commit to a specific, lofty but achiev- able profit goal. And that's the number that makes planning possible. Data-Driven Decisions First, find and list your current 7 Key Num- bers from the list above. Use a spreadsheet if you like, but a simple piece of paper will suffice. This may take some time, but it is imperative that you identify this data and how these numbers relate to each other and to your revenue goal. Next, write down what those numbers earned you as profit this year. That is hopefully a posi- tive number rather than a negative one, but if its in the red zone, well that's why we're going through this planning exercise now - it's a new year and planning will help you control this year's ultimate outcome. Finally, add a column for this year's goals for each of these areas. In order to reach your profit goal, what adjustment or improvement will be needed in each area? If you've followed these steps, you're results should resemble the illus- tration below, taken from the book. In this illustration, based on an actual re- modeling company, the plan was to generate