How To Limit Sales Risk

Written by on September 7, 2016 / Case Study

You face a huge amount of sales risk and you’re probably not ever aware of it. This article highlights the three types of sales risk you must address now.

Most people hate to think about risk. Human nature forces us to focus on the good things vs. the bad things that can happen. It is no different in sales. When we attract one great lead and close the deal, we think about the hundreds of other leads that will come to us the same way. Having only one way to attract leads is risky but that is only one type of risk most sales professionals and business leaders face.

There are three areas of strategic sales risk.  It doesn’t matter if you are a sales pro or an entrepreneur, if you want to build a book of business that enables you to make a great living and live a great life ® you must embrace diversity in your lead generation mix.

I’m not talking about ethnic, racial or other sociological factors.  I’m talking about diversity in the form of revenue and how that revenue is produced.  You must incorporate diversity into your sales plan, in the way you deal with clients, employees and marketing tactics.

Let’s take a look at each of these and formulate a plan for addressing the risk associated with them.

Client Mix

It is tempting to work with a few clients as possible.  After all, it is easier to invest your time and attention in a handful of clients.  The prevailing belief is:  Direct attention from you will result in a deep relationship and enhanced client lifetime value.

In reality, diversifying your client base is the key to long-term growth.  You need to spread your revenue over as many different clients as possible.  The ideal number for maximum amount of business from one client, I order to mitigate risk, is somewhere between 10 and 20% of your total revenue.

While some businesses will always be subject to economic fluctuation, maintaining healthy client diversity will protect you from much of that fluctuation.

Employee Mix

As your business grows you will need to hire additional people to help you sell.  These folks should be responsible for the bulk of the revenue generation in your business.  If you want to grow, your team should be able to deliver 80-90% of the sales necessary to make your budget.

You will always need to sell but your goal should be to replicate yourself. This will help mitigate the risk of personal illness, your focus needed in another area or simply allow you to take a vacation.

Lead Generation System Mix

Businesses – particularly entrepreneurial businesses – are often dependent on one form of media for attracting their clients.  The Internet and search engine optimization are a perfect example of this.  Many businesses invest their entire budget in this area and the minute a change is made to a search algorithm, their client flow is stifled.

The rule of thumb I provide my clients is the rule of 10%.  This means your clients should come from at least 10 different sources, with no one source making up more than 10% of your client attraction methodology.

Here is the marketing mix from one of my prosperous clients:

Percentage of Revenue Last Year by Media

  • Search Engine Optimization – 9%
  • Trade Journal Advertorial – 4%
  • Direct Mail to Referral Sources – 8%
  • Email Newsletter – 3%
  • Client Direct Referral – 10%
  • Referrals from Bankers and CPAs – 10%
  • Networking Group 1 – 7%
  • Networking Group 2 – 8%
  • Charitable Group Leadership – 6%
  • Internet Advertising (ad words) – 5%
  • Banner ad on industry website – 3%
  • Printed newsletter – 2%
  • Direct mail to cold lists – 2%
  • Speaking engagement referrals – 5%
  • Social media direct referral – 4%
  • Personal networking group (created by client) – 10%
  • Business originated by staff – 4%

A few things stand out:

First:  The number of different marketing methods is impressive.  This particular business has one person who is dedicated to managing lead generation activities and that person handles execution for about one third of the initiatives listed above.  The remaining 2/3 is executed by outside contractors and freelancers.

Second:  The person in charge of lead generation and sales in the above scenario is the CEO of this firm.  He oversees the work and approves all client correspondence and interaction but he rarely executes any of the day-to-day activity.

Finally:  It took three years of continuous improvement to get the system to this level.  When I started working with this client 80% of his business came from two sources.

What Does This Mean for You?

Your business must constantly work to diversify all activity.  Putting all your eggs in one basket has never been a good strategy.  Set up your systems.  Then hire people to manage those systems.

If you are an individual sales professional you may think this doesn’t apply to you. Not true. You must have your own lead generation activity separate and apart from your company. If you want clients knocking on your door and calling on the phone, start developing your own lead generation systems. They help you eliminate cold calling and they position you as an expert in your field.

Here are three more articles to help you eliminate the sales risk facing your business:

Ten Ideas To Help You Attract New Clients

Here are ten great ideas to help you boost sales.

How to Become a Sales Superstar

You know you want to. Go for it. Become a sales superstar.

For Questions You Must Answer to Be Great At Sales

Are you destine for greatness? Answer these questions and find out.