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Calculating the Value of Your Leads Portfolio

This content from: Small Business Marketing Blog - Strategies That Increase Sales

When it comes to leads, you’ve probably heard the expression “the money is in the follow up”.

But have you ever wondered how much money? Today I want to show you how to calculate the value of your Lead Portfolio.

Why “portfolio”? While we may not know which leads will turn into customers, we can determination a value for the group as a whole.

The Rule of 45

Before we get started with our calculations, we need to understand the Rule of 45.

The Rule of 45 states that 45% of all inquiries turn into a sale – for someone. The Rule of 45 originates from a company called Inquiry Handling Service (now Harte Hanks). This company conducted thousands of “Did You Buy” surveys to follow up on inquiries. They found that 45% of inquiries bought something within one year.

They also found that 10% – 15% of those who buy do so in the first 90 days. That means the majority of people who buy did so more than 90 days after they made an inquiry.

Calculating the value of your Leads Portfolio

Before we get to the calculation, lets define a couple more terms:

Follow-up% – the number of inquiries you follow up with divided by total inquiries. If you don’t show up (follow up) you can’t compete for the sale.

Estimate Market Share – how often you win the sale vs. your competitors.

Average Sales Price – Sales (pretty self explanatory)

To calculate the value of your lead portfolio, take

Total Inquiries X 45% X Follow-up% X Estimated Market Share X Average sales price = Value

So if our:

  • Total Inquiries = 100
  • Follow-up% = 100%
  • Estimated Market Share = 60%
  • Avg Sales Price = $1,500

Then the value of our lead portfolio is

100 x .45 x 1 x .6 x 1500 = $40,500

Now, lets pretend we only follow up with half of our leads

  • Total Inquiries = 100
  • Follow-up% = 50%
  • Estimated Market Share = 60%
  • Avg Sales Price = $1,500

Then the value of our lead portfolio is

100 x .45 x .5 x .6 x 1500 = $20,250

Wrapping Up

I hope your performed the above calculations for your business. This excercise can really drive home the need for a consistent follow up system.

Here are a few more things to consider/remember:

If you sell high ticket items (>=$100,000) then the time it takes to get to 45% may be closer to 18 months rather than 1 year.

Only 10% – 15% of those who buy do so in the first 90 days – how do that compare to the amount of time you follow up?

The better your follow up, the more likely you are to increase your market share. If you increase your market share, your lead portfolio becomes even more valuable.

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This post first appeared on Small Business Marketing Blog - Strategies That In, please read the originial post: here

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Calculating the Value of Your Leads Portfolio

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