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Tracking Increase in Order Value/Closing %

by SkyeFWP
21 replies
I work with some businesses on a revenue share basis e.g. do the thing, get the result and take 25% of the profit I generated.

I'm struggling to figure out how to track the increase in order value/closing ratio as a result of what I do.

A printer I work with had a crappy process (no positioning, no follow up etc) and closed only 5/10 quotes. If I create a better funnel and he now closes 8/10 quotes I've clearly had some result.

Assuming he gets 10 quote requests that week, would I only share in the profit of leads 6-10? What if the earlier leads were more profitable and the last 5 sucked? - See the issue?

Similarly, if we know the average order value is $50 and my process can increase this to $60. Does that mean I get 25% of the $10 for any orders over $50?

How are you guys working these sort of deals? They're attractive because I do the work once and get paid residuals again and again but I'm struggling to find a simple way for me and the business owner to monitor this sort of thing.

Any help appreciated.
#increase #order #tracking #value or closing
  • Profile picture of the author animal44
    You should've defined this before starting...
    I'd say you'd average.
    Before: 5 quotes bought in $250 (5 * $50)
    After: 8 quotes bought in $480 (8 * $60)
    Your share 25%: $480-$250 = 230 * 0.25 = $57.50.
    Seasonal variations would need to be taken into account.
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    • Profile picture of the author SkyeFWP
      Originally Posted by animal44 View Post

      You should've defined this before starting...
      I'd say you'd average.
      Before: 5 quotes bought in $250 (5 * $50)
      After: 8 quotes bought in $480 (8 * $60)
      Your share 25%: $480-$250 = 230 * 0.25 = $57.50.
      Seasonal variations would need to be taken into account.
      I haven't started yet.

      That makes sense re averaging - how would you suggest taking into account seasonality?
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      • Profile picture of the author animal44
        Originally Posted by SkyeFWP View Post

        That makes sense re averaging - how would you suggest taking into account seasonality?
        You'd need to look back at the history, last year or years. However long you need to agree the benchmark.

        One thing is to keep your commission calcs simple as possible. Instead of 25% of profit calculate that back to average sale price and use that. e.g. if sale is £100 and profit is £40, then 25% of profit is £10. That's equal to 10% of sale price, so use 10% of sale price for your commission calc and ensure that's defined in any agreement.

        Most business owners are honest, but you want to clearly define things (in writing) and keep them simple so there are no misunderstandings...

        Note that business owners will often be enthusiastic at first, then they see how much they're paying you... So you really need to keep selling your value all the time.
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        • Profile picture of the author SkyeFWP
          Originally Posted by animal44 View Post

          You'd need to look back at the history, last year or years. However long you need to agree the benchmark.

          One thing is to keep your commission calcs simple as possible. Instead of 25% of profit calculate that back to average sale price and use that. e.g. if sale is £100 and profit is £40, then 25% of profit is £10. That's equal to 10% of sale price, so use 10% of sale price for your commission calc and ensure that's defined in any agreement.

          Most business owners are honest, but you want to clearly define things (in writing) and keep them simple so there are no misunderstandings...

          Note that business owners will often be enthusiastic at first, then they see how much they're paying you... So you really need to keep selling your value all the time.
          It's so funny you said that, a Jay Abraham audio I was listening to the other day had the exact same concept, the 25% is actually 10% of revenue so just take that. That's exactly how I'll do it.

          Thanks for the reminder
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        • Profile picture of the author DABK
          Animal44 is right. However, wouldn't averaging take care of seasonality... Over a long period of time, both of you get a fair share....


          Originally Posted by animal44 View Post

          You'd need to look back at the history, last year or years. However long you need to agree the benchmark.

          One thing is to keep your commission calcs simple as possible. Instead of 25% of profit calculate that back to average sale price and use that. e.g. if sale is £100 and profit is £40, then 25% of profit is £10. That's equal to 10% of sale price, so use 10% of sale price for your commission calc and ensure that's defined in any agreement.

          Most business owners are honest, but you want to clearly define things (in writing) and keep them simple so there are no misunderstandings...

          Note that business owners will often be enthusiastic at first, then they see how much they're paying you... So you really need to keep selling your value all the time.
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          • Profile picture of the author animal44
            Originally Posted by DABK View Post

            Animal44 is right. However, wouldn't averaging take care of seasonality... Over a long period of time, both of you get a fair share....
            If you make 100 sales in peak season, and 25 in off season, the average would be 62.5. If you then double the off season sales (50), you won't get paid...
            Also off season tends to have different (lower) profit levels. Owners might be reluctant to pay the same commissions in off season as peak season.
            We're not always (actually rarely) logical creatures!
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            • Profile picture of the author savidge4
              If you can get the guy to agree to a flat 10% that's great!

              Using the averaging method gets a bit dicey and would not be a model I would use. Because you are tracking the leads... there is and should not be any "He may have gotten it anyways" he DIDNT, YOU did.

              like I said.. 10% off the top would be without question the way to go. you would be in essence becoming a 10% partner in the business. without the expenses. I will assume you may find some resistance in this approach.
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              • Profile picture of the author animal44
                Originally Posted by savidge4 View Post

                Using the averaging method gets a bit dicey and would not be a model I would use. Because you are tracking the leads... there is and should not be any "He may have gotten it anyways" he DIDNT, YOU did.
                That's fine if the campaign is separate, however my understanding is that the OP is looking at improving the overall business.

                In his example the printer was getting 5 leads, now he's getting 8. If the three extra leads come from, say, a separate ad, or a separate website with a different telephone number, or a different package name, then that's fine, 10% flat on those extra 3 leads.

                However if it's simply improving the marketing message, or ranking of the website, or whatever, then you need a benchmark on which to measure the increase.

                When we do a JV deal or a customer reactivation, it's typically separate, and comes in through a separate telephone number or web page or something else, so that's easy to measure.

                The OPs "better funnel" might have this tracking included in which case it becomes simple. But if the "better funnel" replaces the existing funnel, so also includes existing enquiries, then there's an issue and a benchmark needs to be set and defined.

                I'm sure we're all in agreement, just words getting in the way!
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                • Profile picture of the author SkyeFWP
                  Originally Posted by animal44 View Post

                  That's fine if the campaign is separate, however my understanding is that the OP is looking at improving the overall business.

                  In his example the printer was getting 5 leads, now he's getting 8. If the three extra leads come from, say, a separate ad, or a separate website with a different telephone number, or a different package name, then that's fine, 10% flat on those extra 3 leads.

                  However if it's simply improving the marketing message, or ranking of the website, or whatever, then you need a benchmark on which to measure the increase.

                  When we do a JV deal or a customer reactivation, it's typically separate, and comes in through a separate telephone number or web page or something else, so that's easy to measure.

                  The OPs "better funnel" might have this tracking included in which case it becomes simple. But if the "better funnel" replaces the existing funnel, so also includes existing enquiries, then there's an issue and a benchmark needs to be set and defined.

                  I'm sure we're all in agreement, just words getting in the way!
                  Bingo. Couldn't have said it better myself (this was far clearer than my original post). In this case my better funnel replaces the existing once hence the dilemma
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                  • Profile picture of the author DABK
                    If your better funnel replaces the existing one, you could just get paid on the number of leads beyond what the old funnel got. If they used to get 10 and now they get 14, you could, literally, be paid on leads 11-14. Over a long period, it's going to be fair. Over 1 or 2 months, you or they can get short.

                    It just not going to happen that, month after month, the 4 worst leads come in at 11-14 or vice versa.


                    Originally Posted by SkyeFWP View Post

                    Bingo. Couldn't have said it better myself (this was far clearer than my original post). In this case my better funnel replaces the existing once hence the dilemma
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                    • Profile picture of the author animal44
                      Originally Posted by DABK View Post

                      If your better funnel replaces the existing one, you could just get paid on the number of leads beyond what the old funnel got. If they used to get 10 and now they get 14, you could, literally, be paid on leads 11-14. Over a long period, it's going to be fair. Over 1 or 2 months, you or they can get short.

                      It just not going to happen that, month after month, the 4 worst leads come in at 11-14 or vice versa.
                      That doesn't really work. If the OP includes upsells and cross sells in his funnel, he won't be compensated for that increased value in the first 10 leads.
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                      • Profile picture of the author DABK
                        True.

                        Better funnel can mean that.

                        Back to the drawing board!

                        Originally Posted by animal44 View Post

                        That doesn't really work. If the OP includes upsells and cross sells in his funnel, he won't be compensated for that increased value in the first 10 leads.
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            • Profile picture of the author DABK
              I did not say not to look, together with the business owner, at seasonal patterns, just so the owner knows you know they exist.

              That said, it's best, like Savidge said, to get paid a flat fee. Though, I disagree with Savidge, even if you get paid a flat fee, make the owner average, so he/she knows that he/she is not wasting money.

              (Averaging things with them, now and again, forces them to remember what they did pre-you and the better world you created for them.

              Like I've said before, for months, if you asked my brother to name the best 3 clients he'd ever had, 2 were from my internet marketing. If you, next, asked him if he'd like to invest in internet marketing, he'd have a hissy fit. Because, according to him, marketing doesn't work, only referrals do. You grow a business by referrals. If you say marketing, target audience, internet leads in his presence, all you're doing is hastening his demise.

              He did that for 8 months. Yup, bright boy, but it took him 8 months to admit he was wrong! And even now, he doesn't admit it openly. He just stop saying crap about marketing.

              Pride is an awesome thing, init?)

              Originally Posted by animal44 View Post

              If you make 100 sales in peak season, and 25 in off season, the average would be 62.5. If you then double the off season sales (50), you won't get paid...
              Also off season tends to have different (lower) profit levels. Owners might be reluctant to pay the same commissions in off season as peak season.
              We're not always (actually rarely) logical creatures!
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  • Profile picture of the author DABK
    The fair way, if you don't know which leads he'd have gotten anyway, is to find out the average value of a lead and multiply that by however many extra leads they're getting.

    How do the leads come in? By phone? Then get a tracking number, and you could know which come through your efforts. (callfire.com is what I use; there are others.)

    By email from the site or other location, forward messages to the business owner and to yourself if you control the form... If the form is used by both you and the owner to get leads, average the leads... Of course, you could also follow up with everyone and ask them how they found the business.

    Or the owner can, and be honest about it.
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    • Profile picture of the author SkyeFWP
      Originally Posted by DABK View Post

      The fair way, if you don't know which leads he'd have gotten anyway, is to find out the average value of a lead and multiply that by however many extra leads they're getting.

      How do the leads come in? By phone? Then get a tracking number, and you could know which come through your efforts. (callfire.com is what I use; there are others.)

      By email from the site or other location, forward messages to the business owner and to yourself if you control the form... If the form is used by both you and the owner to get leads, average the leads... Of course, you could also follow up with everyone and ask them how they found the business.i

      Or the owner can, and be honest about it.
      At this point I'm not talking about generating leads, just increasing the value of what he already has, I'm cool with tracking new leads.

      Like the average value of the lead thing though.
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  • Profile picture of the author MrRodrigue
    Which would be the medium leads would be coming in?
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    • Profile picture of the author SkyeFWP
      Originally Posted by MrRodrigue View Post

      Which would be the medium leads would be coming in?

      Some via email but typically a phone call
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  • Profile picture of the author MarkHarnois
    I have and would continue to advocate flat rate deals, calculation is also a breeze..
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    • Profile picture of the author SkyeFWP
      Originally Posted by MarkHarnois View Post

      I have and would continue to advocate flat rate deals, calculation is also a breeze..
      You mean "10% of revenue" type deals? How would you tackle the orders 11-14 thing?
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  • Profile picture of the author SkyeFWP
    I'm scouring Jay Abraham, Dan Kennedy materials but I can't see where this has been addressed. I just set up a few new JV's today and nearly everyone of them needs their funnel optimising.

    They all need to do follow up. How do I prove my follow up gave them the order?
    They all need reactivation - That one is easy to track
    They all need upsells - I usually put the upsell together and share the revenue
    They all need to increase order frequency - We look at how often someone has ordered in the past and I get a % of new orders
    They all need to increase order value - We look at average order value and I get a % above that

    So in summary, it's the first one that's tough and the rest are the best I can come up with.

    As someone already mentioned, these deals let me become a 10% partner in someone's business with zero investment. For that reason I don't want to leave money on the table and I want to get some recurring income going and these little bits add up.
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    • Profile picture of the author animal44
      Originally Posted by SkyeFWP View Post

      They all need to do follow up. How do I prove my follow up gave them the order?
      [..snip...]
      So in summary, it's the first one that's tough and the rest are the best I can come up with.
      If you take the average sales in £ for the month, agreed with the owner, then anything over is what you'd calc on. That will cover everything. It doesn't matter where the money came from.
      If there's large variations each month, (e.g. seasonal) then you might have to vary the baseline sales amount at certain times, just ensure it's clearly defined and the owner is happy.
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