This guest post is by Anshul Dayal of www.nichesense.com.
It is often said that lead generation is the lifeline of any online business big or small. Correct?
Wrong!
Allow me to explain this further. In a traditional business we often look at three or four key performance indicators when it comes to gauging success and profitability. They are leads, conversions, sales, and profits.
Brad Sugars, a very successful (and somewhat controversial) Australian entrepreneur, describes his “5 ways business chassis” as:
Number Of Leads X Conversion Rate = Customers X # of transactions X Avg. $$ Sale = Revenue X Profit Margins = Profit
Where:
- Number of leads = every person who is interested in purchasing from you
- Coversion rate = percentage of leads that make purchase
- Customers = every lead that makes a purchase
- # of transactions = number of purchases made by every customer
- Avg $$ Sale = money spent every time a customer buys from you
- Revenue = your total dollar value of sales
- Profit margins = your “markup” percentage or simply the purchase price of your product minus the acquisition cost
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