Conversion rates are a staple across GTM formulas, and form the basis of the math inside many of the calculations used by finance and revenue teams on a daily basis.
Used to understand how much of an output you can get from an input, they are used to understand everything from how many impressions turn to clicks, how many clicks turn into leads and how many leads can eventually turn into sales. Nailing the maths is pretty key for building out robust revenue models.
Covering the revenue funnel, you can look at any conversion rate as being a representation of "how much of A makes it to B", and essentially is like flipping the funnel on its side.
When flipped into a formula, it's pretty simple:
or in even easier terms, it's what you get out divided by what you put in:
Using Conversion Rates
Using conversion rates in wider formulas is not only helpful, it's also pretty easy. We've aleady used the following formula, however we previously described the conversion rate as an "opportunity close rate" .
In this example, you would be looking to calculate how many Opportunities (Stage X) that you need to get to your revenue target. If you already know the average conversion rate from Stage X Opportunity to close, you can then use it in combination with average deal size/ACV/TCV to understand how many opportunities you need to generate.
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