Small businesses sometimes struggle with new business development. It can be hard to balance the operational requirements to actually do the job, with the necessity to generate new business. Consequently, lead generation gets put on the back burner regardless of how essential it may be. So, in order to help SMEs focus on this key task, we’ve developed our Essential Questions Every Small Businesses Owner must ask about New Business Development.
A Mindset that Impedes Business development
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. And you might perhaps argue that I didn’t do my job well enough to emphasize the value of lead generation. 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 demonstrated our credentials and a tremendous ROI.
So their stated reasoning for not taking action poses an interesting question. In challenging economic times, ‘can organisations afford to not focus on new business?’
Balancing Retention with Acquisition
Whilst client retention is paramount, you just can’t rely on the status quo, or trust to fate, that new business will simply come in through your door. Things change. Buyers change. Buyer circumstances change. Even your current customers change. A steady flow of new business opportunities is crucial as a defence mechanism as well as an engine for growth
Now, of course, there is all manner of routes to market and ways to spend the hard-earned marketing dollar other than the telemarketing that we offer. Companies must select the methods most relevant for them.
Sadly, this reticence to invest for growth isn’t uncommon even when there is a seemingly valid business case to do so. There remain elements of paralysis in the SME marketplace. It isn’t the case for everyone but it is clear that a lot of small businesses are wary of even relatively small marketing investment that has a better than average chance of payback.
It’s a Simple Equation
I view the decision-making process as a relatively simple equation especially with regard to direct marketing for new business leads as opposed to marketing for brand awareness. I’m not saying it’s easy but the consideration process should be straightforward.
The kind of questions an SME needs to ask are:
- What level of new business revenue do we need to achieve our objectives?
- Based on our typical value of the sale, how many new clients do we need to reach that goal? Note: you should ideally consider the lifetime value of a new client rather than the first sale or at least work on a 12-month value.
- What is our likely conversion rate from discussion/demo/meeting/quote to winning new business? Is it 1:5 or 1:10 or some other ratio?
- Based on the above ratio, how many meetings/opportunities do we, therefore, need to deliver the required level of new revenue?
- What are the most worthwhile methods required to generate these desired outcomes?
- What level of investment is required to achieve the above?
Work out the ROI Timeframe
Let’s look at a scenario. If your average client value of sale across a 12 month period is £10,000 and the conversion from meeting/quote etc to sale is 1:10, technically each qualified meeting could be viewed as being worth £1000 in the sales pipeline. Equally, if the marketing cost required to deliver 10 qualified meetings is for example £2500, then the ROI for that activity would be 4:1. If the value of the sale is £20,000 this rises to 8:1. Some of our clients have potential values of sale of over £100,000. In those cases, ROI is potentially very large.
Of course, you have to believe that your choice of marketing will deliver the required number of opportunities. That’s where you need to do your homework and assess your proposition in the marketplace, the credentials of the supplier, and the viability of delivering the number of opportunities in your marketplace.
Regardless of how you do it, the above questions are critical and are what every small business should be asking. Ultimately, the availability of funds and appetite to spend them dictate levels of investment. Either way, businesses cannot afford to stand still while competitors come after their clients. It’s essential to keep the new business leads pipeline well filled. So, do the maths and grow your business.
If you’d like to find out how GSA Business Development can help Generate Growth for your Business call us or use our contact form.