There are three ways to grow your business:
- Increase your price or average transaction value
- Increase the average number of transactions
- Increase the number of customers
Easy enough, right? As your product matures (ie – gets better) and demand goes up, some would argue that it’s worth more. Increasing your price is where most folks start. It’s a cosmetic change to your website to add a comma or replace a low number with a higher number. This would take an average programmer a few minutes but the implications can be severe. Price too high and you risk losing price sensitive customers to your competitors who will happily take the new business you inadvertently sent them. Price too low and leave money on the table or risk that your perceived value goes down. Making this choice requires a complex economic analysis that we won’t go into on this post.
Amazon has a brilliant way to increase their price, which can also be thought of as Average Order Value (AOV). They recommend higher margin, ‘Frequently Bought Together’ add-ons but not every business has extra inventory or value added services to bundle. They effectively increase their average sale without consistently making their individual products more expensive over time and this also allows them to price lower than other retailers while continuing to grow revenue. McDonald’s can sell you a burger for $.99 with slim margins or at a loss because they make a killing offering fries and a drink both at incredibly high margins and an increase average price. Not every business has add-ons to offer as an upsell bundle. If you do, stop reading this and go test add-ons and bundling then come back and work through this post because you are still leaving money on the table.
Option 2… increase the number of transactions a consumer makes over a given time period. If you sell a physical or digital product , you can increase the number of transaction by recommending your customers come back and make a repeat purchase. Flower companies offer a service to set reminders for life events, CPG companies work with grocery stores to give you coupons at checkout to come back for a discount, and speaking of grocery stores…those fuel perks your neighborhood grocery store/gas station offer are a psychological game they play with you to discount gas the more you come back and spend with them.
Increasing transactions isn’t that hard for a smart marketer selling direct to consumer. But, what about B2B? If you run a monthly recurring SaaS business, increasing your number of transactions could be achieved by selling more ‘seats’ or licenses into the organizations who are already paying you money. If you can do this, stop reading this and go upsell your existing customers. Then come back and work through this post. If you can’t easily increase the number of transaction a customer makes or raising your prices isn’t an option, then it’s time to move to step 3.
Option 3…INCREASE THE NUMBER OF CUSTOMERS
I know I can add more customers without making changes to the business that could have residual impacts. I know I can add more customers without getting anyone’s approval. In order to acquire more customers, I have to make first contact. At SellHack, we think email is the best way to make first contact with a prospect as long as you follow the rules.
We chose emails because the alternatives just don’t scale as well. It takes 8 calls and more than 6 hours to convert 2% of your cold calls into demos. I’m not suggesting you don’t use the phone. Calling prospects is still an important part of prospecting. We use the phone, it’s just not our primary method. Phone calls are made to support our email reach out. I know that I can send 100 emails faster than I can make 100 calls. And while going door to door or dropping in on a prospect might work for some folks, in any given time period, I can’t knock on as many doors as inboxes.
Find the Optimal Number of Leads Your Business Needs
Several times a week, a new client will come to us and say: “Can you guys help me build a massive list of emails?” My response to them follows the logic in the exercise I’m about to share with you. I’m not saying that having a lot of prospects is a bad thing, but having the optimal number of prospects consistently in you funnel is the goal.
If you sent an email to 1,000 people with a 40% meeting request rate and your sales team can’t handle scheduling meetings with 400 new leads before they go cold…you have a problem.
Here’s how to figure out this magic number:
Pick your newest customer or review this process across your 10 most recent customers acquired through outbound generate leads (ie – direct sales) not inbound (SEO, paid ads, content etc).
Get out a clean sheet of paper or open a new blank document and copy this next section and answer these questions in order. (You’ll thank me later.)
1) How many calls/emails were required to get to the demo or first meeting?
Answer Here: Example: 15
2) How many days passed between first contact attempt and the first call/demo/meeting? If you don’t actively manage a CRM, searching for the prospect’s email address in your inbox and scanning the results can show most of this information.
Answer Here: Example: 8
3) How much time did the sales rep spend on this deal and over what time period?
Answer Here: Example: 2 hours*
* Let’s say the deal took 1 month from start to finish and took 2 hours of his time…so, the first 5 prospecting emails sent took 2 minutes to type that’s 10 minutes, the contract took 20 minutes to prepare, there was 1 30 minute qualification call, 1 hour long call, then he/she spent roughly 30 minutes per week over the month. If your account executive works 40 hour work weeks, in a perfect world, they could manage 80 engaged prospects per week since they spend 30 minutes per active deal every week.
4) What is your average positive (meaning they want to meet) response rate to a first contact attempt?
Calculate: Response Rate = (Total Positive Responses) /(Total Emails Sent)
Answer Here: Example 40%
5) How many new prospects do you need to find per week to keep your sales team running optimally?
Calculate: (# of prospects an AE can manage per week)/(response rate)
Answer Here: Example: 200*
*In this example, our sales team can manage 80 prospects per week and since we have a 40% response rate, we need 200 prospects per week added to the top of the funnel.
6) How long does it take to find contact information like email addresses and phone numbers for 1 prospect?
Pro Tip: Don’t guess.
We’re trying to get an accurate estimate here.
1) Go to LinkedIn.
2) Run the advanced search that returns a good representation of your prospect. The first page has 10 results. Resist the urge to use SellHack.
3) For each prospect, add their first name, last name, job title, company, company domain, industry, email address and phone number to a new excel worksheet with each data point in a unique column.
That sucked, right? I’m guessing this will take a 1-4 minutes per prospect. How long did each prospect take you?
Answer Here: Example: 2 minutes each*
*Does your account executive do their own prospecting or do you have a Cold Calling 2.0 with a dedicated Sales Development Representative (SDR) or Business Development Representative (BDR) whose sole responsibility is filling the funnel and building pipeline? We’ll dig into the strategy on a future post, but for the purposes of this exercise, let’s move to the next step.
7) How much are you paying the sales exec on your team who is responsible for prospecting?
Answer Here: Example: $60,000 per year
8) Next, calculate the hourly wage of your sales rep or BDR/SDR. You can use this handy tool to figure it out.
Answer Here: Example: $28.85*
*Example: At $60,000, their time is worth $1,154 per week $28.85 an hour, or $0.48 per minute.
9) Now we need to figured out your sales team’s cost to acquire a new customer (CAC).
Calculate: Cost of 1 Prospect Sourced = (Time to Find 1 Prospect) x (Employee’s Cost Per Minute)
Answer Here: Example: $1 per lead*
*If it takes 2 minutes to find a prospect on Linkedin, their verify email addresses, and get their other relevant information into an excel doc, you are effectively spending $1 per new prospect added to a prospect list.
10) How much is your prospecting costing your business per sales rep?
Calculate: Cost of Prospecting = (Time to Find 1 Prospect) x (Optimal # of Prospects)
Answer Here: Example $800 per month*
*In the examples given earlier, at 2 minutes per prospect, each account executive will cost you $800 per month ($1 x 800 prospects). If your closers are doing their own prospecting, the time the spend prospecting means they don’t have time to manage 16 less active deals per week and costing you 20% of their salary. Crazy Right?!?
Now that you know the optimal number of leads each sales executive can manage per week/month and what the cost of finding leads actually is, you need to make sure your sales engine has enough leads in your pipeline. There are three ways to do this.
1) You could hire an SDR/BDR to leverage the AE’s time. A lot of companies are doing this. You still have to pay to fill the pipeline, but you may be able to hire and SDR/BDR for less than an AE and your account exec should now have more time to bring in more business.
There is a lot of uncertainty here and it’s risky proposition to simply expect that paying less money (to the BDR/SDR) for the same output the account exec was producing. I’d argue any BDR/SDR worth their salt would a) rather not be in the weeds of manually building lists all day and b) have a lot more to bring to the table in the form of handling first contact responses and even managing initial qualification calls and demos.
2) Option 2, you could buy a list or outsource the list building. We’ve all done it, and it rarely works out as well as we expect. Expect to pay $.50 – $2 per contact. Not that much of a savings and in some cases much more money compared to what it was costing you to have someone on your team do this.
Sometimes the lists are customizable based on your criteria, but I haven’t seen any list broker out there come close to providing the volume and attribute criteria that I can find on my own using a professional social network to search and filter results.
Pro Tip: Avoid buying lists from folks contact you with a generic message like this:
I’m sure you’ve all gotten an email like this. And it’s just bad on so many levels. First, I found this in my spam. It’s not personalized so obviously a blast. There’s poor grammar and lack of attention to detail. Not what I want in someone sourcing my leads. Not to mention, how many other folks do you think are getting the EXACT same leads? The goal with prospecting is to find pockets of people who may not be on everyone else’s list and contacting them with a message that is targeted. When you build your own lists, the information recency and accuracy are up to the minute. You’re not relying on data that is a few weeks or a few months old. The takeaway: invest in data from the most up to date sources like Linkedin, Facebook, and Twitter. Moving on.
70.8% of execs surveyed had at least one change to their contact record last year.
3) The best way to find your target prospects and efficiently get their contact information into an actionable list is to use the right tools for the job. The cherry leads come from customized searches to find prospect segments that have a high propensity to engage in a dialogue because you solve a problem they have and their profile attributes are similar to those of your existing customers. We talk about this more in our ebook. Get it here. Once you’ve identified these unique customer segments, save your search criteria because you should be coming back to the well until you’ve exhausted reaching out to every person.
The bottleneck with this approach is typically the amount of time it takes to gather all of the relevant information and find the hidden contact information. This is fixed by introducing a repeatable process assisted by technology that will create a 6,000% increase in productivity with at least a 50% cost savings compared to the next best option of buying something prepackaged or building lists manually. The numbers sound crazy, but we just did the math to figure out how much time you were spending and what it was costing you to build your own lists or buy them from someone else.
Here’s how we did it.
1) Remember when I asked you to examine your most recent closed-won deal? Find the decision maker’s profile on LinkedIn. Make note of their title, industry, experience, keywords in the profile and location. I talk about this in even more detail on this webinar.
2) Use these data points to run an advanced search. You’ll usually see thousands or results based on your search criteria. These are all potential buyers, but now it’s time to reach out. First you need to get their contact information.
3) If you don’t use a tool like SellHack, whoever is prospecting on your team probably build lists the wrong way by copying/pasting the search results page into excel doc. You’ll end up with something that looks like this. Yuck!
4) Then they have to format the contacts so each data point is in a unique row with the correct column attribute. So they spend their valuable time doing even more copy/pasting until they have the data in unique columns so you can work append the contact information that you need to start reaching out.
It’s not over once you formatted the raw excel doc. Now you have to find email addresses. You can guess email formats, use an email address verifier to search 1 by one, or some other inefficient task. Remember when I told you this takes 2 minutes per contact? Try it for yourself. 2 minutes was generous. I’ll bet it takes longer.
5) Smart sales teams use a tool like SellHack build prospect lists and find emails and phone numbers in as little as 2 seconds per contact. We use publicly available data to. No scraping. Think of us as an alternative to Salesloft.
6) Since you already know the optimal number of prospects each salesperson needs, you can build the right sized list and SellHack will verify emails and phone numbers in the background. You’ll end up with all the data you need, formatted nicely for an export to a CSV file or Salesforce so you can start a successful cold email or cold call outreach campaign.
Systemization of your prospecting is a critical piece to achieving predictable revenue and growing your business. We built SellHack because we had a lot of the same frustrations you and your team have. Our technology is trusted by some of the fastest growing startups and the most trusted brands from the Fortune 500. If you keep doing what you’ve been doing you are going to keep getting what you’ve been getting.
More posts to come. Feedback always welcome. Send an email to firstname.lastname@example.org