By Kirsten Knipp, HubSpot
NOTE: The following article was written by Kirsten Knipp, HubSpot, who will be a featured presenter at the 2011 Business Technology Symposium, July 27, in Long Beach, California. Kirsten’s July 27 session will be, “Capture, Manage & Nurture Leads to Win More Customers.” The event is powered by the SEMA Street Performance Council (SPC) and will feature five supersessions covering everything from mobile marketing, online marketing essentials, emerging R&D technology and more. Register by July 23 and save $50.
|Kirsten Knipp of HubSpot will lead the session “Capture, Manage & Nurture Leads to Win More Customers” at the 2011 Business Technology Symposium, July 27, in Long Beach, California.|
Budgeting and planning may not be the most fun activity, however, it feels really good to know what metrics I have to hit as a marketer to make my business successful. HubSpot’s strategic metrics are planned well in advance, but, as the vice president of marketing for another small business that I am personally affiliated with, I have to admit, I’m sometimes remiss with advanced planning when developing key targets. This exercise can be a difficult one for any small business, but it is a major eye opener when it comes to laying out a plan for marketing success and revenue growth.
Full disclosure, what I’m discussing is my boyfriend’s business as he embarks on his own inbound marketing journey. We decided to sit down and crunch some numbers. We used the inbound marketing calculator to work backwards and figure out what we needed to do to hit our revenue goals. I’ve altered the actual numbers a bit for privacy, but the ratios are pretty close to reality and should help small business owners do similar calculations. There’s a list of things you need to complete this yourself at the end of the post.
Here’s some background. Newbold Stone is an Austin, Texas, concrete countertop company that makes custom counters and architectural elements out of concrete for high-end residential kitchens and baths and commercial venues, such as restaurants and offices. The bulk of our business is generated via word-of-mouth in the Austin architect and designer network with a small amount of business coming from the website. This week, Newbold Stone is moving from a small workshop into a commercial facility that is more than double the size of the existing space, with a larger lease, of course. Business has been growing at a nice steady pace, but the new space necessitates a jump in leads and sales to more than offset the increased cost and continue to grow the business.
With that in mind, we’ve set a goal of $30,000 in revenue per month for 2011. Since we’re starting late, it will take us some time to hit that goal—in fact, most HubSpot customers see significant results after about five months of practicing inbound—we should have started this sooner!
In order to calculate the amount of traffic and leads we need to hit that sales number, we have to look at a bit of historical data and make some assumptions. I’ll describe them and illustrate how I used the inbound marketing calculator to come up with some numbers that will help us understand what we need to do to improve the business.
Step 1: Setting Revenue Goals
We already said that $30,000 is our revenue goal for 2011—so we entered that data in the first empty row of the calculator.
Step 2: Percent of New Revenue From Inbound Marketing
Currently, a very small part of Newbold Stone’s revenue comes from Inbound Marketing; we’d like to be conservative and try to get 20% of our new business from inbound activities in 2011. We’ve entered that into the calculator.
Step 3: New Deals Needed to Hit Revenue Goal
In order to know how many new customers we need to meet the goal, we need estimated average revenue per customer or an average order size. Our projects range broadly, but on average, we're going to use the number $4,000 for the purposes of this exercise. We’ll keep it simple and leave out outliers like the big $20,000 or little jobs since they don’t help us do the math and cannot be easily predicted. That yields the first result from the calculator: how many new customers per month we need from inbound marketing to hit our goal. In the case of Newbold Stone, we need 1.5 net new customers from inbound per month. That sounds achievable.
Step 4: Estimated Close Rates
Estimating a close rate was the hardest step for us because it involved a lot of assumptions. When Newbold Stone gets a lead via word-of-mouth, we win the business more than half of the time. We also know that leads reaching out from the web close at a lower rate, but they are so few, that we don’t have a real ‘trend’ or pattern. So, we estimated a 30% close rate, and we’ll keep that as the initial goal. That means we’d need five new leads per month. Once again, that sounds achievable, but the number is only as good as our assumptions.
Step 5: Estimated Website Traffic Needed to Meet Revenue Goals
Now comes the fun part—how much traffic do we need to generate five leads per month? Again, we have to make some assumptions because today, there is only one form on the site and there aren’t very strong calls-to-action (CTAs). Those are things we intend to change—fast. The question is ‘what is your visit-to-lead conversion rate.’ Well, we aren’t measuring it all that well, but we get 150–175 unique visits per month and usually one person reaches out, often via e-mail and not via the "contact us" form (note again our lack of compelling CTAs). So, let’s call that a .5% conversion rate today. If we increase content and have more CTAs to enable conversion, we should be able to double that to 1%. This is still reasonable given that a variety of averages show that 1%, 2% or 3% rates are achievable in many industries (though no ‘standard average’ is agreed upon in the industry). Over time, we should target even higher conversion rates.
What does that mean?
If we can get to 1% online conversion, then we need about 500 visits per month to achieve the goal, 1,000 visits per month if we don’t increase conversion at all. That means at a minimum, we need to triple the visitors to www.newboldstone.com—not a trivial task, but something that other HubSpot users and practitioners of inbound marketing have achieved. It is a stiff goal, but now we know what to target.
With that in mind, we’ll use keyword analysis and blogging to start bringing more folks to us and then add a few CTAs using content that we’ve already got to drive up conversions. I don’t think we’ll triple traffic in January, but if we can get to 500 visits per month by mid-year, we’ll be well on our way. If we can continue to increase it, we may get the average up to our $30,000/month goal and have a phenomenal year for the business!
Doing this exercise was really eye opening for Newbold Stone and gave us some concrete goals to shoot for in 2011. Now we just need to work towards them, keeping in mind that if we do better at conversion along the way, we may beat our goals or need less traffic.
Do you know what your traffic and lead goals are?
How are you going to get your small business to the next level this year? Take the inbound marketing calculator for a test drive yourself to get a sense of how inbound can help grow your business. Here’s what you’ll need:
- The Inbound Marketing Calculator
- Your Current Website Traffic Numbers (from Google Analytics or HubSpot Analytics)
- Your Current Visitor-to-Conversion Rate (estimate if you have to)
- Your Current Average Deal Size
- Your Revenue Target this year
I look forward to seeing you all at the SEMA Business Technology Symposium, July 27, in Long Beach as we dive more into the topic of inbound marketing!