One of my least favorite prospecting metaphors is the sales funnel because it implies that, sooner or later, everything you put into it comes out eventually. Try thinking about your prospecting as a sieve instead.
The word “prospecting” derives from the concept of the old gold miners carefully sifting through riverbeds of silt looking for the right nugget of gold. It’s an apt metaphor for many reasons, the most important of which is the implication that you are seeking a defined target while willing to toss out low value rocks.
This means the key to success is determining the type of client you seek and proactively finding them in the market. If real estate success is founded on the three principles of location, location, and location, then the three principles of sales success are locating, locating, and locating. The problem for most salespeople and organizations is the false belief they are supposed to get every sale and, worse yet, treat all opportunities the same.
Some critical characteristics worth seeking in a valuable prospect include engagement, long-term potential, loyalty, on-time payment, volume, package consolidation, and fair margins.
Engagement means the level of interaction your client will have with you. There are builders and remodelers that see your company as nothing more than a delivery service. As a result, they place orders and expect you to accommodate their (sometimes irrational) expectations. Profits are greatly enhanced when you locate buyers who work with you to plan relationship protocols and allow you to manage your operational costs effectively.
Long-term potential is a critical trait for a prospective client. Yet many LBM dealers and salespeople invest abundant time with commercial projects, homeowners, condo associations, and other one-time purchasers. Project sales can be profitable, but do not provide a solid foundation of repeat business. The value of a sales opportunity should not be measured in the value of the price on an upcoming project, but instead on the long-term value of a relationship.
Loyalty is something that every salesperson wants, but feels is difficult to evaluate prior to the start of the relationship. To that, I suggest you listen and observe. Ask your prospects how long they have been buying from their various suppliers. Understand their past buying habits and you’ll have a window into their future behaviors.
On-time payment means exactly that. On time. In accordance with your standard terms. Salespeople frequently barter with their own employers on behalf of the customer to extend terms or create special payment options. This is a costly practice from an administrative standpoint and a risk escalator. Good prospecting practice means finding buyers who pay on time.
Volume is obviously a key characteristic, but should be considered according to your market and business model. Personally I always favored having many mid-size accounts rather than large volume buyers. They were more cooperative and profitable. More importantly, there is much less risk for your future if you have many small accounts rather than having your eggs in one basket.
Package consolidation refers to clients who will buy multiple products from you. In my recent three-part series for LBM Journal, “From product peddler to sales concierge,” I highlighted the power of a salesperson capable of facilitating the sale of numerous products to a single customer. The benefits are obvious.
The importance of Fair Margins seems so obvious that it isn’t worth mentioning. Yet many LBM dealers find themselves constantly struggling in negotiations with combative buyers. Create relationships with cooperative and compromising negotiators and your margins will rise.
If all this sounds too good to be true, it’s a sign you may not be prospecting enough. One thing is for sure, you’ll never know until you get out your sales sieve and start looking for better opportunities.