Reverse Engineering The Numbers

Reverse Engineering The Numbers

What Does It Mean “Reverse Engineering The Numbers?”

We hear the term “reverse engineering the numbers” a lot in business. But what does that really mean? Are we attempting to determine our cost of setting up our business? Is it a way to calculate taxes? Or, is it the price associated with Employee costs?

Reverse Engineer the Numbers

Actually, it is none of the above.  When we talk about “reverse engineer the numbers,” we are talking about understanding results.  Results that will tell us a story of the productivity we need to accomplish over a specific period of time that will result in hitting our income goal.  It could be any type of number that you determine appropriate to help you achieve your goals:  monthly, weekly, daily, or even hourly.

Let me give you an example. When I was in my mid-twenties, I became a licensed life insurance agent. In those days, sales we made came from existing clients in our agency or those made from cold-calling. To understand how I could “Make Money on Demand,” I had to log specific actions on the telephone.

This is how my numbers were arranged. I started with a piece of paper and every time I picked up the phone and dialed, I would put a tick mark online one. If anyone answered the phone, a tick mark would go on line two. In those days you had to speak to the man of the house, so if you reached him a tick mark would go on the third line. If you set an appointment to discuss life insurance, a tick mark would go on the fourth line. And finally, if you made a sale, a tick mark would go on the fifth line.

So, here are how the numbers broke down. For every 100 dials, I would get about 50 answers, I would speak to about 25 men, set 5 appointments, and make 1 sale. With the average commission being approximately $150, that meant that for every time I picked up the phone and dialed it, I made $1.50.

Now those are powerful numbers to know as an insurance agent because cold-calling is a brutal task that has to be accomplished daily.  And all you have to do is ask any insurance agent or telemarketer and they will have a million excuses why they didn’t make many calls on a given day.

It could be called phone aversion but realistically, it is the fear of rejection. Nobody wants to be rejected or hung up on so the natural defense mechanism is to avoid picking up the phone which then equates to no income.

Asking someone for an appointment to sell them life insurance gets a whole range of responses. Everything from “I already have an agent,” through “I am insurance poor” and every conceivable excuse between.

But the numbers spoke volumes. If I wanted to make $30 that day, I only had to make 20 dials. But if I wanted to make $300, I would have to make 200 dials. It was cash on demand. But it got a lot easier.

My company started selling auto and homeowners insurance. They had great products but they didn’t enter this market to primarily sell those products. They sold them to “get in the door to sell life insurance.  It was a brilliant tactic. It was a lead magnet because our pitch was to provide value on the phone by not selling anything initially.

We introduced ourselves by company name and included “property and liability.” We did this rather than identifying ourselves as the parent life insurance company.

We told them we would like to give them a “free competitive quote on their auto and homeowners insurance and maybe we could help them save some money.”

Now, who doesn’t want to save money? Of course, almost everyone, so my numbers went through the roof. I still reached the same 25 men but now my appointments went from 5 to 15 and I made 3 or 4 initial sales instead of 1. My dollars per dial jumped up from $1.50 per dial to nearly $3 per dial.  It did not triple because the commissions were lower than for life insurance. But we were able to close future life insurance sales as a result of this campaign.

This all came about from the perceived value of the customer. We were trying to save them money and in the course of our presentation, most of them asked if we were part of the “parent” life insurance company.  They would ask me to look over their policy because nobody had done so for years and that led to many more sales.  We had built trust because that first call was not about life insurance.  It was about “saving them money,” and we only spoke about it if asked.  We put the life insurance as the next step on our value ladder.

Carrying the concept of “reverse engineering the numbers” to Internet Marketing, we can apply the same principles. If you want to make $6000 a month with a product that pays a commission of $100, then you would have to sell 60 items per month. Or, looking at it another way $6000 a month over a 30 day month is $200 a day. Either way, it comes out to selling 2 items per day online.

You must further break down the numbers by determining how many people must see your ad, how many must click on it and then how many buy your product.  Knowing these numbers is like being able to generate cash-on-demand just like I did with my insurance sales.  When you know your numbers, you can determine exactly how to set up your marketing campaign to make a certain income.  And remember, with Internet Marketing, you are open for business 24/7/365, WORKING FROM HOME OR ANYWHERE ELSE IN THE WORLD!

The point is that no matter what you are selling, whether it be a physical product, a digital product or a service, you must figure out how much you want to earn. Once you do that then you just reverse engineer the numbers to accomplish your goal.  It makes it a lot easier.

By doing this, you will have a crystal clear plan for arriving at your goal that you can track on a daily or even hourly basis if you break it down that small. Tracking your business in small “chunks” makes it more attainable than saying you want to make $100,000 per year and not knowing how you are going to arrive at that number.

The bottom line is to become a master of your numbers. Know how to manipulate them to your advantage, and adjust them as necessary to attain your goal.

If you continue to strive for improvement as you scale your business, it will become like generating “Cash-On-Demand.”

 Become a master statistician of your business so you can control everything by reverse engineering the numbers in your business.

If you would like more information about how you can leverage the power of the internet to make a significant income, <CLICK HERE>.

To your wealth,
Tom

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