A friend of mine started a new small business not too long ago and he recently approached me for some advice. I love working on businesses with entrepreneurs, so I was happy to sit with him while he gave me the rundown of what was going on with his new venture.
His business is in the asset recovery space, and the process goes something like this:
- Source leads over the internet by scouring hundreds of websites by hand. These leads are highly qualified and represent folks who have unknown assets held by county-level government.
- Contact the leads and get their permission to retrieve the assets in their name
- Take a percentage of the retrieved asset and turn the rest over to the customer
He had been running the business for about seven months, and in that time he had sourced 692 leads, 12 of which he was able to successfully contact. He returned assets to five of them, which generated a little over $14,000 in revenues for his fledgling company.
The 692 leads he had sourced had come from a small corner of a medium-sized U.S. state, and they would turn over (create fresh leads) annually. In other words, he had barely scratched the surface of a revenue pool that would regenerate every year.
My friend had managed to build the beginnings of a solid business that could give him what he yearned for – a six-figure, location-independent income.
He had a little bit of revenue, about $2K/month. Now he needed to boost it. If he was generating that much money by sourcing and reaching out to ~100 leads each month, how much revenue could he create by boosting that number to 1,000 leads per month? To 10,000? 100,000? If he increased the number of leads he was hitting, would revenues increase accordingly? It was time to find out.
To determine how we could scale up his system, I asked him to identify the slowest part of the process. Without hesitation he responded, “Contacting the leads.”
My friend doesn’t have strong computer skills, so he was sending letters to each contact by pasting their data into a Word form letter, printing the letter and the label, and dropping them in the mail.
To make matters worse, he decided early on that he wanted to use a Customer Relationship Management (CRM) tool to track his mailings, so before he sent out the letters he would create a record for the lead, then spend a lot of time doing data entry for each and every one.
It was slow. Painfully slow.
My first impulse was to suggest eliminating the CRM. If he was only sending one letter and hearing back from such a small number of leads, why use a costly, time-intensive CRM to manage the process? It was only slowing him down and wasn’t adding any value.
My second thought was to streamline the letter-sending process by either doing mail merges or by outsourcing it to a vendor who could do it much faster.
I didn’t do either. Instead, I asked him to go through his entire research and mailing process while I sat with him. We were fifteen minutes in when I pointed to something on his screen.
“What’s that?” I asked.
“That’s a phone number,” he replied.
“A phone number for the lead?”
“Yes,” he answered.
It turned out that in addition to street addresses, many of his leads also had phone numbers.
“Have you tried calling any of them?”
He paused for a moment. “Nope.”
Instead of contacting his leads using a method that would get him instantaneous feedback (Is it a dead number? Is it a voicemail box?) my friend had instead opted to collect addresses, print letters, stuff envelopes, lick stamps, and wait for weeks for a minuscule number of responses to his mailings.
Get to Revenue as Quickly as Possible
When experimenting with your startup, try the cheapest, fastest methods first. There’s no point in spending a boatload of time and money to coax a trickle of revenue if you can do it inexpensively and quickly.
To put it another way, my friend sent 692 letters to make 12 contacts, which turned into five “sales”. Could he make 692 phone calls instead and make the same five “sales”? If so, how much faster could he make 692 phone calls than send 692 letters?
The answer is: much, much, faster. Which means the same money in less time, or more money.
When I explained this to him he was resistant at first, because he thought a high percentage of the phone numbers would be junk. I conceded that many of the numbers would be garbage, but then I asked:
Which would be better, to make $14K in 7 months by sending 700 letters and waiting for responses, or to make the same $14K in a month by making 700 phone calls?
He committed to trying the phone for a month.
Note that I’m not suggesting that he take all the leads with dead phone numbers and throw them into the shredder. My point is that it’s faster to get the same results by using the phone. He was still leaving perfectly good leads on the floor by sending letters, he just didn’t know right away which addresses were garbage the same way he would with the phone numbers.
If he confirmed that the phone was indeed a quicker way to the same revenues, then he could scale and streamline that process to boost his revenues to five, ten, or twenty thousand dollars a month. At a later date he would then be able to circle back and grab the not-so-low-hanging fruit by contacting leads via email and snail mail.
The lesson: Try to get to revenue as quickly and cheaply as possible, and get rapid feedback on your product or service. Building complex processes that slow down your feedback loop or delay revenues are going to waste your time and energy, which is ultimately going to sap your will to continue experimenting with your business.