An example is that we want to generate $100,000 as our target, so therefore we start working backwards. $100,000 in revenue might mean we need 200 new clients. If we need 200 new clients that means we need 1,000 new leads coming through the door (based on a lead-to-client conversion rate of 20%). If our current website is converting at 4%, that means we need to get 20,000 new visitors through to the website. You get my gist. These become our activity targets or working targets, for want of a better word.
Then we can start putting metrics to that. So if a new client is worth $1,000 to us, therefore, if we’re converting one in five, we are able to spend $200 in that cost per acquisition to acquire that customer.
If that’s one in four, that means we’re happy to spend $5 per visitor to get the number of visitors we need to then get the leads we need to get the sales we need. This is why financial model and metrics are really important.