What is a conversion rate and why does it matter to a small business?

5 min read
Will Stevens

If you've just launched a new business, there's a lot to get your head around. You'll have to learn about everything from Search Engine Optimization to providing customer service.

And all though all of the elements that go into running a small business are important, some are more important than others.

One of the most important concepts to get your head around is your website's conversion rate. In this guide we'll look at the basics of conversion rates including what they are, how you can track your conversion rate and some rates to improve it.

What is a conversion rate?

Put simply, your conversion rate is the percentage of your website visitors who make a purchase. To give a basic example, if 100 people visit your site and two of them make a purchase from you, then your conversion rate is 2%.

In practice, things get more complicated. For example, if your website sells multiple products and you have multiple product pages, then you're going to be interested in the conversion rate of each of these pages, along with that of your website as a whole.

Then there's the issue of time. Your conversion rate one day could be vastly different to your conversion rate another day, especially if you receive a relatively small number of website visitors. (In our example above, just a few extra purchases would send the conversion rate rocketing.)

So it makes sense to track your conversion rate over the course of different time periods, so you get a fuller picture of what's going on.

Don't forget - your website will still have a conversion rate even if you're not using it to sell a product directly. If you're using it as a way to generate leads, then for the purposes of calculating your website's conversion rate, you can count the number of leads generated as a "sale".

Why do conversion rates matter to small businesses?

You're probably already starting to get the feeling that conversion rates are a vital metric to keep track of, and you're right.

Why? Well, here are some of the reasons that knowing your conversion rate is so important.

  • Conversion rates have a huge impact on your bottom line

This one almost goes without saying, but it's absolutely crucial. A high conversion rate is obviously better for your bottom line than a low conversion rate. But if you don't know what your conversion rate is, you can't even begin to make improvements that will boost your revenue and profits.

  • Conversion rates are a health indicator for your website

If you see you're getting loads of website visitors, but a very low conversion rate then that's an indication that there's something wrong with your website. Knowing this is the first step to identifying your problem and fixing it.

  • Conversion rates are a health indicator for your marketing

Lot of traffic and a low conversion rate might be an indication that your website has a problem, but it might also indicate that you're doing something wrong with your marketing. For example, if your website's overall conversion rate is high, but your conversion rate from pay per click (PPC) marketing is low, then that's a sign that there's something wrong with the way you're running your PPC ads.

  • Conversion rates are the key to website improvements

Making a change to your website can be a great idea. But there's also a risk that any change you make will lead to a drop in sales. Knowing your conversion rate is the first step in understanding whether any change you're planning for your website will have a positive or negative impact. (Check out this beginners guide to A/B testing to learn more about understanding what affect changes to your website will have.)

How can I start to measure my business's conversion rate?

To measure your conversion rate, you need some sort of analytics package on your website. Google Analytics (GA) is a really good choice, as it's free and gives you a huge range of data to make use of.

There is a little bit of technical skill required in setting up GA, so you may want to ask your web designer to do it for you.

If you want to install it yourself, then check out this guide to getting started with GA.

Once you've got it installed, you'll be able to start viewing data about your website straight away. Unfortunately, it will take a while before you can start doing really useful things with GA as you'll have to allow the data to build up over the course of a month or so, so you can start to get an accurate picture of how your website is performing.

But as the months and years pass, the data that accumulates in GA will provide you with powerful insights into your website and how it can be improved.

How can I start to improve my business's conversion rate?

The big one. Once you've begun to measure your conversion rate, you'll undoubtedly start to wonder about ways you can improve it.

The truth is there are almost limitless ways to attempt to improve your conversion rate - from rewriting the content of your website to changing the colour of the "buy" button on your product pages.

But the most important thing is that you know for certain the impact of any changes you make. And that means testing! (Refer back to the link earlier in this article for more information.)

Only once you've got to grips with testing can you really start to make real, long term improvements to your website's conversion rate.

But if you want to whet your appetite, check out this selection of methods to improve your conversion rate. It should hold you in good stead in the future.