EP187: Prospecting Costs - Dollars Spent, Dollars Missed

The game isn't won with the buzzer shot. The game is won by endless hours of preparing for the buzzer shot. Chris and Susan dive deep into the often-overlooked topic of prospecting costs and return on investment (ROI). Chris's passion for the subject shines through as he challenges conventional thinking and emphasizes the importance of time as the ultimate business denominator. He reveals that traditional efficiency metrics like conversion rates and ratios have little to do with business success. Instead, he argues that prospecting is about maximizing the value of every hour and building a robust pipeline. Chris expertly breaks down prospecting ROI, highlighting the investment in time and the need to attribute pipeline growth back to conversations.

Throughout the episode, they share pro tips and emphasize the need for a strategic and holistic approach to prospecting beyond research and follow-ups. This engaging discussion is a must-listen for sales professionals looking to unlock the true potential of prospecting and boost their ROI. Join Chris and Susan for this episode, "Prospecting Costs and ROI: Dollars Spent, Dollars Missed."

Links from this episode:

Susan Finch on LinkedIn
Chris Beall on LinkedIn

Funnel Media Group
ConnectAndSell

 

Full episode transcript below:

Susan Finch (00:06):

Welcome to another session with the Market Dominance Guys, a program exploring all the high stakes, speed bumps and off-ramps of driving to the top of your market with our host Chris Beal from Connect and Sell, and Cory Frank from Branch 49. Hey everybody, Susan Finch here. I am sitting in for Corey Frank on Market Dominance. Guys, I'm with Chris Beal and he tossed out some topics that we are going to be tackling one by one. And the first one we will be covering is prospecting costs on return on investment, which means dollar spent, dollars missed. So Chris, let's just get right into these because I am really excited and I know you're excited because then I will stay off your case to record shows for a few weeks. 

Chris Beall (00:53):

I do have a few things going on, Susan, so let's be great. 

Chris Beall (00:59):

But this is one of my favorite topics. I'm kind of a fanatic about this and I keep finding myself thinking, oh, other people must think like this about prospecting, and then I get the same blank stares over and over, which it indicates to me maybe they don't. So what I find is when folks are thinking about prospecting, they're thinking about things like efficiency, like well, how many dials does it take to get a conversation? Or how many emails does it take to get somebody to open an email or to act on an email, or what's our conversion rate when people come to the website? So there's a lot of rates and ratios that go on, and to me, none of that has anything to do with business. The denominator in business is always time, right? So time is the thing you can't do anything about other than get as much out of it as you can possibly get out of it, right? 

Chris Beall (01:50):

Money, you can go get more money, you can get talent, you can have ideas. You might even wake up being creative one day. I highly advise just go back to sleep, but you can't really do anything about time. And the main thing is we have a whole show that's dedicated to this is time is overhead, so it's eating up your costs. It is the thing that just basically if you just sit around and do nothing, if you don't prospect, then you don't have a pipeline. If you don't have a pipeline, then you don't have future business. And if you don't have future business, then out in that future you don't have gross profit to cover your overhead and you will go out of business eventually or sell in a fire sale or whatever. So one part of prospecting is obvious, which is in as little time as possible, you need to build as much pipeline as possible. 

Chris Beall (02:39):

And pipeline built now is worth more to your business than pipeline built tomorrow. So going fast actually counts because of the nature of overhead. I think we used the phrase once. Overhead is like a race horse that you buy like a race horse that eats while you sleep. It's absorbing your bank account regardless. And Susan, you run a small business and you know the feel, right? This is why business owners act differently from agents. Agents never feel this the same way. Even CFOs don't feel it at the same level. So that's part of it. But with prospecting, there's another hideous cost that shows up, and this is multidimensional cost. That's like the worst of the worst and it's opportunity cost. So in the world that you can't quite see from in inside your own business, there are out there multiple competitors. There are competitors like you, and then there are folks just solving problems themselves. And then there's folks putting off solving problems, which gives time for a competitor like you to come in or for that person who thought maybe it was worth solving to go away and now that company won't even bother to solve that problem. So time is your enemy in this other dimension, which is the dimension of opportunity cost, and the I'm 

Susan Finch (04:02):

So, I'm so glad you brought that up. Oh my gosh, I was, the whole time you're talking about this, I was thinking constantly that silent behind the scenes in your sleep race against your competitors, which is where time, what are they doing? How are they handling it? Are they more efficient with their time than I'm being with my time? 

Chris Beall (04:20):

That's pretty much it. And so to me that says that prospecting return on investment, the investment is in time, how much you're getting per hour, and now you come down to, well, you got to break it down. It's not just per hour of the day, but it's per hour of prospecting capacity. So what is prospecting capacity? Well, it's somebody, a person generally doing something that raises the probability that within a fixed period of time or a known period of time or an average period of times, some other buddy, somebody out there in the world will engage and be willing to learn from you how you might be able to help them solve a problem that they have that they would pay for. So when you look at it that way, you're now down to a person in your organization. So that person is essentially being paid by the hour no matter how you pay them. 

Chris Beall (05:13):

You can always go back and divide it up and go, oh, it was so much per hour. In my case, as we well know, it's we what we call a burger flipper wage, but we have other wages we could be paid. So here we have this hour of this person's time has gone by, I call it a rep hour or prospecting hour. So how much pipeline did you build? Well, that's often treated as a big mystery like, oh, how could we possibly know? And the answer is, it's not that hard. You go to your C R M, you pull out the opportunities, you find out which opportunities were influenced by the actions of this person. So the easiest one is a conversation. Did a person on our team have a conversation with somebody and the customer's team that proceeded the opportunities close date? Why do I say close date instead of create date? 

Chris Beall (06:07):

Because opportunities get influenced not just to get created, but along the way there's a number of interactions that'll occur and everyone counts. So trying to figure out which ones count as a big mistake because then it's like, well, was it that conversation? Was this other conversation? Was it the you go crazy doing that stuff. What you want to know is in aggregate is the investment that I made in these people and whatever else I bought for them. So if they were working with us, maybe who knows, maybe they graced them with the opportunity to talk to many people an hour using connect and self. Or maybe there's some other thing, an ad budget or whatever that you spent. But whatever that stuff is, just go back from the opportunities backward in time and go back and find out what did you spend on that you paid for by the hour? 

Chris Beall (06:58):

That's people that influenced these opportunities. Now it's a simple matter of division, by the way, numbers that can be achieved, and I have a big long list of customers of ours who achieve these numbers. You can achieve numbers like $10,000 an hour of pipeline building. If your pipeline coverage then is say everybody says three to one, but say it's more realistically four or five to one. So say it's five to one, you're actually getting $2,000 an hour of future revenue out of that particular rep while they're prospecting. So now the question is, well, how much of their time are they spending prospecting? General answer, once you know that you could be getting $2,000 per prospecting hour, probably not enough, you probably undervalue their prospecting time because you've never put a dollar number on it. Multiply that 2000 an hour times your gross margin. So say you're running a gross margin of 70%, so now it's $1,400 an hour of opport. That's, this is opportunity cost by the way, because pipeline represents opportunity that you're giving up to somebody else to go out and win that business. So every hour spent prospecting is a valuable hour, more valuable generally than time spent. Closing. Closing is something that happens relatively naturally if you have enough in the pipeline, but I tell you for sure, deals that don't ever go into the pipeline, they don't ever close. Oh, wait a minute, they do. Somebody else closes them. 

Susan Finch (08:33):

You're right, you're right. People get so worried about the last piece of it all, or not the last, but the first closing, 

Chris Beall (08:40):

Right? 

Susan Finch (08:41):

Because we always want to keep going and keep closing on more things as we go along, but they get so focused on that that they forget that they have to keep replenishing and keep replenishing and revisiting and reconnecting and all the pieces. That all comes down to great conversations. 

Chris Beall (08:59):

None of it is of it. Easy is easy and very little of it happens at the end. That counts. You know what people are like though? We all highlight reels. Nobody has a video of Michael Jordan practicing dribbling with his eyes closed when he was in high school. That should be on a highlight reel. It's the shot made at the buzzer, and then we all go, well, that must be where the game is being played. Well, no, the rest of the game was being played both off the court and on the court, and almost none of it was the shot at the buzzer, right? You have to set stuff up and you prospecting is how we set stuff up. And unfortunately or fortunately, the thing I like about business, actually, I like competition a lot as some people who know me know that's somebody once said, that's why you can afford to be such a nice person, isn't it? Yes. 

Susan Finch (09:46):

We'll be back in a moment after a quick break. 

Susan Finch (09:58):

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Chris Beall (11:23):

Yes, because I'm actually out of my mind with regard to competitiveness. It's ok. I can afford it. Nice. But what I love about business is that the rules are simply the rules of nature and the law, and to some degree, social propriety, Elon Musk is demonstrating to us that perhaps that last one doesn't count at all and he's doing okay. Last I checked, he's made more than a hundred bucks. So it's really interesting when you think about what field you're playing on, it's a field that you are actually discovering while you're playing the game. You're discovering it by talking to people primarily. So prospecting does one more thing, which is really interesting, and that is it puts you in contact with the real world that you need to deal with and it puts your organization in contact. Literally the number of conversations you're having and the quality of those conversations times each other is going onto your balance sheet that's actually going in as goodwill. 

Chris Beall (12:28):

That's what goodwill actually means. It's like the folks, ultimately it's the market that will do business with you times your gross margin attenuated off into the future because of the cost of money and a bunch of other stuff that business people think about. But when you come right down to it, that's going on to your balance sheet. If you're having more conversations, you're actually becoming not just a better company in terms of your ability to do business. That is not just something that's going to be on your p and l, but it's actually going on your balance sheet as goodwill. You ever wonder what Goodwill is? It's all those folks that you've talked with that would do business with you preferentially to somebody else. 

Susan Finch (13:08):

I had an interesting thought about that too. I teach podcasting classes. You guys teach things you train, and the other piece of that goodwill, when we help somebody, when we, when we present the questions that come back, unless you're having those conversations with everybody, you would've never heard all these other perspectives too. 

Chris Beall (13:30):

Oh yeah, yeah, 

Susan Finch (13:31):

All the, I mean it's like, man, I wouldn't have even thought of that. And it's some unique situation, but suddenly it's applicable to many people, which adds to our value, which adds to our prospecting success because we have more to bring to them. So conversations, just because they don't end up in our CRM immediately, doesn't make them not valuable. 

Chris Beall (13:54):

And I think they should go in the CRM in the sense that we should be thinking about what we're doing, what we're influencing, but also about what we're learning and all this conversational AI out there is actually quite interesting in that regard. My new favorite thing is to get an email, which I get now from a conversational AI product. It's chorus. Yes. And it sends me an email synopsis. Every meeting that's had in the company, it takes me less than 30 seconds to read one of those. It would've taken 30 minutes to go to the meeting, and I can get about 90% of the meeting value out of those 30 seconds. And I don't have to go to an app to fetch it. They kindly send it to me as a summary in an email that if I want to click through and listen to, it's fine. 

Chris Beall (14:42):

I always say that it's the tone of voice, the cadence, the prody, all that stuff that makes a difference. But the fact is, once I know my reps, I know what their voice is. Like right now I'm trying to get 10 to, well, what's happening next? Do we actually have a next step? Is the next step one that I would anticipate? Or am I going to learn something new? Because some surprising next step shows up and it's amazing how good those summarizers are. Chat G P T showed it. It'll summarize anything you and I had. It summarized podcasts and it did a great job. Didn't make a great book, but made a book in two days, which saved a lot of time, 

Susan Finch (15:20):

But wasn't the point. That wasn't the point. 

Chris Beall (15:22):

Yeah, I know. I loved it when somebody called it a cheap cash grab. I'm going, so where's the cash? Yeah, so it's pretty interesting. But when I think about ROI for prospecting, the investment is the dollars you're spending for the people who are doing the prospecting and any tools and data that you provide them with. The R is in the pipeline. The pipeline needs to be attributed back to the conversations in order to connect the return to the eye. And the surprising route, which the value that comes to you in your pipeline is going to take, is the route that didn't go through a meeting. So we always think conversations lead to meetings, meetings lead to discovery meetings, discovery meetings, lead to demos, blah, blah, blah, whatever it is in your world as you're selling. But in fact, what really happens is conversations lead to somebody knowing that you're worth checking out. 

Chris Beall (16:15):

And it's so cheap now to check folks out. They're going to check you out. They're going to check your company out just during the conversation. If you want to be super extra brilliant in getting a high return on investment, instead of having your rep, just send them a follow-up email. By the way, most first conversations and follow-up conversations that are done through cold calling, they get zero email afterward. But it's the one email somebody will always open, thank you for our conversation of the day. And nobody bothers to send it, which I find shocking. It's like, well, they didn't take the meeting with me. They must not be interested. It's like, do you actually believe that their company might benefit from your solution and send them the email? But if you want to be super brilliant, here's like the pro tip to end all pro tips and that have the boss send the email. 

Chris Beall (17:04):

So set your automation up so when your SDR R or BDR has the conversation, an email comes from the boss with the personalization from the conversational AI that listened to the conversation and it has a subject matter, a line that says, thank you for speaking with my colleague today. Who's not going to open that? And you're a gracious boss. You're like a love your team kind of person, like Ucci or something. I mean, I don't know if you love your team like she does, but at least you're kind of on the board. And these things are straightforward to do with modern automation and they're not what's being done. What we tend to do is instead of having the conversation, we tell people to do a lot of research because that's easy. Also, there's two things that are easy. Following up is easy. That requires a little thought. 

Chris Beall (17:58):

Research is easy and requires no thinking whatsoever. You just look at one thing and look at another thing and look at another thing. Draw some conclusion about somebody. I'm going to talk to Chris Beal about Arizona State University because he went there. Go Sun Devils. Little did they know. Well, I also went to the University of Arizona. So go cats. I got a fight going on maybe between devils and cats. Do you want to be in here? I don't think so. Devils and cats altogether in the same brain. No. So don't talk to me about the devils and the cats, but you think you accomplished something with that research? If you just call me out of the blue and tell me that you've discovered a breakthrough about something I care about, I care about, maybe I'll give you a few minutes. So as we think about R O I, we need to really break it down. 

Chris Beall (18:48):

It's like what is that person doing? That starts with a conversation and ultimately leads to engagement where the engagement is expressed in the CRM as an opportunity. And by the way, don't just count the closed one. This is another huge mistake folks make in our OA at Eyeland. They go, oh, all that counts as the closed one really. Does your business run on magic? Is this Hogwarts? I mean, you don't get to wave a magic wand and make business come into being. You have to actually go find folks who are first of all, fundamentally qualified to buy your product. And secondly, in market now. Now only one 12th of your market's in market now. So 11 twelfths of the time, you have to fail anyway. So now you we're down to what are you going to do with the remaining 8.66%? Because that's all you got in this quarter. All you've got is one 12th of your market. So it's not a magic wand thing. It's actually got to talk to a whole bunch of folks. So it's so interesting to me when I talk to somebody who says, well, I'm a bottom line guard, or it's always a guy, by the way. Thank God it is. Say this, all I occur about is results. Really, you think if you pound your fist on the table long enough, something will happen, or hard enough, you fire enough people or whatever. 

Chris Beall (20:07):

I don't think it works like that. I think you actually, it's like being a, I'll go back to basketball. It's like being a John Wooden or something. You have to break it down. You have to break it down, and it's going to come down to a person doing something with the limited time they have. And you need to be able to go measure what happened looking backward from the opportunity to that thing that they did. And my guess is the best thing for them to do is to hold a conversation with somebody who might be worth engaging in your business. 

Susan Finch (20:38):

Fantastic. Chris, this was perfect. So we're wrapping up prospecting costs on return investment, dollars spent, dollars missed. I think you have told us all the ways we've been missing it. The way we're not thinking properly. Yeah. The way we need to rethink what it actually means and the value and importance of pipeline. Not closed deals. Not signed contracts. That isn't what keeps you going because once those are done, they're done. And you need to keep replenishing the pipeline. Connect and sell. Welcome to the end of dialing as you know it, connect and sell. Patented technology loads your best sales folks up with eight to 10 times more live qualified conversations every day. And when we say qualified, we're talking about really qualified, like knowing what kind of cheese they like on their impossible whopper kind of qualified. Learn more@connectandsell.com. Never miss an episode. Go to any of your favorite podcast venues and search for market dominance guys, or go to market dominance guys.com and subscribe.