Qualifying Leads to Long-Term Success

When you start out in business or sales in general you typically take any client that wants what you are selling. It doesn’t matter if they are profitable to you or not. You just want volume!

Unfortunately, that’s the way to failure in the long run. If you are not looking at your bottom line all the time for every client then you are not going to last long in business. Some sales people think that if they just make $1 on each sale they are okay. Heh, they aren’t losing money, right? But many times they are not thinking about their time, energy, and overhead.

What’s Your Overhead?

Yes, everyone has overhead, even if it’s not your company. You may be reimbursed for many of your expenses but not all. What about your gas? What about your auto wear and tear? Do you pay for tolls or parking? What about client meals? When you go to a function, even if it’s free, do you buy an extra drink, tip the valet? What about samples? The list goes on and on.

And that’s why it’s important to really understand how much you are making before you make a sale. It’s even okay to make $10 on a sale once in while if you can see big profits in the future or they are an amazing referral source. But if that’s what you do all the time then you need to be thinking about an alternative career.

I used to provide some pens for a local printer twice a year. I truly made $8.00 profit each time. I did it because he was a good referral source and friend. And when we went out to lunch he usually paid for the meal! Unless, of course, I just landed a new client from one of his referrals for a big project.

Sales Margins are Key

My new sales account manager is finally starting to understand this lesson. Not only about how important sales margins are but also how important qualifying a client is.

I was introduced to a new department at a long term client recently. I was excited to continue to grow our relationship with them. However, after the meeting I realized that we weren’t going to be a good fit.

In my initial discussion with her I mentioned that we are “idea people”. We take the headache of trying to find the right item to extend their brand for every event (she manages several of their annual events). Immediately she said that wouldn’t work for her. She loves to scour the internet for ideas and then bid out the ideas she’s come up with.

Help Your Client Understand the True Cost

I would truly love to know how much her hourly salary is. She thinks she’s saving her company money while she does something she enjoys – shopping online!

But if her employer was really paying attention they would see her hours of scouring in the long run is costing them so much more. So she bids out the ideas for the best price. Well, the minimal savings she may get will not cover the cost of her salary for those many online shopping hours.

And, if she is buying from one of the online “stores”, buyer beware! We had a client do just that to us recently. We provided a host of quotes and ideas and then they said they could find it less expensive online. My account manager was beside herself (and still is). She feels betrayed.

I explained to her that they would learn their lesson. As it turns out, they learned very quickly. The online pricing was incomplete so they actually ended up paying more (we learned from someone else within the department, and to top it off a good number of the items were received broken and the replacements didn’t arrive in time for their event.

Not All Clients Are a Good Fit

Are we knocking on their door to work with them? No. We want to work with people that value our experience, our creativity, and our relationships with our manufacturers. I know that we can get things done faster than most if necessary. I’ve been doing this a long time. I know who to call, who will make it happen. All on time, on budget, and with no breakage.

So, it’s okay to say no to a potential client if the fit isn’t right. It’s important for everyone to be comfortable and have a mutually beneficial relationship. I’m a for-profit business. My long term clients understand and respect that. They are too (even the non-profit organizations understand that).

I’m not going to gouge my clients but I can’t give it away either.

Years ago I was asked to participate in a reverse bid auction. I had never heard of it before. The client posted the exact item they wanted and then opened it up for everyone to post their bid online. As I watched I realized that each bid was getting lower as people fought to win the bid. The item they had chosen was very specific and only available from one manufacturer. I had a long talk with him about the pricing and if anyone got a “special” price from him. He assured me everyone got the same net price.

The final bid was below that price. The wining company won the opportunity to lose money.

Understand Your Bottom

Not long after I ran into the head of the marketing department for the company hosting the reverse auction. She told me how pleased she was with the process and that they would be continuing for the foreseeable future. I told her I wouldn’t be participating. She was shocked.

I explained that I didn’t want to work with a company that was encouraging companies to go out of business. Her response, “no I’m not, if they don’t know how to price it correctly it’s not my job to teach them.”

She is right about that, but sad that she still feels it is okay. The companies were competing for a chance to become a long term vendor. Figuring they’d make it up in the long run. Unfortunately, she wasn’t looking for a partner she was just looking for a cheap price.

So as you are developing your prospect pipeline make sure you also understand your personal parameters for client profitability and stick to them. It truly is one of the reasons I’ve stayed in business so long.

If a particular prospect turns out to not be a good fit, then move on. Because there are plenty of other buyers out there that will be. Just keep looking.