For most companies finding new business is hard. So many things must fall into place to find a new client.
The research suggests that about 5% of a market is looking for a solution at any given time. So just by the law of averages, if you proactively approach people you will need to speak to 20 people to find one that needs your solution.
That’s a big enough challenge, but then there’s the issue of speaking to anyone. We have too much to do and we don’t believe what cold callers are telling us, so we’ve made it harder and harder to reach us. In 2020, 12-17% of outbound calls were answered by a person, today that number has dwindled to 3-4%.
When you multiply these effects together you can see why you must make a lot of cold calls to get anywhere. If on 4% of people pick up the phone, and then only 5% of those are in the market for your stuff, you need 500 calls just to find one opportunity.
Relationships are most important
The #1 thing that drives whether someone will talk to you is trust. Relationships bring with them trust. This kind of relationship trust can come in a few ways:
1. You know the person you are calling
2. You used to know the person you are calling but you lost touch
3. You have a mutual friend
4. You have a mutual background
Any of these circumstances greatly impact the probability of the other person connecting with you. In my experiments, I have found these kind of warm outreach efforts to be 3.25 times more effective than cold approaches (in terms of time usage—and many times more effective in terms of acceptance rates).
Finding relationships
Many businesses do not leverage their relationships, or they use them initially but then they get big enough that they need “to sell for real”, which translates into mass cold calling. But we all have many people we can reach through trusted relationships. Professor Robin Dunbar showed that humans can maintain 100-250 relationships (150 is a commonly used average.) The eye-opening thing about this number is that if we know 150 people and each of those people know 150 people, then we can reach 22,500 people through a trusted connection!
And this is not the only way to reach people in a trusted manner. If we share a common background (say a common school/college etc.) that also works way more effectively than cold outreach–even without a mutual friend.
Businesses that have been around a while tend to have goldmines of dormant relationships in their CRMs, billing systems and other contact lists. Many companies are not good at keeping up with people once they become an ex-customer. But these ex-customers took a leap of faith to trust the business at one time. Unless something went wrong with the service or product, these former clients are “low hanging fruit” to be warmed up again and turned into future customers.
Many businesses rely on cold outreach methods that are hard, and getting harder, when they are in fact sitting on relationships that could make their outreach efforts way more efficient. Prospecting for new business is hard. Why make it any harder?
Summary
- Cold outreach is getting harder every year. Businesses that rely on cold outreach methods will have to keep increasing the volume of their cold outreach just to stand still.
- Relationships bring with them trust. Trust is the #1 factor that determines whether someone will speak to you.
- We all have relationships, in fact on average we can get referrals to 22,500 people!
- If you’ve been in business a while, you could be sitting on a goldmine of relationships that just need to be warmed up again.