The only Franchise statistic that matters

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Every franchise company measures different things in different ways when it comes to selling franchises.

Cost per lead, cost per month, average closing time, this ratio, that ratio, E I E I O. The list of statistics goes on and on.

Some folks in our industry really get caught up in the statistics that lead up to a sale.  Don’t get me wrong, it is good to measure those things, so that you are aware of what they are and you can make adjustments to advertising efforts and other things, but too often, we make decisions based on these statistics.

For example, let’s assume your budget is $24k per year for qualified Internet franchise leadsIf XYZ lead source is selling leads at $25 each then that means you can buy 80 leads per month and have leads all year long.

If you are tracking your lead data on contact ratio, bad phone numbers, how many profiles you get etc, then you know if it is worth buying leads from them over and over right?

But what if you don’t close a deal from those 80 leads per month?  What statistic shows you that important piece of information?

The only statistic that matters is the “Cost per sale”. Cost per lead, cost per month, number of profiles and all that jazz is great to review at monthly meetings for the executives, but when all the dust settles, how much did it cost you to get a sale is what should be measured.

I ran a blind survey with over 200 franchises about 6 months ago and one of the questions I asked was: How much is your cost per sale?

This number may surprise you, but only 6 companies out of 200 actually knew how much their cost per sale was when they answered the survey. I asked them how much per lead they were paying, how much commission they paid a broker for each deal, they knew how many leads they were buying each month, they even knew how many leads it took to close a deal, but they didn’t know how much money and time they were spending for each sale.

Keep in mind, there are 2 parts to a true “Cost per sale” statistic. (There are probably other small expenses associated with this, but these are the 2 main ones)

Part 1: How much do the leads cost you and how many leads does it take to close a deal? If it takes you 100 Internet leads to close a deal and you are paying $35 each, that would be $3500 per sale + number 2 below.

Part 2: How much time do you have to pay for to close a deal? Meaning, how many hours does your sales person need to work to call through 100′s of leads to get to the nuggets? And then how many hours does it take them to close a deal from the nuggets?

If it takes your sales person 40 hours per week x 52 weeks to close 20 deals per year and you are paying your sales person $100k per year, then how much do you add to number 1 above to get a true cost per sale?

When we are calling leads for franchise companies and brokers as part of our Verified Franchise Leads Program I get asked for all types of statistics because people commit to spending money with us, I understand this, yet I often wonder how many people actually track the statistic that matters most? Cost per sale.

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