Conversion Visibility = Healthier Organizations

Businesses are about converting something into something else.  Whether it is converting revenue into cash, prospects into customers or subscriptions into relationships, knowing how well you are doing is a key to having sustainable success.  Successful conversion rates are defined by their downstream impact on the health of the business.  If your conversion rates aren’t visible to you, their sway will be in the form of cash flow issues, declining sales or higher levels of customer attrition. 

Many of the organizations I have worked with could guess at best as to what their conversion rates were.  Those that could guess weren’t sure what information was available to confirm their estimation.  All of them were aware of problems in regards to cash flow, customer satisfaction, new customer growth, revenue stagnation and process issues.  Increasing the visibility to conversion metrics allows for the correlation of organizational concerns to the visibility of the root problems and viable solutions.

Because for so many businesses, CASH IS KING, we can use cash conversion rates as an example.  The first step is defining when the process starts.  In most cases, the process starts when the sale starts, i.e. when the customer commits to a purchase.  Once that starts, there are a series of events that occur including but not limited to:  Order Placement, fulfillment, shipping, billing, collection and deposit.   In this case, there will be a time period between each step. 

Adding up all of the time periods will give you the amount of time it takes to convert a sale into cash.  The average of those transaction times will give you your average conversion rate which can be compared to the amount of time it takes you to pay for your COGS.  If it takes you longer to get your cash than it does for you to pay for to goods, you have a negative conversion balance which means you are floating the money for your business.  Unless you are a bank and can charge interest on these transactions, you have an unbalanced scenario which leaves your business holding the bag.

Whether it is cash or any other conversion variable, understanding your metrics is the key to coming up with action plans to address any misses.  In the cash example, if you aren’t able to track the time between each step, you aren’t able to confirm your conversion rate.  This creates an inability to effectively improve your process or your results. 

The first step, as it is so many times, is admitting there is a gap in your information.  Once you have done that most difficult step, the next ones come much easier. 

Step 1. – Determine the key components of conversion.  Make sure they are quantifiable and consistent across the majority of your transaction scope. 

Step 2. – Once you have determined the individual components of your transaction ensure that you have a consistent way of tracking each one.  Make sure that your information is quantifiable and can be gathered in an efficient and consistent way.

Step 3. – Collect your data.  Depending on the size of your organization and the number of transactions you complete, the period before you have usable data may take a while.  It is important that you exercise patience here and understand that pushing the issue or trying to affect the data before it has time to come in may have a detrimental effect on the outcome.

Step 4.- Organize and analyze your data.  By placing the date in a consumable format that is easy to read and understand, you will have a simpler time creating your roadmaps for success.

Why does this matter?  Beyond the financial and organizational impact of not knowing what your conversion rates are, if you can’t see them, you can’t fix them. 

Having the information is only the first part, but now that you have it, you can create actionable plans to improve the results.  The beauty of having good information is the ability to create good plans from it.  Taking each section of your conversion process, you can determine which parts need more work than others.  In the case of the cash example, if it is taking you 15 days to create an invoice after the product is ordered, that might be an example of an area of opportunity.  From there, you can look at your process to figure out how you can create more efficiency in order to have a more positive outcome.

Organizing your action plans to address one or two issues at a time will have a better long term impact than trying to fix all of your issues at once.  I have found that picking two at a time is usually the most efficient.  Take one of the biggest areas of improvement and one of the smallest and tackle those first.

By creating a data driven matrix, you have given your organization the clear visibility to where you are currently (actuals), the ability to determine where you should be (benchmarks/goals), the variables you want to track (KPIs), and the possibility to create a clear path to improve them (action plans): all of the things a successful organization needs to be efficient and sustainable.