Clate and Scott answer a listener question—when should you consider adding outbound sales, especially when you already have a healthy inbound flow of leads and sales?
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Dusey: Hello listeners, this is Dusey, one of your hosts for the Small Business Success podcast. And typically, when you hear my voice, that means you are not going to hear Clate's voice or Scott's voice, but today is a very special day. We are all in the room together. Hello.
Scott Martineau: Hello, hello, hello.
Dusey: That's Scott, how's it going? And Clate?
Clate Mask: Great to be here. Thanks Dusey.
Dusey: All right. So today we [00:00:30] have a question that we're going to answer, and we are just going to get right to it. This question comes from Tim Brooks, he's the director of marketing at Atlantic Training. They're a "stage four" business, and again, if you're not sure what a stage four business is go check out our episode on the stages of small business success. And his question goes like this: We're primarily an inbound lead company with quality traffic. At what point should we shift focus to include outbound efforts to grow our business, while keeping our model of funneling quality leads [00:01:00] to our sales team?
Scott Martineau: Fantastic. I'm going to give a couple other data points too just for those who don't have the stages document right in front of them. So we're in the category of one to $3 million dollars in revenue and we're in stage four. We got 11 to 25 employees, been in business for a few years. So it's probably good just to contextualize. I'll give an answer that's probably not as appropriate for a one-man band or one-woman band that's just getting started and doesn't have that type of [00:01:30] revenue or employee base. So I want to talk about a couple things. First of all, I think the question is a great one. We've got natural inbound traffic that's coming in.
Dusey: It's a pretty good problem to have, right? [crosstalk 00:01:44]
Scott Martineau: Yeah, it's a fantastic problem. And for those of you who aren't familiar with that terminology that refers to just various approaches where you have search engine optimization and other efforts that are essentially having organic traffic coming to you, and typically there's some [00:02:00] form of education that you're using to attract people and capture their information and follow-up. But you've got people who are coming to you versus you out cold calling, would be the epitome of outbound marketing, more interruption-based marketing.
So I think the thing I want to talk about here is I would first start by looking at the conversion rate in the funnel, and there's a high-level way to look at that and there's a more specific way to look at that. But if you got inbound traffic, a lot of business owners, there's this [00:02:30] insatiable appetite to go have more leads and more leads and more leads, but what we see a lot is businesses don't actually optimize to the right level before they start to do that work. So they end up going and getting more leads that just go into an unoptimized funnel.
Dusey: And they're probably starting to spend a lot of money to do that, and that money is just getting wasted because there's not a great conversion as you go down the funnel.
Scott Martineau: Yes, exactly. So it's challenging to have a benchmark that's consistent across every business model, but [00:03:00] I would say to Tim, Tim if your conversion rate from your number of leads captured to closed sales is sitting in the 3 to 5% range, it's likely you've got more optimization that you can do, and I'd like to see his conversion rate up in the 12 to 15, even 20% range before you even need to go start looking at adding additional traffic.
Because that's just money sitting right there in front of you. When you start to look at that, how do we increase conversion? I would say two things to focus [00:03:30] on would be, what are my systems for turning a regular lead into a hot lead? So how am I following up and engaging in a conversation that causes people to say, "Holy cow, I want to have a conversation with you"? In this case, we have a sales team. And then the second thing would be actually the optimization of the sales process itself, so making sure that you have a really tight pipeline set up, and that you're really clear on: How quickly are we moving people through that pipeline?
Which of my salespeople are performing well? One good thing to look at is if he's got 20 [00:04:00] employees, there's probably four or five salespeople. I would say, what's the spread? What's your top conversion? What's the conversion rate for your top salesperson and your bottom salesperson? And what can you do to increase? A lot of times we look at maybe that as an average, but knowing what the bar ... You want your four-minute mile setters so that you can set the bar that other salespeople can aspire toward.
Dusey: So what does that look like? Just making sure that those top performers are sharing best practices? Maybe looking at systematizing the sales process?
Scott Martineau: All of [00:04:30] the above, yeah all of the above. Your job is to figure out what is going on. [inaudible 00:04:34] you're deconstructing, you're doing some reverse engineering there.
Scott Martineau: And it might mean that you're shadowing and having the lower performers sit on the calls with the higher performers and really trying to leverage what they're doing.
Clate Mask: Yes, so I think that's great advice from Scott. I wanted to take a little bit of a different approach because, Tim, in your question you say, "At what point should we shift focus to include an outbound component ... ?" to what you do. [00:05:00] So currently, you've got this inbound system that's working reasonably well, you're sending quality leads to your sales team. What I would caution you to do is it's not a shifting of focus, you're adding something.
You got a team that's working, you follow the suggestions that Scott made. But really, the question becomes: Well, at what point do you believe that you can create additional sales output, sales production by hiring [00:05:30] a new resource to focus on that component? Because what could happen, but I want you to avoid, is you have a thing working reasonably well right now, you take a person off of that, which is the normal thing to do, right? You're looking at your existing resources and you're like, "Okay, well Joe's maybe not doing great on this so we're going to move him off of the inbound and start on the outbound."
But in the process of doing that, it's likely to occur that your existing inbound function [00:06:00] will lose some steam and not perform at the level that you had planned, so your sales decline, you run into a problem. So I'd like you to think of it as not shifting focus, but adding a new thing, and the question becomes: When do you believe that adding that new resource that you're going to pay to do this outbound function will be additive to your sales outcome, or to your sales output? So just make sure you avoid the trap of borrowing from Peter to [00:06:30] pay Paul when the thing's working pretty well with Peter.
Dusey: And what I was thinking in my mind is that in order to know in that moment, is you've got to have a pretty good understanding of each step of the funnel, and how effective every piece of that puzzle is before you're really able to make that decision.
Clate Mask: That's right, and we've got a resource out there that you can go to that basically just helps people understand the funnel set-up. I think, Tim, you probably have already got something like this in place because you've got a few sales reps, but it's very, [00:07:00] very common for businesses run by the entrepreneur who's doing the sales herself, that now all of a sudden is hiring a salesperson and there's this new thing where you've gotta put a sales process in place, and a pipeline in place.
So we got a resource for you out there, it's called the Seven Sales Pipeline Stages Every Small Business Should Use, and that's something that you might want to take advantage of. Maybe, Tim, you've already got this in place, but probably a lot of our listeners are wanting to set this is, Dusey.
Dusey: Now, if you want to find that we set up a link to make it easy for you to get to. Its bit.ly/salespipelinestages. [00:07:30] That's bit.ly/salespipelinestages. That will take you to the article that walks through what we're talking about; that funnel within the sales process once some of these already started to come to you.
Scott Martineau: And he had one more thought about "expanding the channels that we're using to acquire customers." I would use as a rule of thumb that you should carve out about 10 to 15% of your total sales and marketing expenditures, and [00:08:00] dedicate that toward discovering new channels that you can use to acquire customers. To do this, you need to have awareness about what is it costing you a day to acquire a customer.
In the case of an inbound campaign, it's going to be primarily a sales cost, though there might be some additional fees that you're paying maybe to an SEO firm or something like that. And then the way I would think about that is focus on how can I invest those dollars with minimal investment to maximize my learning about what is going [00:08:30] to work. So I'm thinking about small tests. I don't need to go out and set up a year-long campaign with somebody.
Clate Mask: And let's apply that to this situation with Tim. What that would look like, Scott, is you're not going to go pay $50,000 a year to hire an employee that's gonna do the outbound work. That's way too much investment before you know if this is going to work, but you could do something like a contractor that you spend $1500 a month on part-time to learn and figure things [00:09:00] out.
You could do something like, a friend, or you could do something like you burning some midnight oil and doing it yourself for a little while before you go dedicate $50,000. So the principle you're describing, Scott, of test small, learn fast, figure out what works then invest in a program, is great. And I love your rule of thumb of 10 to 15% of the sales and marketing spend is experimental to find what you'll be going [00:09:30] to invest in and the future for growth.
Dusey: And like you mentioned earlier, Clate, be careful not to ruin the inbound processes you've already got going on. But a lot of times we think, "Well, let's dedicate this employee to this." Well, maybe just a small sliver of that employee's time could be a few test outbound calls as well. That principle of a small test first, I think is really important.
Scott Martineau: While we're on it, you might even say, "Hey, I'm going to actually go put a job posting up and have candidates take three ... " In a part of the job interview process, you're going to take three hours [00:10:00] doing outbound calls, and essentially you don't have to close the sale, we're going to train you on a very basic script, you're going to hand that off to one of our internal salespeople ... I'm making it up on the fly but point is, be creative, find low-cost ways to invest, and have as a very distinct goal that you're going to expand the channels so that you can continue to grow sales.
Clate Mask: Tim, great question. Thank you for submitting it. We're happy to talk about it and love when we got something concrete like this we can sink our teeth into. Thank you.
Dusey: Fantastic. [00:10:30] Anyone else out there who has questions for us, please send those to smallbusinesssuccess.com/questions. We've got a form there where you could now ask us whatever you want to know about running your small business and we'll help you out. So thank you everybody and we will see you all next week on the next episode of The Small Business Success podcast.