I had an interesting conversation with a prospective client recently. The end of the chat went something like this:
‘Unfortunately, we’ve had a tough last quarter so we can’t afford to spend on new business development at the moment’
Of course this particular client could conceivably be masking the real reason for not going ahead.They may be genuinely cash-strapped. They may need to reduce costs to avoid a risk of going out of business. There could be any number of reasons why they legitimately did not want to use our lead generation services.
Equally, they may not have been telling me the truth. It’s conceivable that they simply went to a competitor but didn’t tell me. I’d like to think that wasn’t the case since we built an excellent relationship and I provided lots of free advice.
And you might perhaps argue that I didn’t do my job well enough to emphasise the value of lead generation to overcome their current business development challenges. Yet we clearly demonstrated that, very recently, we’d delivered significant new business opportunities for another client that does exactly the same work in another part of the country. This showcased our credentials and illustrated a tremendous ROI.
Can you Afford to Rely on the Business Status Quo?
So their stated reasoning for not taking action poses an interesting question. In these challenging economic times, ‘can organisations afford to not focus on new business?’
Whilst client retention is paramount, is it possible to rely on the status quo? Wouldn’t it be great if, without trying, a steady stream of new business would just keep waltzing in through your open door? Perhaps current clients continue to provide fresh opportunities. Maybe you don’t need to go out and search for new leads. If you have sufficient clients, and those clients provide regular opportunities for cross-sell and upsell, you may be in a good place. Yet, that’s rarely the norm for most businesses.
Change Destabilises Client Relationships
Things change. Buyers come and go. Buyer circumstances change. If your customer database is of a reasonable size, there is likely to be a regular turnover of buyers. And, with new purchasers, comes a fracturing of the relationship you have with certain customers. What’s more, if competitors come in with new offerings or promotions, the stability of your core business may become a little shakier.
That’s why, in most cases, a steady stream of new business prospects is essential not least as a defense mechanism against attrition in addition to being an engine for growth.
Lots of Marketing Channels from Which to Choose
Of course, there are a huge number of marketing channels that can be used to generate new business. Companies need to work out what works best for them. Unfortunately, though, many business decision-makers are still reluctant to invest even when there’s a seemingly good case to do so. Paralysis sometimes exists amongst SMEs. ROI is crucial but, sometimes , that can take time and small businesses usually need quick return. Some organisations can be wary of marketing investment without guaranteed return. And, marketing spend is often the first thing to go in tough business climates and it’s slow to return.
Clearly, companies can invest in all manner of marketing. That could be to generate brand awareness or to drive promotions or to generate enquiries for the sales team. It isn’t necessarily quick or easy. However, the process for deciding whether to invest should be straightforward and it should be an annual process at least. .
The kinds of questions SMEs need to ask include:
- What level of new business revenue do we need to achieve our objectives (from existing and new customers)?
- How many clients do we need to reach the revenue target based on the lifetime value of the new business as opposed to the first sale alone?
- What is the probably conversion rate from a sales lead?
- Based on the above, how many leads (meetings, demos, appointments, zoom calls etc) do we need to deliver the conversions?
- What methods are most likely to generate these opportunities?
- What level of investment is needed?
With the above in mind, let’s look at a very basic scenario. It goes without saying that there are many more considerations in the decision to invest in lead generation activity.
If an average client is worth £10,000 and the average conversion from lead to sale is 1:10, then we could view each qualified lead as having a value of £1000 within your sales pipeline.
If the marketing cost to deliver those 10 leads is perhaps £3000, then, simply put, the ROI could be a 3.33:1 ratio.
If the value of sale is £20,000, the ratio doubles. Some of our clients derive significant revenue from their clients which means the ROI could be even higher.
Of course, you need to believe that your choice of marketing will bring that level of business to the table. That’s not guaranteed. This is where you need to do your homework and assess your proposition, your competitor positioning and the market receptiveness. You also need to vet your marketing supplier’s credentials.
Regardless of how you carry out these tasks, the above questions are simple but important. Ultimately, the availability of funds and your appetite to spend the money will dictate your success. However, no business can afford to stand still while competitors are active, not least since those competitors are targeting your clients. Therefore, it’s essential to keep your sales pipeline well filled.
So do your analysis, and grow your business.
If you’d like to find out how GSA Business Development can help Generate Growth for your contact us now.