At the heart of any business there are a series of simple metrics that need to be achieved in order to attain results. The challenge lies in identifying what those metrics are and then consistently applying the action that is needed to achieve them.
What do we mean? Well look at it a little like this…
Dan is a real estate agent. In order to achieve the financial figure he needs to support his own income and that of his sales associate and personal assistant, Dan needs to achieve 110 property sales a year.
The commission from these properties pays the wages of his staff, plus performance bonuses, along with his own wage and superannuation.
But in order to sell 110 properties, Dan needs to work backwards, considering the actions he needs to take.
If Dan wins one out of approximately two appraisals he makes, he knows he needs one appraisal of a property each day in order to successfully sell 110 properties a year.
Discounting weekends, that means he needs to conduct 261 appraisals a year to achieve that sales figure.
But what does it take to obtain one appraisal a day?
The call ratio
In order to obtain one appraisal each day, Dan needs to make 30 phone calls with existing clients in his database of potential customers.
During these phone calls, he’s not necessarily asking them for their business, but rather touching base to reacquaint himself with them and ask what they might need.
The final tally
Dan’s daily routine is one of reverse engineering where he undertakes specific actions in order to achieve very specific goals.
In fact, he has reverse engineered the entire process with a goal set firmly in his mind.
Each day, Dan starts his morning by conducting 30 very brief phone calls in the knowledge they might yield one single property appraisal in the future.
This meets his target of 261 appraisals a year, which Dan knows, based on his prospect to conversion rate (which is pretty decent) yields 110 sales a year.
The value of reverse engineering
This example might pertain to real estate, but the reality is every business owner can work backwards to determine exactly what they need to achieve each day, each week, month, or quarter to hit their goals.
Importantly this reverse engineering allows you to understand what needs to be done to hit your break even, and then forecast a profit margin.
So remember this, business is just a numbers game…In any business you can work backwards from the sales you need to make, to the leads you have to convert, to the contacts you have to make in order to meet your business targets.
Ultimately this allows you to plan for growth, additional staff and then increased profits using a simple strategy that takes the stress out of business.
Ready to reverse engineer?
If you’re looking to decode your business, reverse engineer and plan for growth using the numbers you already have at hand, I’m available to assist.