You’ve just been introduced to a person who was not only happy to meet you because you have the chops to take on a hot project that’s on his/her radar screen, but also has the authority to green-light your hire. Oh, happy day! You’re thrilled to do the card exchange as your newest prospect asks you to make contact so that the two of you can talk specifics. You can almost taste the billable hours, but how excited should you be? Statistical probability can help you put a dollar value on your happiness quotient.
I found this intriguing formula that uses sales outcomes historical data and probability that allows you to calculate the expected value of your next prospect. As has been noted in numerous posts and no doubt reflected in your own experience, there is a randomness to networking and Freelance consulting. In our effort to bring much-desired predictability and financial security to our lives, the Freelancer’s (and all salesperson’s) objective is to control variables, positively impact outcomes and therefore win more projects and generate more revenue.
Let’s say you’re talking to a prospective client about a project that you estimate should be worth $10,000.00. The operative word is should. $10K is the potential value and not the real value until and unless one is awarded the project. If you don’t win the project, then it’s worth zero.
Your project’s worth is impacted by the probability of successful close. The following formula allows you to calculate the potential value of the prospect and the project throughout the various stages of the sales process. Both the steps in the sales process and the values assigned at each step in the process are based on historical data provided by a large corporate sales force. To refine the accuracy, identify the steps in your usual sales process and record your sales success rates at each stage of your sales process.
I. Identify the steps in your sales process
- Invitation to meet and discuss the project
- Initial appointment / discussion of of needs and benefits
- Verbal proposal / assessment of needs and benefits
- Invitation to submit written proposal
II. Determine the probability of a successful outcome at each step
- Invitation to discuss project 2% success probability
- Initial appointment / discussion of of needs 8% success probability
- Verbal proposal/ assessment of needs and benefits 25% success probability
- Invitation to submit written proposal 65% success probability
III. Calculate the dollar value at each point of the sale for a proposed $10K project
- Invitation to discuss project $ 200.00
- Initial appointment / discussion of needs $ 800.00
- Verbal proposal / assessment of needs and benefits $2,500.00
- Invitation to submit written proposal $6,500.00
The key to customizing the outcomes probability formula for your business is keeping detailed records of sales presentations from which to compile your statistics. In other words, here is yet another reason to document your business transactions so that reliable data will be there to guide business planning.
Thanks for reading,