I want to share some information for agency owners and new business leaders this week. I’ve written previously about how meet your annual sales goals, but I want to share it in a format that makes it easy for you to apply to what you are doing right now. This is the basic math of agency new business. You should be able to put it into practice immediately to help you reach your year-end targets.
Here’s what you will need:
- Your annual goals (how much new business do you want to bring in this year; how much more revenue do you need to generate?)
- The average value of an account (though it varies, assign a value to how much you might expect to gain from a new account)
- The length of your agency’s new business cycle (from the time a lead emerges on your radar to the time that you close it, how much time passes, on average?)
- The percent of targeted prospects with whom you are able to connect and have a conversation of substance
- The number of touches it takes for you to connect with a prospect to have a conversation of substance (how many calls and emails are necessary, on average?)
- The percent of targeted prospects who are ultimately sales-qualified and present an opportunity (requires a conversation of substance; use qualification questions to determine if a lead is a genuine opportunity for your agency)
- Your agency’s win-rate (of all of your sales-qualified opportunities, how many do you close?)
Tip: If you absolutely don’t have this information, you can ballpark it, but use caution; agencies often under-estimate the length of their new business cycle and the number of touches required, while overestimating their win-rates.
How to do the math of agency new business
For the purposes of this post, I will use placeholder figures as follows:
- Annual goal (new revenue): $800,000
- Average value of account: $230,000 (average)
- Your agency’s win-rate: 30% (for every 10 sales-qualified opportunities, you close three)
- Conversation rate per targeted prospects: 25% (for every 100 targets, you have conversations of substance with 25 of them)
- Percent of targeted prospects who are sales-qualified and have an opportunity: 50% (of those 25 conversations of substance, half are potentially viable candidates)
- The length of your agency’s new business cycle: 14 months (average)
- The number of touches to connect for a conversation of substance: 8 (average)
Working backwards from your win-rate, it is possible to ballpark how many new connections and touches you need to make to reach your annual goals for closed new business.
A. Annual goal ($800,000) / Average value of account ($230,000)
= 3.5; rounds up to 4, so your target is to close four new accounts.
B. To close four accounts with a 30% win-rate, you need to have sales discussions with at least 14 sales-qualified leads with genuine opportunities for your agency.
C. If you only engage in substantive conversations with 25% of your target prospects, and only half of those 25% are sales-qualified and have a genuine potential opportunity for your agency, you need to reach out to 112 targeted prospects. (112 targets x .25 = 28) and (28 ÷ 2 = 14).
TIP: We typically reach out to multiple decision-makers at each relevant prospect company. So if we identify 112 targeted prospect companies, we might create a list of 350 target contacts. Make sure that your messaging is adjusted to resonate with the role you are writing to.
D. If you need to connect with 350 contacts on your prospect list, and it takes you an average of 8 touches to reach someone for an initial conversation, that assumes roughly 2,800 touches.
TIP: Don’t forget to factor in appropriate timing for your touches. If you try to make all of your calls and emails in an unreasonable amount of time, you will not get the same results as someone who exercises good judgment about their cadence when reaching out.
You might reach out to a contact once a week, alternating between email and phone. At some point, you may be asked to circle back in six months (because that’s when they will be revisiting their marketing budget, etc.). Such delays, in large part, account for the typically longer new business cycle. It is important to track your cycle because you may find that as the market switches gears towards project work, you may be closing greater volumes of new business faster (but with smaller budgets). This would mean you need to rework your new business math.
Using your new business math
With annual goals, you can determine your quarterly, monthly, and weekly targets for new contacts and touches. When reaching out to prospects, it’s best to move as quickly as possible while maintaining a respectful cadence. Unless you are asked to wait before circling back or told “no,” checking in persistently at regular intervals may mean you don’t miss an opportunity.
With a list of 350, you could spread your eight expected touches over two months, reaching out to each contact once per week, which works out to 70 touches a day. If you have a less-ambitious list of 100, you might complete all eight touches in one month with just 40 touches a day.
TIP: Lost an account unexpectedly? Use your math to determine how many more outreach activities you need to do in order to compensate.
As you approach the 14-month mark (or whatever your average new business cycle is) you will start to see your efforts come to fruition. Your agency may have better metrics than these, and changing circumstances may make it more or less favorable for your agency to close, but when you are dedicated to doing the front-end work consistently, it will yield back-end results in the form of closed new business.
What if you do the math and still don’t hit your targets? If you are using accurate numbers for your agency, you should. If you are doing the work to hit your benchmark outreach activities and you still aren’t hitting revenue targets, it’s an indication that something is wrong. Most likely, the problem is with your average numbers, lead targeting, qualification, or sales techniques. If that occurs, you should reach out to new business professional for some outside help.
Tip: If you don’t have someone to actively hold you accountable to your sales goals, you can do it yourself. Write down the number of touches (calls, emails, LinkedIn connections, etc.) you need to make each day to hit your weekly targets. Keep your plan visible and refer to it daily to stay on target. Share your goals with someone so you aren’t tempted to lower your bar. When you are behind on performance metrics, you can ramp up your front-end work (weekly new contacts and touches) to compensate.
With a long sales cycle, planning ahead is imperative for new business success. While you might get lucky and close new business in the next few months — especially if its project work — you are primarily building a strong foundation for 2020. By working through the new business math, you can reverse-engineer your sales targets to know exactly where you stand relative to your goals at any point in the year. This is an easy, common-sense way to stay focused on hitting your goals in a constantly-changing new business environment. Let us know how it works for you.