If you want to know how well your business is doing, you need to look at two things: 1) what you planned for and 2) how closely you followed your plan.
A few months ago, I wrote an article in this column entitled “I Don’t Need a Business Plan.” I asked a basic question: Where do you want to take your business? The benefit of a business plan is that it gives you direction and identifies goals. However, knowing where you want to go does not mean that you are going there.
Look at your “hit rate” for the various methods you use to generate business. The hit rate is commonly thought of as the number of contracts awarded over the total number of attempts. This bare bones approach to the evaluation process often hides valuable progress indicators. To better understand where your business is coming from, compute your hit rate for every method you use.
If you receive business from referrals, who is referring you? Break down the leads into categories related to your business. For example, as a technical writer, I receive calls for developing documentation from scratch, for polishing up existing documentation, for proposal reviewing and writing, and for developing marketing literature. By calculating the hit rate for each category, I have discovered which aspects of technical writing people use the most. This information also helps me focus my marketing campaign.
Many contracts are also awarded following a proposal review. Examine the different types of proposals you have submitted. Is your hit rate better for government contracts or commercial contracts? Break it down even further if you submit proposals to both local and federal governments, or if you target both small and large companies.
Next, make a note of the number of business cards you gave out and collected last month. Of these contacts, how many were worth pursuing? How many did you pursue? How many resulted in an appointment for further discussion? How many resulted in a contract?
A related example of this technique is examining your hit rate for cold calling. Write down the total number of calls, the number of calls that reach the right person (e.g., the manager who has the authority to hire you), the number of appointments, the number of follow-up calls, the number of follow-up visits, and the number of contracts awarded. Also, make a note of the dollar amount of the contracts and the time you spend getting them. This kind of analysis will show you, on average, the number of calls you need to make to get one contract. You will also be able to evaluate the time it takes to get a contract and the amount of revenue that is generated. This information can help you adjust your marketing campaign. You will then know how many initial calls, contacts, appointments, etc. it takes to get a contract.
You can improve your hit rate by asking yourself several questions. How do you follow-up leads? Do you return phone calls even if you can’t take on any more clients? What kind of reputation do you think you have? What do others think of you? You can probably think of many other questions. By honestly addressing these basic issues, you will gain insight into your progress to see if it is consistent with your plans. You might also find ways to increase your business.
