Why Tracking is so Important to Your Business

“I don’t know.”

That answer comes up way too often when talking to a business owner about their marketing and sales. They aren’t tracking anything and therefore cannot answer when I ask how a certain ad or marketing tactic is working.

When you run a business without properly tracking sales and marketing, you are blindly making decisions. How do you know what ads are actually effective if you are not tracking the sales from that ad? How do you know where to spend your money if you do not know what has been effective?

The only way to know what is working and what isn’t is to track your sales and marketing efforts. Only then can you actually make educated decisions for your business.

What Tracking Shows You

Your tracking should show you where leads and sales are coming from and how much profit is being made from those sales. So if you run an ad in the local paper, for instance, you should know exactly how many leads and sales that ad brings in. This allows you to calculate your total profits as well as your cost per lead. When you compare that data to the price of the ad, you can then decide if the ad is worth continuing or not.

Let’s look at an example:

You take out an ad for $5,000. The ad runs for a month and brings in 50 leads. Of those 50 leads, you make 15 sales.

So here is what your tracking should tell you:

Each lead cost you $100. Each sale cost you $333.33. So as long as your net profit is more than $333.33, you made money on the ad. If it isn’t, you either need to drop the ad or tweak it for a better return. But you must know these numbers. It is extremely important to do whatever you can to know these numbers.

These numbers can vary per marketing tactic or in some cases, per product or salesman. But knowing these numbers, you can average things out and you will be able to make far better decisions with your marketing efforts.

Know What You Can Afford

Knowing your sales statistics and profit per sale will also help you make better decisions on marketing. You need to know your sales rates so that you can determine what a lead is worth to you.

Let’s look at another example:

If your average sale has a profit of $750 and you average 1 sale for every 3 leads, that means that a lead is worth $250 to you. Because 3 of them will get you $750 in profit on average. Knowing these figures, helps you decide what you can afford to spend on a marketing campaign. So in this case, you need to know that you can average better than 3 leads per $750 spent if you want to make money on the campaign.

Again, these numbers can fluctuate depending on the type of ad, the product, etc. But knowing these numbers is critical to having a successful business.