Understanding Sales Conversion Metrics

How effective is the sales function of your business? One way to answer that question is to calculate conversion metrics for every step of your sales cycle. These numbers are not tied to any numbers on your balance sheet or income statement, but they can help you produce a better return on your sales and marketing expenses. 

Your Sales Cycle

The sales process is different for every business. If the dollar amount of the customer purchase is small, the sales cycle needs to be short or it won’t be efficient. For larger purchases, the sales cycle might be longer. 


The first step in determining conversion metrics is to outline the steps a typical prospect takes before they become a customer. 


Here are a few examples: 

Retail Example

  1. Prospect walks into the store.
  2. Sales clerk interacts.
  3. Prospect selects item(s).
  4. If they’ve chosen clothing, they may visit a dressing room and try it on.
  5. Prospect stands in the checkout line.
  6. Customer completes purchase.

Ecommerce Example

  1. Prospect visits the website and uses search or navigation.
  2. Prospect views lists of products.
  3. Prospect views the product page.
  4. Prospect places product in cart.
  5. Customer completes checkout.

Service Example

  1. Prospect sends an email requesting more info or an appointment.
  2. Customer service/sales clerk responds to the email.
  3. Prospect makes an appointment.
  4. Salesperson and prospect meet.
  5. Salesperson performs follow-up activities.
  6. Prospect agrees to a price/purchase.
  7. Client signs contract and pays the initial deposit. 


For each step in the processes above, the prospect won’t always proceed to the next step. Conversion is measured at each step with the percentage of prospects that move forward. 


Not all steps are worth measuring. Sales and marketing personnel must agree on when a prospect becomes a viable lead. Measurements should occur from lead to customer. 


Let’s expand on the service example: 


  1. Prospect sends an email requesting more info or an appointment.
  2. Customer service/sales clerk responds to the email.
  3. Prospect makes an appointment.


The first meaningful conversion can be calculated between steps one and three. Let’s say during the month of December, the company received 100 emails from prospects requesting more info, and of those, 50 made appointments. The conversion rate is calculated as follows:

# Appointments made (step 3) / # prospect emails received (step 1) = 50/100 = 50% 


To improve the 50 percent conversion rate, ask yourself what can be done between steps one and three to improve the prospect-facing activities. 


Here’s another example:


  1. Salesperson and prospect meet.
  2. Salesperson performs follow-up activities.
  3. Prospect agrees to a price/purchase.
  4. Client signs the contract and pays the initial deposit. 


The second meaningful conversion rate in the service sales process can be calculated between steps four and seven. (You could also measure 3-4, 4-6 and 6-7.) Let’s say 40 appointments were kept and 30 became clients. 


# New clients signed (step 7) / # salesperson and prospect meet (step 4) = 30/40 = 75%


To improve the 75 percent conversion, ask yourself what you can do in steps four through seven to improve the prospect’s experience. 

Actionable Sales Intelligence

As you measure these results over time, are your conversions improving or declining? Is one salesperson closing more business than any of the others? How can you improve each step so conversions are increased? You will have more questions than answers when you first start calculating these numbers. You will also likely have many ‘aha’ moments of insight you can use to improve the prospect’s journey. 


If conversion is extremely low in the first few steps, it could be that marketing is not sending you qualified leads. In that case, marketing needs to improve before conversion can improve. If conversion is low in the final few steps, follow-up activities may need to be strengthened. 


In any case, measuring conversion throughout your sales cycle will pinpoint the weakest areas so you can improve. When you can increase your conversions, your marketing and sales costs will decrease, and you will become more effective. 


And if we can help you with any of these measurements, please reach out any time! 

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Cash flow is the lifeblood of any business, but for service-based businesses, managing cash flow can be particularly challenging. With fluctuating client payments, project-based revenue, and ongoing expenses, maintaining a steady flow of cash is critical to sustaining and growing your company. In this white paper, we’ll outline five actionable strategies to improve your cash flow and ensure financial stability. 1. Optimize Your Invoicing Process One of the most common reasons for cash flow issues is delayed payments. To accelerate cash inflows: Use Automated Invoicing: Implement invoicing software like QuickBooks Online to send invoices promptly and track outstanding payments. Set Clear Payment Terms: Require upfront deposits or shorter payment terms (e.g., Net 15 instead of Net 30). Offer Multiple Payment Options: Make it easy for clients to pay via ACH, credit card, or online portals. 2. Improve Pricing and Packaging Many service businesses underprice their offerings, leading to tight margins and cash flow struggles. Consider: Bundling Services: Create packaged service offerings to encourage larger commitments from clients. Value-Based Pricing: Charge based on the value you provide rather than just hourly rates. Regular Pricing Reviews: Reassess your pricing annually to ensure profitability. 3. Implement a Recurring Revenue Model Recurring revenue provides predictable cash flow and reduces the pressure of constantly acquiring new clients. To transition to this model: Offer Subscription-Based Services: Create monthly retainers or ongoing support packages. Encourage Long-Term Contracts: Provide discounts for clients who commit to extended service agreements. Automate Payments: Use autopay systems to ensure consistent cash inflow. 4. Manage Expenses Strategically Reducing unnecessary expenses can free up cash and improve profitability. Some key actions include: Review Expenses Regularly: Identify non-essential costs and renegotiate vendor contracts. Use Technology to Streamline Operations: Invest in tools that automate administrative tasks and reduce manual labor. Outsource Strategically: Leverage outsourced bookkeeping or virtual assistants instead of hiring full-time staff. 5. Forecast and Plan for Cash Flow Gaps Proactively managing your cash flow ensures you can handle slow periods without financial strain. To stay ahead: Create a Cash Flow Forecast: Use financial software to predict cash inflows and outflows. Build a Cash Reserve: Set aside funds for emergencies or seasonal dips in revenue. Secure a Line of Credit: Establish credit before you need it, so you have access to funds when necessary. Improving cash flow isn’t just about cutting costs or chasing payments—it’s about implementing smart financial strategies that create stability and growth. By optimizing invoicing, refining pricing, adopting recurring revenue, controlling expenses, and forecasting cash needs, you can take control of your business’s financial health.  If you need help optimizing your financial systems and cash flow strategy, First Steps Financial is here to support you. Schedule a consultation today!

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By Alisa McCabe • April 4, 2025
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