Why Startups Stumble - Avoiding the Fatal Five - #1 - Stop Obsessing About Leads - Innovest SME

Why Startups Stumble – Avoiding the Fatal Five – #1 – Stop Obsessing About Leads

I once knew a small business owner who was forever asking me for advice in growing his business. This is no problem, this is what I do. But here was one guy I never seemed actually to be able to assist.

Because from the way he always phrased his needs to me, he was quite clear what the problem was at his end, he was absolutely clear what he needed assistance with, and the problem was “leads”. He needed more of them. Lots more of them. He needed as many leads as he could possibly generate in order to maximize his sales at the end of the day.

Now, this approach, while it’s pretty easily to rationally walk yourself through the argument, sets off instant alarm bells to me.

“I am struggling with overall growth, so the solution is to continue running the same system, only faster”, reads like a recipe for small business disaster.

This mindset starts out by assuming that you have no control over how well you perform in converting those leads to actual sales. That conversion percentage is treated as a fixed number, so the only way to get more sales is to get more leads. Because Leads x conversion rate = sales.

When you look at the equation like that, you can see how focusing purely on lead metrics means you are deliberately factoring 50% of the equation beyond your control.

But in the REAL world, that conversion rate percentage is one of the most significant business metrics that you CAN specifically strategise to improve.

The means of improving conversion are of course as many and as varied as there are business contexts for it. Undertaking a systemic sales training programme, looking at how well you are meeting identified customer needs the entire way through their buyers journey, increasing the number of lead touch points, changing up your marketing effort, -all of this things in tandem with a huge array of similar tactics can variously impact your conversion rate.

So in fact, what we’ve really done is proven the lie that small business only has effective input into 50% of the sales equation. In fact you have input to 100% of the process.

In fact, while improved lead generation does not usually demand a much more sophisticated tactic than extra sales and marketing expenditure, focusing on metrics related to conversion will require you to drill much more deeply into your business operations, and ask a lot more meaningful questions.

The upshot is invariably that an emphasis on conversion rate leads to a far more sophisticated and complex strategic response for the small business owner who focuses their energies there, rather than on the much more unsophisticated mechanism of pure lead generation.

And again, from the same equation it’s easy to see that improving lead volume does not necessarily translate into extra sales (if your conversion rate drops), but if you’re improving conversion rate and maintaining exactly the same lead volume, then you are by definition still growing sales, and the efforts you made to improve that conversion rate should remain as a factor increasing the likelihood of every future sale from that day forward.

So, in the long run. I had a lot of good ideas for my friend about how he could increase his lead volume, but I told him I couldn’t assist. And then I told him why. And at the end of THAT conversation, we put together a plan that has seen him grow his business consistently and constantly for over five years running.

It is a mistake for small business owners chasing success to focus purely on lead volume.

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