Mclellan: Front-load your sales funnel
Friday, February 08, 2013 7:00 AM
Most businesses really gear up their sales/new client activity about the time their biggest client walks out the door.
There’s a dangerous place for any business. It’s called “just fine.” That sense of complacency when things are good can lull a business leader into thinking that the “just fine” that exists today is a permanent condition.
Which of course, it is not.
One of the fallouts from the recession is that the decision maker (whether it’s a mom or a procurement officer) is saying yes much more slowly. We exist in a tentative world right now. Whatever your normal sales cycle, you’re probably experiencing at least a 25 to 40 percent delay in closing the deal. All the more reason for every business out there to be trying to front-load the sales funnel long before its sales start to slip.
I can hear you now: “But we network like crazy and we get lots of referrals.” All of that is great. And you should keep doing it. But it won’t be enough. Most businesses grossly underestimate what it actually takes to get a client.
Sales and marketing are numbers games. But most businesses never bother to run the numbers. This oversimplified example will give you an idea of what you need to do. You’ll want to factor in other things, like timing, lifetime value of your customers, etc. But this will outline the thinking/math you need to do to really get a handle on what you need to build into your new business efforts.
Let’s say, on average, you lose one client a year through attrition. On average, a client is worth $25,000 in profits a year to your business. You would like to grow your business by $150,000 in 2013. Including the $25,000 lost client, that means you will need to get $175,000 worth of new clients to achieve your goal. Based on your $25,000 per client average profits, you will need to land seven new clients to accomplish your goal.
Now, we need to determine your sales process. Again, for simplicity sake, we’re going to ignore those lucky-strike moments when a prospect just calls you out of the blue to hire you or a referral that makes you the only contender. We’re talking about sales you generate through your own efforts only. Let’s assume it looks something like this.
• To get one sale, you need to make 10 presentations.
• To get the opportunity to make a presentation, it takes 30 warm prospects.
• To get a single prospect to respond to a marketing piece (become warm), it takes 100 cold prospects.
• To get seven sales, you need to make 70 presentations.
• To get the opportunity to make 70 presentations, it will take 2,100 warm prospects.
• To get 2,100 warm prospects, you’ll need to have regular contact with 210,000 cold prospects.
That kind of volume doesn’t happen overnight, so you can’t wait until you desperately need the business.
Don’t get hung up on my math. Naturally, there are lots of variables that would affect that simple example. It will matter if your product or service costs $10 or $10,000. Another factor would be the longevity of your product. Do I need one every week or every decade? Do you sell a niche product? Are you the market leader?
Regardless of the variables or how many networking events you attend, I’m hoping the point hasn’t been lost. Even if the above equation isn’t precise, it does illustrate that you need to be chasing new business every day. Even on the days you don’t need it. That’s the only way it will be there on the days you do.
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