Getting your foundational revenue from your Rolodex is a great place to start. But this won’t sustain you in the long run.
I’ve seen businesses coast off referrals for years but, if you really need to scale revenue, that party has to end at some point. You’ve got to have a good answer to the question, “Then what?”
Let me tell you how this impacted a marketing communications agency founded by a troika of connected industry veterans. They’d started their own shop after tiring of seeing their leadership fail to adapt to market realities; they fled and brought along two top clients with them. For a while, all they needed was a small team of production executives to deliver service. Their client relationship roots were deep and they enjoyed a virtually invulnerable incumbency.
One of the partners had excellent sales skills. He was Rolodex selling at its best, building a number of relationships with very large potential clients over a period of many years.
Late one Friday he got a call from his top prospect. This prospect ran marketing communications for a large consulting firm and had an emergency situation. Her leadership team needed something done by Monday, but her primary provider had gone silent on her. Needless to say, the company worked through the weekend and delivered an excellent product. This led to a multi-year relationship that added close to $2M in additional annual revenue.
Then a smart decision was made. They hired an account executive to find another similar client. The new hire also had a fat Rolodex from a past job and quickly brought in another $1.5M to the top line. You would think that at $4.5M in revenue, the company would be secure.You would think that at $4.5M in revenue, the company would be secure. But let’s think about the numbers.
But let’s think about the numbers. Four clients made up 95% of company revenue. When major internal changes hit the client’s company, the business dried up. Scrambling to avoid disaster, the partners hired me to help replace that lost revenue.
It worked, but it took a couple of years; these were the realities of this industry’s sales cycle. It would have made more sense to start earlier, but nobody was feeling any urgency when the main clients were paying the overhead and providing a nice margin.
At this chapter in the company story, they really needed more than just one sales hunter to stabilize current and future revenue. But they remained on the precipice, not acquiring the skills to build this capability. This deficit became painfully clear when their largest client left and sent them into a tailspin.
Our outbound prospecting efforts diversified their account base. The company was sold in the nick of time—then collapsed on top of the new owners in less than a year when the two top sales people left. (This is the business weakness of having your revenue be talent-dependent.)
There was no real sales process, talent or capability to replace them. The sales staff worked on their own without any sort of reporting, coordination or structured pipeline management. Everybody just sort of wrote their own playbooks, with results consistent with what you would imagine.
A Rolodex Will Not Protect You from an Uncertain Future
I’ve seen this story unfold many a time: Companies have principals whose credentials are bombproof and whose networks are deep. They are recognized as leaders in their field for decades. And they successfully got their businesses off the ground by relying on close contacts to build their client base. The ones that got the “sales thing” often did a terrific job at networking.
But then they called us years after they should have started. Why? The same reason as the first company. They could pay the bills without much worry and didn’t look out into what is always an uncertain future. We were able to turn things around just enough in the first story. Others have bleaker endings: Clients in make-or-break situations have had to break off our engagements because we’re only four months into a 9-18 month sales cycle and they’re out of time and money.
Bottom line is that you’re going to need a more disciplined approach to mining opportunities in your pipeline and bringing new prospects into it. This is for two major reasons:
• You’re going to hit a plateau after the low-hanging fruit is picked clean. Actively tending and growing a robust pipeline is a full-time equivalent job. If you have the luxury of being a full-time schmoozer and closer—and never have to worry much about ops, financials, product/service delivery or long-term company strategy—have at it. You may find you can hit your revenue mark. But for companies with a bigger appetite for revenue, this won’t be sustainable.
• You don’t have time to work it properly. Effectively mining a pipeline—especially for reviving leads you forgot about or thought were dead ends—takes integration with a true sales system. Again, if you’ve got the time to turn over all these rocks, go for it. Otherwise, you may find yourself in the same situation as clients of ours who came to grips with the fact that they just didn’t have the bandwidth to find all the gold hidden in their decades of contacts.
A consultancy we engaged with recently offers a truly tier one methodology for helping their heavy industry clients solve seemingly intractable performance and profitability issues, among others.
They had engagements with multi-billion-dollar industry giants, some as long as 10 years ago. They ended up just handing the contact list to us, and as I write this, we’re in proposal stage with one of the biggest energy companies in the US—an opportunity that would remain buried had it been left on the principals’ plates.
Another recent example is a client with a terrific sales incentive management software solution. The owner had made contact with a senior executive at a major auto dealership, but was too swamped to follow up. So was his VP of sales. We grabbed the contact’s business card and jolted the dead lead into a not only a major viable opportunity, but a beachhead on a whole new vertical.
The Bad Fix: Hiring Another Rolodex
This is a different flavor of the “sales hunter” trap we described in a previous article. While a sales hunter will be charged with prospecting and selling, this mistake involves bringing on a “walking Rolodex” in a quasi-partner capacity to keep the inside-track opportunities coming.
But there are a few issues here: For one, if your Rolodex knows so many people, why are they coming to you for a job? Secondly, this person will eventually run into the same wall as other principals: They won’t have anywhere to go after they burn through their list of buddies. Generally, these additions don’t or can’t do the hard work of building a real sales process or researching fresh opportunities in the industry.This advice is also for those who demand bigger and better: Unless you’re a guru with a massive media audience and a self-running inbound machine, your contact list will not provide the fuel you need to get there.
The same execution gap still exists. This may even be a problem for small/medium-sized business owners who are running a “lifestyle business” and don’t mind if they putt along with modest, but stable, revenue every year. But obsolescence cycles and disruption means even the lifestyle businesses won’t survive without a stream of fresh clients.
This advice is also for those who demand bigger and better: Unless you’re a guru with a massive media audience and a self-running inbound machine, your contact list will not provide the fuel you need to get there.
Whether you’re aiming for next-level revenue or just want to keep your “lifestyle business” humming along, that Rolodex is going to give out sooner or later—and you better have something in place before it’s too late.