I nearly choked on my banh mi sandwich. We were talking over Skype as I ate my breakfast. It was kind of like whiplash, confusion, and a laughing attack rolled into one.
First, she said, “Things are terrible. My income is way down this year.”
Then, within 90 seconds, she told me, “My conversion rate is great. That’s not my problem.” She sounded kind of cocky about her “great” conversion rate.
That’s when I nearly choked. Income down? Conversions great? I understood what she was saying. It was the way that she said it that made my head spin. It was the cockiness that threw me for a loop.
She was so confident of her “sales” skills that it hadn’t occurred to her that there could be a connection between her high conversion rate and her low income.
I swallowed the delicious mixture of pork, eggs, and vegetables assembled on a fresh baguette, and we started to talk.
She’s been listening to me. She moved her practice to fixed fees. I love it when people take my advice. But somehow, now that she’s doing what I suggested, I’m to blame when any part of it doesn’t work out as she’d like. I’m not thrilled with that part. I got sucked in, and I had to explain to her why a high conversion rate could be a sign of bad things.
What Your Conversion Rate Might Be Telling You
Here’s what I explained:
The grocery store has a high conversion rate. It’s unusual for a visitor to leave without becoming a customer. But it’s a high-volume, low-margin business. That makes sense for something the customers have to replenish each day for the rest of their lives.
In stark contrast, the Rolex store has a low conversion rate. It’s pretty normal for a visitor to go in, look at the fancy watches in the thick glass cases, and leave without even trying one on. It’s a low-volume, high-margin business. That makes sense for a once (or twice) in a lifetime purchase.
The grocery store and the Rolex store have business models that work for their industry, their customers, and their bottom line. You can easily think of competitors in both industries that play with the formula. Whole Foods charges more. Swatch charges less. It’s all about finding the right mix for your business, and it’s not entirely about the frequency of purchases.
The lawyer on my Skype call is converting like the grocery store. Usually, that kind of conversion rate reveals grocery store prices. I pushed for specifics on her pricing.
Yep, low prices. That’s what she’s doing: she’s charging too little. She’s getting grocery store prices and, thus, corresponding conversion rates. She’s losing money faster because she’s so good at conversions. That’s not a good business model. All the money that’s coming in is quickly going out in the paychecks of her team required to service those newly “converted” prospects.
Now, she’s seeing her conversion rate for what it really is: it’s a big, black hole for her money to disappear into.
What Metric Really Matters
You can increase your conversion rate by charging low fixed fees, by offering a low hourly rate, or by asking for a minimal initial retainer (this is where most lawyers blow it). A high conversion rate is frequently a sign of prices that are way too low.
What about you? Would you rather deliver two contracts for $5,000 each or one contract for $10,000? The “high conversion rate lawyer” is sometimes doing twice the work. She’s doing it for half the price. You get it. You’re smart. From a business perspective, it would be better to draft one contract, manage one client, negotiate once, do one initial client consultation, etc. One case at twice the fee is better than two cases at half the fee.
The best measure of the health of your business is your income. If it’s going up, then we’re headed in the right direction. Up is good. Down is bad. Your conversion rate isn’t what it’s about. You may want it to be high, but a low conversion rate works just as well and, sometimes, lower is better.
This banh mi sandwich cost me a dollar here in Vietnam (high volume, low margin). I think I’ll have another one. Hopefully, this time I won’t choke.
