Running an agency is difficult. You need to keep focused on what moves the needle for your company. KPIs – Key Performance Indicators – are a fantastic way to maintain that focus and track your progress.
One KPI that you should be tracking is Lead to Cash Cycle Time (LCCT). It tells you how long it takes from a client entering your pipeline until you have the first money in the account. It’s especially important when you’re bootstrapping yet want to grow quickly.
In this post, I will outline how to calculate LCCT and offer actionable tools to improve it.
Lead to Cash Cycle Time specifies the number of days (or if you’re lucky hours) between a lead first entering your pipeline and the first payments from that account hitting your bank account.
You need to track that for your agency if:
- You are bootstrapped and are looking to grow quickly. You’ll need to refinance your growth out of cash flow. So the quicker cash flows, the better.
- You’re investing a lot in leads upfront, e.g. you create an SEO audit and strategy for the first lead call.
- You want to streamline your customer acquisition process.
Lead to Cash Cycle Time consists of two metrics that can also be used isolated:
- Time to Conversion
- Time to Cash
Time to conversion is the time in days it takes you and your team to convert a lead into a client.
Time to Cash describes how long it takes to receive first cash from a newly signed client.
To calculate your agency’s Lead to Cash Cycle Time, do this simple calculation.
- Open a spreadsheet
- Create four columns
- Client Name
- Lead Date
- Date First Cash
- Fill in the date for your clients
- Build an average to get the LCCT
LCCT is telling you how quickly you’re generating cash from your lead generation efforts. It is critical if you want to grow your agency and finance that growth out of cash flow.
The quicker you’re able to have funds coming in from a new client, the quicker you have resources available to reinvest into customer acquisition or to refinance this customers acquisition.
As with any KPIs, the absolute value of LCCT is less important than comparing it to other companies in the same industry, or monitoring it over time.
Schedule time monthly to review your KPIs and see how it is developing. Set targets for a number of days you want to achieve and then define and track initiatives to achieve these targets.
Lead to Cash Cycle Time is a very comprehensive and multi-dimensional metric, so there are many different tactics to improve it.
Here are some tactics to decrease time to conversion:
- Simplify your sales process
- Offer incentives for clients to sign up quickly
- Offer a lot of upfront value
- Train your sales team
- Make signing up with you as easy as possible
There are many ways to decrease time to cash:
- Deliver value to the client quickly
- Agree on a down or full upfront payment
- Work on a retainer model with upfront payments
Give that Lead to Cash Conversion Time is a such a holistic metric, the person that’s ultimately accountable for it has to be the CEO. Of you have a Chief Revenue Officer in your agency, they could also be a great person to manage this KPI.
There are many other roles in your agency that need to contribute to the KPI: Sales, Customer Success, Account Management, and Finance.
Lead to Cash Cycle Time is essential for a bootstrapped and growing digital agency. It basically tells you how quickly you’re making money from new clients.
Go and measure your Lead to Cash Cycle Time and set an ambitious goal for your team to get better at it over time. Please reach out if you need support to shorten this cycle.