“Measure twice, cut once” is important advice to help builders avoid making costly mistakes. But when it comes to your sales staff’s performance, are you measuring at all?

Conversion rates measure the ratio of opportunities presented (leads) to opportunities seized (closes), and this statistic is critical to measuring performance. Knowing how often a salesperson converts a prospect into a sale will tell you how well that person performs when it counts most, which is in the model home itself. Your marketing—ads, promotions, online—focuses on bringing people into your model home. But once those prospects are there, it’s the job of your salesperson to turn them into buyers.

Conversion rates are to new home sales as batting averages are to baseball. A player can be batting .1000, but if he has only come to plate once or twice, that statistic is worthless. How will he perform throughout the season? Once that player has had 100, 200, or 300 at bats, you’ll know whether you have a Mickey Mantle or a Mickey Mouse.

By measuring a salesperson’s conversion rate, you can potentially plug up a huge profit leak. Maybe you have an underperforming salesperson who is actually costing you sales—and profits—because of his inability to convert company-generated traffic. Maybe you have a great salesperson in the wrong neighborhood who isn’t working enough leads. Both scenarios represent lost profit.

Some managers tell me they don’t believe they should measure conversion rates because you can’t prove this number. Really? Statistics are probability based on actual events. If your salesperson has a conversion rate of 10 percent, then it’s not likely he’s going to turn around and convert the next four prospects that walk in the door.

My advice is to work backwards: If you need three sales per month and have a 10 percent conversion rate, then you need to bring in 30 prospects. Conversion rates aren’t about profit, but measuring what happens between the four walls of your model home. If prospect conversions aren’t being monitored and measured there, you have a profit leak. So, you must set a benchmark to evaluate your sales staff’s performance against pre-determined goals. Some key points to measure include:

--Appointments with prospects
--Bank/lender appointments
--Internet sales counselor appointments
--Registrations
--Realtor showings, and co-op percentage of sales
--Number of visits, from initial visit through contract
--Fall-throughs and cancellations.

Bottom line: Hold yourself and your sales team to conversion rates. Yes, it’s work, but the ROI is huge.

Realtor and general contractor Myers Barnes is author of seven books, including Secrets of New Home Sales Negotiation. He is the founder of Kitty Hawk, N.C.-based Myers Barnes Associates.