Have you found yourself falling into bad business habits, even though you think you’re focusing on what’s best?
You’ve learned, or you’re trying to learn, all there is to know about lead techniques and tracking conversions, tracking the data, and charting the flow of your incoming leads.
Great. But what people aren’t talking about, in this era of lead generation obsession, is that when it comes to numbers there is still only one metric that matters.
And that metric? Cash.
It can be uncomfortable for people to talk about, but it’s essential to understand that if you’re focusing on anything else without paying attention to your bottom line, then you’re in trouble.
Think about it this way:
- Can you pay team members with “cheap leads”?
- Can you go on vacation with a “good” cost per click?
- Will the grocery store accept a 25% opt-in rate on your landing page?
- Can you buy your wife a diamond ring with a good relevance score?
You cannot (I’ve tried). The way you get ALL those things (plus a healthy, thriving, exciting, life-giving business) is by having the money to do it.
Cash is the lifeblood of any business. If you don’t have liquidity, then you don’t have any leverage. Let that sink in.
When businesses, coaches, training programs or consultants want to make internet marketing about anything other than dollars-in-the-bank cash, they’re shortsighted (at best) and delusional (at worst).
Why You Should Pick Lag Not Leads
To help you understand the damage that prioritizing your leads over your cash can do, it’s important to understand the difference between the two measurements.
I also want you to understand that I’m not saying ignore your lead generation metrics – in their own way and their own time they are useful tools.
After all, a lead generation metric is a great way to understand what can potentially happen in the future – it’s a predictive tool that you can dig into to see if you’re attracting the people that you want to attract, and getting the attention that your product, business, or service demands.
It’s input-oriented, so it helps you to build an idea about your client-base, what they need and wants from a situation, and to see whether or not you’re satisfying that need in a way they understand.
But it can also be the worst place to dedicate your time if you’re not seeing a return on your investment. Your lead generation numbers are suggestions – they’re not promises.
We all know the adage to work smart instead of working hard, but when it comes to lead generation, don’t let yourself be lured by the shiny, sexy metrics of lead generation that can lure you into a false sense of security. There is no point spending all of your time and money on generating leads if they never go anywhere.
How do you know if you’re seeing the returns you should be?
You need to look at your lagging indicator. Lagging indicators are output-oriented, and so your cash is your output. It shows the effectiveness of your lead generation, but it’s also the bottom line.
The Dark Side of Internet Marketing
It’s important for you to have good leading metrics like cost per leads, cost per click, landing page opt-ins in order to determine the right lagging metrics, like cash in the bank.
But unfortunately, way too many people stay stuck on the leading metrics. After all, leading metrics are easy. They’re “sexy.” It’s what the gurus want you to focus on, so they can sell you their $40k per year programs.
If you can't convert your leads into active sales, then the lagging metric that matters – the cold hard cash in the bank – never happens. Not only that, if you’re trapped looking at the sexy metrics, you could be failing without even realizing it until it’s too late.
Consider this: 79% of marketing leads never convert into sales. Which basically means for every five people who are interested in what you do, only one of them will bring you a return on your investment.
When 4 out of 5 of your marketing leads don’t convert, it doesn’t matter how great your leading metrics are looking because cash doesn’t care about your opt-in rates.
And your profit margin – the money that you make – is as objective as you can get in business. It is also what decides whether or not you succeed or fail.
Step Into The Light Side of Lead Generation
Cash puts a burning hot spotlight on your leading metrics and makes them prove their worth. And this is where I’m going to be completely frank: It doesn’t matter at all what your lead costs are if your profit margin is less than 10%.
No matter how many leads your costs are generating, if your profit margin is less than 10% then you're failing.
After all, the point of Facebook Ads, the ultimate purpose, is not to get a good click-through rate. The point of your Facebook Ads is for you to make money at a healthy profit margin.
This should absolutely be your ethos across whatever business leads you're using. So if you have a podcast, the purpose if for you to gain more clients and customers.
Yes, it's great to have a “good” or well-received podcast, but if that's not converting directly into cash for you, then you're focusing on all the wrong things.
This, friend, is the dark side of internet marketing: focusing on anything else besides the output. It's how people fail, time and again, even when they're generating a staggering amount of leads.
Because spending all of your time, money, and energy on leads in order to make mediocre sales isn't a sustainable way to live.
The 8 Metrics that Matter
To help you focus your attention, the good news is that there are 8 metrics you should consider to help rebalance and reroute your business efforts. These metrics don’t work in isolation, but when considered holistically provide you with the most accurate information as to where your money is – and isn’t – coming from.
While the metric we care about is cash, it’s also important to remember that spending, particularly for a small business or entrepreneur, comes also in how you spend your time and your energy. This involves being brutally honest about the way in which your efforts are working out for you.
- Average Cost Per Lead
Not all leads are created equal. Depending on the time, energy, and money that you have to put down upfront in order to attract a lead, you'll find that they rank high, medium, or low.
- Average Yield Per Lead
At the other end of your cost per lead is your yield per lead. If you’re spending a lot of money on getting a specific lead, are they bringing you a return on your investment? Depending on the channels that you put your information out in, be it Facebook ads, Google AdWords, SEO, blog posts, webinars, or mail campaigns, you need to know and understand how much cash is coming through each channel.
This helps you to put in perspective the cost you’re spending per lead. If it’s a high cost with a high yield, that might not be terrible. If it’s a high cost per lead with a low yield per lead, then it’s time to get honest about whether or not this is worth it for you.
- Sophistication Level
Some leads cost more money because you have to spend more time and energy educating the lead on your company, product, or services. Ask yourself, how much is the lead aware of, or do they need to be coached through your services and convinced to make a sale?
If you have higher cost leads, is it worth it if they then have a higher sophistication level so that you can translate this more quickly into a sale?
- Energy Drain
Your energy levels are important here. How much of your energy does the marketing channel take?
Some channels you might find are like pulling teeth – they’re draining to you, and if they’re also bringing in low yield leads at a high cost, you may find that your attention is best spent elsewhere.
- Decision Makers
When your leads come in, are you talking directly to the decision-makers? We’re talking the CEOs, the VPs, or the entrepreneurs who can decide there and then that this is the route for them.
- Follow Up
How often do you have to follow up with the clients in order to get the sale? Is it 3 emails, a text, a Facebook message to a lead from one channel? Remember that time is the biggest cost here, and it can be huge. On the other hand, you may have leads that are ready to give you a yes/ no, or you can automate certain questions that are repeated over time in order to streamline the process.
- Investment Speed
This is the speed from ‘yes’ to cash. When do you get the money and the information that you need?
Some companies, particularly non-profits, can have the money to spend but be unable to spend it for 30, 60, 90, 180 days. If the investment is slower, while you’re expected to begin work, it’s important to consider whether or not it’s worth the wait.
- Enjoyability Factor
What do you actually feel about it? How much do you enjoy the specific channel and where you are. Do you love doing FB lives, or writing blog posts?
Grade yourself on these criteria, because all of them provide you with a broader picture, and an idea on which channels you should avoid, and the ones that you can double down on.
The composite grade gives you a TRUE ROI on your marketing efforts. It helps you to see where your time and attention are best focused so that you can go from scrabbling for tiny percentages to seeing a healthy profit margin.
I cannot stress enough, we’re looking at your bottom line. We’re looking at what you make at the end of the day so that you can live your life, pay your bills, pay your staff, and have a sustainable company.
This isn’t about your vanity metrics. It’s not about the “what if?” potential of your leads.
We just want to know where are you getting the cold hard cash so that your business can not just survive, but thrive.
To be Jerry McGuire about this: show me the money. For the health of your business, and to see a true return on your investment, this is how you step from the darkness into the light.