Articles
Billable Hours vs. Business Development
Richard Grant, Bullfrey Ltd.
I've always found that it's not very difficult to get salespeople to contact potential clients. It's what they do. But what happens when the people in your organisation responsible for bringing in new business are fee-earners, not salespeople. Inevitably the paid work - billable hours, always comes first, to the detriment of prospecting for new business.
“I didn't phone those people who came to our seminar the other day because I have to put in some more hours on the suchandsuch project.”
“I know I was supposed to spend 10 hours on business development this month, but I didn't see the point when we're so busy with project work. Why bother, we're busy right now anyway, and those 10 hours earned the company £1000 instead of being wasted”.
It's frustrating! You know that without new clients your business is at best going to stagnate, and at worst decline. How you can you make them get it?
Well, logical people need a logical argument. So here goes.
How much is each prospect in your target market worth? Have you ever thought about that question before? I'm not talking about what they're worth personally if they buy, I'm talking about the average value of a prospect.
Let me explain. Let's say that there are 1000 potential buyers in your target market.
Based on what you know about your current clients from this market, they spend on average £10,000 on a project, about once a year. Typically you retain a client for at least 5 years.
So the lifetime value of each of your clients in this market is £10,000 x 5 = £50,000.
Let's try setting a goal for the year. We want to get 10 new clients. This would mean £100,000 for the business in the first year, and the lifetime value of these clients would be £500,000.
Out of your pool of 1000 potential clients, each and every one (based on your goal of 10 new clients) is worth £500.
Based on your tracking of previous business development performance, (you do track this don't you?), you know that for every 5 prospects that you manage to meet with face-to-face, you sign one of them up as a client.
When you're trying to set up these face to face meetings, you know that out of every 5 people who have been referred to you / called in / are leads generated by marketing, who you talk to on the phone, only one has a potential project that they would like to talk about in a face-to-face meeting.
OK, that was fun, and I'm sure you're disputing those numbers, so please feel free to cross them out and replace them with your own; it's your figures that are more important! I've even created a calculator to help you do it – click here for the prospect valuation calculator.Now let's move on to the persuasive part.
What we've done here is defined your sales funnel ratio projection. In order to get one new client you need to meet face-to-face with 5 potential clients. To meet with those 5 potential clients, you need to make 25 phone calls. 1:5:25. (For those of you with a voice in their head right now that's saying “It's not as simple as that”, please read my article “Sales is not a numbers game”).
Earlier, we said that each new client you bring in has a lifetime value of £50,000.
Therefore the value to you of each face-to-face meeting you had on the way to getting that client, is 1/5 of that – i.e. £10,000. Is it worth going to those meetings now? Even an unsuccessful meeting is worth £10,000!
Each phone call that you made to set up those meetings is worth £50,000 / 25 calls, i.e. £2000 each. Assuming those phone calls take 20 minutes each, you'd be making £6000 per hour for the company by making them. How does that compare with the £100 per hour on billable work?
You can keep playing this game for your marketing as well. Is it worth spending the time to get 30 people along to a seminar? Is it worth sending out all those marketing letters?
So there you have it. No more excuses. Go and call those prospective clients right away!
Did you find this article useful? Why not talk to Richard Grant at Bullfrey Ltd about your numbers?
Back to full listing of articles
