In A158 How much money do I need to make?, you learned what to take into account when trying to figure out how much money you need to make.
What you’ll learn today is activity based selling. Which boils down to looking at what you can do today, not what happened yesterday, to reach your goals.
What it really comes down to is breaking it into chunks. You started off knowing what things you enjoy and totaled all them up into a yearly number. You figured out what your total revenue number is too based on your aspirations and the reality of your expenses.
Lagging vs Leading Indicators
Here’s the shocking point, you have zero control over this number. It’s solely based on someone else handing over money to you. The amount paid to you is a lagging indicator, it’s the output or result. It’s easy to measure but hard to improve or influence because you don’t have the control.
The concept of activity based selling is a focus on leading indicators. These are the inputs or effort you put forward. They are hard to measure, but easy to influence because they are what you do control.
Example of lagging vs leading indicators
Let me explain this concept with a simple example. For many of us a personal goal is weight loss. A lagging indicator that is easy to measure is the weight lost. You literally go on the scale every week and see the decrease in weight.
But how you reach that goal are leading indicators. For weight loss there’s really 2 leading indicators, calories in and burned. Easily influenced by you and within your control.
Now let’s take this concept and apply it to yesterday’s episode.
Real life business example of activity based selling
Say you want to make $120,000 per year. That means you need to make $10,000 per month.
If you have an average project price of $5,000, you’ll need 2 new clients per month.
All these are lagging indicators. You really don’t have any control over how many clients you get per month. Sure you can hustle and land none, or sit back and get someone to fall into your lap.
Obviously, not the way to run a successful business.
What you do control though is the number of leads, number of sales calls you make, number of proposals you send out, etc.
In between each of those stages will be a conversion rate too. Not everyone who is a lead will turn into a sales call. Not every sales call turns into a proposal. And I hate to break the news, but not every proposal turns into a paying client.
You won’t know this at the start, but you can put an good estimate on them to give yourself some context. As you start using this system, you can then tweak your percentages accordingly to get more accurate numbers.
With these leading indicators in mind, you can take the 2 clients you need and work backwards from there and figure out how many proposals you need to send out.
The math to figure out how many leads you need to talk to
At a 50% close rate, you’ll need to send out 4 proposals a month (or 1 a week).
Say 30% of your sales calls result in sending out a proposal. That means you’ll need to have 12 sales calls per month.
Say 10% of your leads result in a sales call, that means you need 120 leads into your business.
Now you have certain numbers that you do have control over and influence because the number of calls and proposals that you send out is based the effort you put into your sales.
Based around the conversions you have at the present time, you can be assured to get those 2 clients you need per month.
You aren’t looking back at the previous month’s revenue anymore wondering if you are going to hit your numbers.
You simply look at certain key stages in your sales and if you haven’t had any sales calls this week, then time to move some folks through that pipeline to get them booked.
Running your freelance business
More episodes in this topic:
What do you do when a crisis hits?
How to start building an email list as a freelancer?
How do you manage time wearing so many hats as a freelancer?
What software tools do you use for business? What is best?
How do you prevent, manage scope creep in your projects?
Do you schedule in time for exploring or reading articles online?
What is the best way to get income fast?
What happens if you can’t define a scope of work on a call?
What do I do first thing Monday morning?
How can I focus on my business when I’ve got a ton client work?
Do I have to be concerned with GDPR?
What are the tools and services that you use and would recommend to freelancers?
How do you have time for all that you do?
What podcasting gear do I use?
Does live chat bring you in business?
How do you followup with a lead after a proposal?
Did hiring a mentor really help you with starting up your business or your career?
What is my writing process
What is the easiest way to get a remote testimonial?
How do you determine a quality prospect?
How do you step away and actually take a vacation?
Are job boards reliable?
How to decrease the sales cycle or time to close?
How would you write a cold outreach email?
How to present different services that could potentially diminish your abilities in the minds of clients?
Should I bundle projects for clients or keep projects separate per client?
What product do you use for your business that you can’t live without?
What makes you stand out from other freelancers?
Do I drop this client?
How do I set a goal?
Do you meet leads and clients face-to-face?
How do I work “ON” my business and not “IN” my business?
What is the best structure for setting a goal?
How do you do a review of your week?
What do I say when a potential client says I’m too expensive?
What is activity based selling?
How to get more clients?
How to have a productive week?
Do you use a CRM for your business?
How do you choose the technology for your clients?
What is the structure of a weekly review?
What is the structure of a monthly review?
What are lead generation techniques to get me out of the feast and famine revenue cycle?
How do I know if I should buy a course?
What’s a polite way to tell existing clients you are raising your rates? And what is a reasonable percentage to go up?
How many email follow-ups should I send to a lead?
What do I do? I’m afraid to filter the tire kickers coming into my business because they are the only leads I have.
How to take the next step from contracting resource to solo business owner?
What do you think about Gutenberg? Schmutenberg!
How do I get better at sales?
How to overcome objections in sales?
How do I respond to an RFP?
How to respond to “I don’t need strategy, can you just do…”?
If you don’t have experience, how to you prove the quality without the education/experience?
How do you handle a client that has ghosted?
What do you ask during a sales call?
How to improve your sales process as a freelancer?
How to charge more as a freelancer?
How do you push past the imposter syndrome?
How do you segment your email list?
What to say when a client insists on adding something new?
What kind of content should I promote to potential clients?
Best of Season 3 - Get out of the comfort zone
Best of Season 3 - Building Relationships
S06 E12 - Undercharging, Targeting the Wrong Audience, and What You Should Do About It with Alex McClafferty
S03 Bonus - Tom McFarlin on Blogging, Balancing Work and Family, and Building a Business that Lasts
S09 E11 - Differentiation, Reputation, and Pivoting From the Top-Down with Peep Laja
S01 E11 - Kai Davis helping freelancers get more clients with outreach