Market sizing is often done with a degree of rigour, but far less rigour is applied to the task of sizing your own sales funnel. The proposition that “there is plenty out there” might be true, but sizing is not just about working out if the market can support you.
You need to ask yourself, “How much market do I need?”
To be a small player in a big market is as frustrating as it is unprofitable – but being No. 1 generates its own awareness.
What you really need is to choose a market small enough – not big enough – to win.
Identify how many customers you can properly serve
Determine what share you need to be dominant
Divide your target customer base by your target market share to determine the number of businesses in your ideal market size
Once you’ve done this, your sales and marketing planning must centre on sustainable marketing effectiveness for a market of just this number of businesses.
If targeting this tightly sits uncomfortably with you, then perhaps you need to reconcile yourself to being the happy chimp rather than the wealthy gorilla!
How to make money from failure
Sales and marketing teams are geared towards success, but it’s how they handle failure that will make them rich.
When a buyer leaks from your funnel, putting a recontact note in Outlook might be good housekeeping, but simply making the entry has zero effect on your buyers. And how do you know how many will leak?
Here’s a typical progression from initial interest to sale, recognising that it takes time for buyers to progress, and that some will leak at each stage:
In the table above you can see that buyers took one quarter to make each progression, and that 300 buyers failed on the first attempted progression, 100 on our second, 25 on our third and fourth, and 33 on our fifth progression.
There are two big conclusions from this:
Given that 483 out of 500 buyers will leak at some point and be recycled at least once, doesn’t it make sense to have a proper recycling program?
Shouldn’t we have some idea of the effect of recycling before we plan a demand generation campaign?
How to size your resource load
A face-to-face sales call is the preferred and most successful method of making a sale. But because it is also the most expensive tactic, you should use it where it will have maximum effect.
You will need to consider carefully where to use face-to-face meetings and where to use some other tactic. You will also need to build a funnel that has the right number of buyers progressing – too many and you will not act on all enquiries which wastes resources and dilutes your effectiveness in future because prospects will be sceptical of your ability to engage
And too few will create a hungry sales force competing for the same prospects.
Let’s put some numbers to this:
Consider how many leads you intend passing to Sales (remember that Sales won’t accept all of your leads).
Divide this by the number of sales people.
Multiply this “leads per sales person” number by the number of meetings that will be required per opportunity to take it through to closure (won or lost).
Compare this “required meetings per sales person” number with the actual number of meetings they have to offer this campaign (given they have existing customers and other duties).
If your required inventory (of meetings) and available inventory don’t align, go back to the drawing board.
How many leads do you need per campaign?
Trying to calculate the number of leads is a valid pursuit, but it’s also a trap.
Your campaigns need to be built with two factors in mind:
Buyers need time to progress
Your tactics need to be repeated several times to have effect – “one-hit-wonders” rarely do the job.
Here’s what Marketing needs to do to contribute strongly to sales revenue, and properly determine its contribution in numbers of leads:
Build a simple model (see progression above) that shows how buyers progress through each stage in their journey.
Add all the “leaked” buyers back into the funnel and re-run your model.
Decide how much of the total revenue (and therefore how many sales) Marketing is to contribute.
Adjust your top-of-funnel number until the “customer” numbers suggest you will deliver Marketing’s required contribution to your revenue goals.
Decide which point in this journey you consider to be a “marketing-qualified lead” for the purposes of campaign design.
This model will provide you with two key pieces of data for your campaign design:
How many leads you need
How many buyers for whom you need to know the contact details
Before you try to over-deliver, you need to move into reality. Back-of-the-envelope calculations might look easy, but they usually get lost in the mail.
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