Are you trying to decide whether or not you would like to engage with a sales and marketing vendor? Are you considering hiring a telemarketer, hiring a social media manager or hiring a sales rep? Maybe you are trying to figure out when you might need more technical resources to support your sales pipeline. These are all great ideas – if you have the resources to do it and you understand when it makes sense to do so.

Sales and marketing isn’t magic. It’s math. Most of the time, if you take care of the top of the funnel, the bottom of the funnel does what it’s supposed to. The problem? If you’re doing the wrong things, or you’re doing things that aren’t sustainable, your sales and marketing investment will be the thing that delays your growth instead of accelerating it. If you understand the metrics that matter, you can make better sales and marketing investments.

Cash on hand

There are no guarantees in sales and marketing. Anyone who tells you different is selling you something. There is no one tool, one company, or one amazing employee that can predict how the market will respond to your marketing efforts. The only thing you can count on is this: whether it works or not, you’re still going to have to pay for services. You can’t count on them working quickly, or working at all. Marketing best practices can be followed to the letter – that doesn’t guarantee that they will work. Exhibit A: Covid-19. Nobody could have predicted a pandemic that shut down the country.

With this in mind, your first KPI is cash. In my early 30s, I wanted a tattoo from a famous artist named Paul Booth. I went for a consultation and learned that he charged upwards of 300 dollars an hour. I wanted a full sleeve, which was quoted to be about 30 hours of work. I went home to consider my choices (and I had time – he has a three year wait list). Friends with tattoos advised me to put my name on the wait list, and start saving my money. Why? You don’t start your full sleeve tattoo without knowing you can pay for the whole thing. Otherwise, you may end up sporting half of a tattoo for the rest of your life.

You don’t know what the future holds – nobody does. That advice is solid, and it applies here. Until you can absolutely afford to pay for a sales asset or a marketing partnership that doesn’t work out the way you want it to, you should not be investing in those things. Your first metric to manage is cash. Have six months of the amount you’ll need on hand, free and clear, before you sign a contract or run a job ad. And be prepared to lose it without losing sleep – your sales rep won’t close business day one.

Your marketing vendor will need to do dozens of things before they’ve contacted even one prospect for you. This is a pretty easy metric to manage – monthly cost of a service or an employee times 6. And remember – profit first. (Check out Mike M’s book “Profit First” to better understand this concept.) Don’t steal from your future to pay for maybes.

Cost per acquisition

So, you’ve got some money in the bank. Now what?

Before you spend that cash, understand how much you spend right now to win one new customer. If you don’t know how much it costs you to win a new client, you’ll never know if your new marketing investment is paying off.

The math is rather simple, even if you’re not a numbers person. Look at 2019. How many new customers did you sign? Now look at anything you spent to acquire those customers. Do you spend 50 percent of your time selling? Fifty percent of your salary should be included in this number. Do you use special software? Did you buy sales lists? Did you sponsor events, or attend networking functions? Wrap your company cars? Those expenses count, too.

Did you pay referral fees? End direct mail? Buy lunches? Print brochures? Redo your website? All of those expenses are included in the amount you paid to win new business last year. Take that number, divide it by the number of deals you closed. That’s a simple way to identify how much it costs you to sign one new client right now.

Want to dig deeper? Start looking at what kinds of accounts close faster, and what sales and marketing activities provided your highest rate of return, so that you can point your cannon at the place where it will make the most impact, fastest – join us on Thursday August 20th for an interactive webinar.

Conversion rates

Right now, you should be able to log into your CRM or PSA and pull a report that identifies all of your activity for the previous year. The numbers you want to look at are:

  • How many activities, on average, did it take to sign one client?
  • How many activities in each stage of your sales funnel are necessary? (Do you call 500 companies to get one sales appointment? Do you meet with three prospects before you close a new deal?)

Work backwards from the growth you want to determine the activities you will need to complete to get there. If you want 10 new clients in 2021, and you know that you need to meet with three prospects to win one deal, you need to go on 30 sales appointments next year. If you need to make 300 dials to get a sales appointment, you need to make 9000 dials next year. If one person can make 100 calls per day, that’s 24,500 calls annually. That’s more than you need, so now you know you can structure your sales team around a half time caller.

These numbers are important. Once you understand your KPIs, you can understand if your potential new hire will be a good fit (they don’t like cold calling, and you know you need at least 20 hours of it weekly) or if your marketing partner is selling you a bill of goods. When you know how much activity it takes to win new business, you also know that a quarter of that activity at 5x your usual CPA isn’t a good deal.

Understand your KPIs, then make good investments in people and services that can help you achieve your goals – profitably.

Photo: beeboys / Shutterstock

Carrie Simpson

Posted by Carrie Simpson

Carrie Simpson is the founder of Managed Sales Pros, a lead generation firm dedicated to providing new business opportunities for MSPs. Carrie teaches IT firms how to build, manage, and grow their sales pipelines. You can follow Carrie on Twitter @sales_pros and connect with her on LinkedIn. 

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