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How To Track Net Sales Per Lead Issued (NSLI)

January 25, 2023
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Education

The One Crucial Metric Most Home Contractors
Overlook But Shouldn’t

How And Why To Track Net Sales Per Lead Issued (NSLI)

If you asked most home improvement contractors the number one metric they use to evaluate sales performance, the answer is almost always “close rate.”
But what if there is a better, more accurate measure for analyzing your salespeople? One that gives you a clearer overall look at the health of your business? A metric that would not replace close rate stats, but could complement it and give you a more complete picture?

There is such a metric, and every home improvement contractor should be tracking it. It’s called Net Sales per Lead Issued (NSLI). Getting a handle on this can give you a wealth of useful information for improving your business.


What Exactly Is Net Sales Per Lead Issued (NSLI) And How Do You Calculate It?

The formula for figuring out NSLI is straightforward. To figure out the Net Sales per Lead Issued for any sales rep, simply take their total sales and divide it by the number of leads you issued them. To take a random example, let’s say in a particular month, you issued a sales consultant 20 leads, and they closed $100,000 in sales on those leads. The net sales per lead in this example would be $5,000.

(Of course, depending on what kind of home improvement business you are running, these example numbers may be wildly off compared to your specific set of numbers, so don’t be alarmed if there is a vast difference in calculations!)

With contractor CRM software, this is simple to track (more on that below). But first things first: why would you want to track this in addition to the close rate?

Why NSLI Is A Very Valuable Metric

One key reason to use this metric is that it treats leads as what they are: ASSETS.

When you are running a home improvement business, you want a simple and highly accurate measure of the return on investment you are getting on leads. Without NSLI, you have no idea the profitability you are squeezing out of your leads (or how much money you’re missing out on!).

Maybe some kinds of leads are not profitable enough. You may even discover some lead sources are not profitable at all. Using NSLI will help expose these issues quickly.

Net Sales per Lead Issued can also uncover weaknesses and bad incentives in your sales team. For example, if you are basing a close rate only on appointments run versus sales made, your salespeople probably feel like following through on leads that are likely to be tougher to close is not worth it.

Once they understand that there is a new emphasis on NSLI, sales reps tend to get more diligent about treating every lead as a precious commodity (an asset!). Suddenly, they will start doing things like trying harder to reschedule one-leggers or other appointments that fell through for whatever reason. Give them an incentive to be more diligent with their leads and see what a difference it makes.

NSLI can also help you capture other important information about the performance of individual reps, like which salespeople are consistently selling at higher prices or upselling more.

Getting A Firm Handle On The Value Of Different Lead Sources

It is super beneficial to have this kind of information to evaluate individual performance. But let’s return to the more general value of measuring NSLI. We touched on this briefly above, but let’s dig just a little deeper.

When you measure NSLI, a more accurate picture of the value of your different lead sources comes into focus. After some time tracking this, patterns will begin to emerge, and you will be able to see what lead sources are generating excellent net sales and which ones are not producing enough to justify their cost.

NSLI will also give you a clearer picture of what percentage of sales is going to marketing costs. Let’s say you get 100 leads a month at a cost of $250 per lead, which totals a cost of $25,000. Let’s further assume that you close 25% of your total leads and your average sale is $10,000. That would be 25 closes a month, so $250,000 in revenue. You can see that your marketing costs ($10,000 expense to acquire 100 leads) is 10% of your total sales ($250,000).

That is a calculation you may already be doing. But looking at it through the lens of NSLI, you can begin to break things down by individual sales rep and lead source more easily.

Of course, your own numbers and expectations will probably greatly vary from the above example. This just gives you a way to start thinking about your own benchmarks.

Which brings up a question…

What Benchmarks Should I Use For NSLI?

This question is impossible to answer in the abstract. What product you carry, its price point, your lead sources, and any number of other factors will have an impact on an ideal benchmark for your contracting business.

The good news is that this is not a question you need to worry about at first. The point is to start collecting the data. The more accurate information you gather over time, the clearer the picture will become. Your customized benchmarks will come into focus, and you’ll know where to put your efforts.

As you get a firmer handle on your own current NSLI, it could be helpful to network with similar companies. You can then compare NSLI benchmarks to get a broader picture of what you should be expecting out of your sales reps and lead sources.

You may learn you need better sales training, or maybe you’ll discover you should cut one particular lead source while increasing another. The great thing about tracking NSLI is that you’ll have the information to make a smart choice.

How To NOT Drive Yourself Crazy Tracking NSLI

Trying to track NSLI manually with spreadsheets, or worse, a notebook and a calculator is a recipe for driving yourself nuts with tedious tasks you’ll never follow through on. You will also end up frustrated if you use sales lead management software that makes tracking this metric difficult or impossible.

If you would like a free demo of Builder Prime, a contractor CRM that makes it incredibly easy to track NSLI and all kinds of other useful metrics, just reach out using one of the options below.

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