Let’s talk about a simple sales statistic that you absolutely must understand if you want your business to succeed long-term.

Many new agents fail to accurately track their cash flow from the time marketing dollars and expenses go out to when commissions and renewals come back in, and the results can be devastating to their bottom line. Don’t fall into this trap – at the bare minimum, you must track your return on investment for each and every marketing campaign you run.

Return On Investment

For every dollar you spend on marketing, how many dollars can you expect to earn in commissions? ROI is king, and it’s one of the most important criteria you’ll use to evaluate any campaign you run.

Calculating your ROI is simple: it’s a ratio of what you earn to what you spend in order to earn it.

For example, let’s say you do a final expense direct mail campaign, spending $420 to send out a thousand lead reply cards. From this, you’re able to write four final expense applications with an average first-year commission of $400 each. In other words, you spent $420 and earned $1600 in commissions – you got about a 3.8 : 1 return on your investment. That means for every $1 you spent marketing, you earned about $3.80 in commission.

If you had a machine on your desk that spit out $3.80 every time you fed a dollar bill into it, you’d sit there and stuff it full of bills all day long.

Make sure that you track your ROI for each marketing campaign individually. Maybe a certain lead source has been pulling a solid 4 : 1 ROI, but all of a sudden the return drops down to 2.5 : 1. You need to be able to react to this right away by diverting marketing funds to more profitable ventures – if you have another lead source that’s still pulling 3.5 : 1, perhaps you’ll switch to that until things recover. This type of move is only possible when you’re tracking your cash flow for each and every campaign, and it’s one of the things that separates the average agent from the guys sitting at the Million Dollar Round Table.