I've been talking a lot about sales leads lately, perhaps because I feel that I'm just overwhelmed by how the topic seems to dominate discussions. Discussions with clients, with prospective clients, in my social media streams and certainly in my inboxes where I get asked if I want guaranteed leads on a weekly basis at least 2x per day.
The funny thing about leads is do we really need them? Or maybe a better question is, do we need them in the volume that we think we do? [I feel like I'm writing this post inside of the open and close of a Sex in the City episode - for those that don't know what I'm talking about here is what I mean...]
So, in honor of Carrie Bradshaw...I couldn't help but wonder, are we approaching lead generation all wrong?
Here is a typical client that we work with -
Founder of a data analytics firm, 10 years in business, $15 million in revenue spread across 3 salespeople, 90 clients in total. Small marketing team 2 people. Serviceable website, consistent thought leadership content, a social presence, attend conferences, have an email marketing list. Has used outside firms to generate leads, to ramp up their social activity, to help them with email marketing. They've been able to grow 3-5% per year, organically, over the last 5 years. The goal is to make a jump. How do we grow 10% this year?
If we used simple math, our focus should be to pick up 8-10 new clients this year with an average contract value of $150-200k, which amounts to 3 new clients per salesperson.
Now, the real math will be different. Revenue isn't spread evenly across clients. There are usually a handful of larger clients (strategic accounts) that represent over half the business - say 15 clients that produce around $8 of the $15 million in annual revenue, leaving 75 clients averaging $100k each. New clients, might even average a lower figure, say $75k each. Furthermore, we will lose a few clients (let's say 5) so our true growth target is probably closer to $2 million. That would mean we need 33 new clients, but that isn't right either. Some of that $2 million (in fact maybe 1/2 of it) will come from price increases and expanding business with the existing client base. So, we are back to a real, new business target of about $1 million or about $330k per salesperson, which is somewhere around 4-5 new clients.
That is a lot of math...and conjecture...and the year probably won't shake out that way exactly. But it is a worthy exercise to think about where growth will come from and then how we can affect it. When you start to put things in these simple terms, there is a feeling of comfort, of control.
In the end, we are talking about hitting big numbers through small victories - a handful of clients, a small sum of new dollars.
What does all this have to do with leads?
Most lead generation efforts assume that volume is the goal. In fact, the goal is a counting metric. How many MQLs (Marketing Qualified Leads) did we create? But if you look at what it really takes to hit growth targets, it's not about quantity, it's about quality. If your salespeople close just 33% of their leads, that would mean they each need about one qualified lead per month to hit the growth goals discussed above. That isn't a lot.
Another thing to consider is that for many professional services firms, the total addressable market isn't that big. There aren't thousands of targets to go after. For example, one recent prospective client talked about their being a little over 900 companies in their market. That's it. There isn't an endless supply of white space out there and, in fact, most firms don't need to capture it all to significantly grow.
The Value of Sales-Generated Leads
OK. I'm finally going to get to my point. With all the talk about lead generation programs, and email sequences, and social media efforts, what about good, old fashioned, sales-generated leads. Ask any salesperson out there worth their salt and they will tell you that the best leads are the ones they create for themselves OR ones that are created when they partner with a skilled and motivated Sales Development Rep (SDR).
In fact, the value of an SDR is underrated overall, but even more so in the professional services space, BUT we probably need to rethink what the role, responsibilities and expectations are for this position.
Typically, we view the SDR as someone that prospects, handles intro calls where light discovery leads to a hand-off to a sales person for either a demo or a pitch. This often results in weak leads, poor ROI, and a volume mentality (more leads/meetings are better). If we take into account the limited nature of most firms' addressable market discussed above, what's needed is a more strategic and insights-driven approach where SDRs must go beyond superficial research and scripted dialogues. Effective SDRs in this space are those who invest time in understanding detailed aspects of a prospect’s business through thorough research of public documents, financial reports, and internal company discussions, as evident in more successful communication strategies that reference specific corporate goals and projects. By engaging in deeper research and fostering genuine conversations with potential clients, SDRs can identify and understand the nuanced business problems specific to each prospect. This shift requires enhanced coaching and support from sales managers, moving away from rapid turnover strategies to focus on developing SDR capabilities and knowledge over time, transforming them into valuable assets for securing complex enterprise deals.
We are living in a golden age for sellers. There are sales tools and information sources that can make a good salesperson as effective as a whole team. Pair a good salesperson with the right sales enablement tools and one or two effective SDRs and you have the makings of an incredible sales team for most professional services firms. This approach does not mean we throw growth marketing out the window, but it should be a complement to what your sales team is doing. Taking not just a coordinated approach, but an integrated, holistic approach is the key to success.