New Revenue Math
To make money and create wealth, businesses must drive predictable revenue growth at a flat or declining cost curve. Yet, while a few companies know how to achieve this on a consistent basis, many struggle to grow without a correspondingly increasing marketing and sales cost. That’s why the modern B2B seller needs new revenue math.
Why is it difficult for B2B sellers to predictably grow their revenues and do so without a corresponding high marketing and sales cost?
We will get to the reasons shortly, but first, let’s introduce the new revenue math for driving predictable revenue growth at a declining cost curve (PRG@DCC). That should be the goal for any business—predictable revenue growth attained at a declining cost curve.
Why it’s Hard to Generate Predictable Revenue Growth without New Revenue Math
Let’s start by understanding why predictable revenue growth is hard to achieve in the first place. There are at least four good reasons why:
- There are now more B2B Sellers than B2B Buyers
- Geographic boundaries no longer protect any firm from remote competition
- B2B Buyers are getting harder and harder to reach
- B2B buyers are far less brand loyal than ever before
Furthermore, each creates a situation that exacerbates the others, and the vicious cycle escalates like a cyclone.
More B2B Sellers than B2B Buyers
There are now some 233 million businesses worldwide. Of these, roughly 22% are B2B companies, which means there are roughly 51 million B2B companies worldwide.
To understand how this impacts B2B Sellers, think of the Fortune 5000 companies. Let’s assume that there are an average of 1,000 decision makers per Fortune 5,000 company. That means there are about five million decision makers worldwide.
If there are roughly 51 million B2B companies worldwide, then the ratio of Sellers to Buyers is about 10:1 That’s a lot of competition.
Now, you might say that you only compete with two or three companies, but that is mostly incorrect. If you are targeting Jane Doe who heads the marketing division in ABC Corp, then everyone who targets Jane Doe competes with you for her limited budget regardless of what you or they sell.
And that’s just the easy part to figure out. If you think about what competes for Jane Doe’s limited attention, then you have a big problem. You will have to include tens of thousands more consumer product vendors. After all Jane is a consumer too.
Geographic Boundaries are Mostly Irrelevant
You probably have heard of the saying “location, location, location”. It’s now mostly irrelevant, even for B2C companies. During the COVID lockdown, B2C firms had to go eCommerce and sell to anyone regardless of where they were located, if they wanted to survive.
Practically all goods today can be shipped to wherever the customers are. Even heavy manufactured goods such as lumber and steel beams can be shipped now to anywhere.
There are literally no B2B good or services that can be protected by physical boundaries. Your competitors can be anywhere in the world and compete with you in your backyard.
B2B Buyers are Getting Harder to Reach
With the alarming ratio of ten B2B Sellers for each B2B Buyer we saw, you can imagine how many calls, emails, and text messages B2B buyers receive each day. B2B buyers also happen to be consumers, and so, in addition to the vast amount of B2B spam they receive, they also get endless B2C spam calls, emails, and texts as well.
Do you blame them for hiding from all of the junk they get that adds no value to their day? You are also a B2B buyer, and you also receive similar junk all the time. You hide from that too.
And as long as we B2B Sellers continue to send out “Quick Question Jane” type of emails, Buyers will continue to hide. And they are getting really good at it.
But wait! It gets worse!
B2B Buyers are Less Brand Loyal than Before
A 2019 Accenture study showed that 80% of B2B buyers changed vendors within 24 months.
Today’s B2B Buyers are more sophisticated, more digitally savvy than ever before. Even after your best rep just spent months selling them one of your gizmos, they are back researching for a better alternative. After all, their incredibly powerful research tool (their mobile phone) is always with them wherever they go.
Your annual contracts protect you at most for a few months, not even the full year. As soon as they find something “better”, Buyers are working with the new vendor to find ways to replace your gizmo.
One more bad news and I will stop.
All of the above trends are getting worse because we, B2B Sellers, are part of the problem, not the solution. As Buyers get harder to reach, and as customers leave us for a competitor, all we seem to know how to do is try to spend our way out of the problem by hiring more people who will call more, and send out more emails and text messages.
We are making things worse by the day.
There must be a better way.
How B2B Sellers Can Drive Predictable Revenue Growth with New Revenue Math
Enough with the problems. Let’s get down to the solution.
First thing to remember is that B2B Buyers are in exactly the same situation, because they too for the most part are B2B Sellers. They too have customer churn problems. They also face huge competition.
Both Sellers and Buyers are spiraling out of control, caught in the same cyclone.
To slow down this cyclone and escape it, we must change our behavior—we need to stop being part of the problem.
For starters, we must adopt these simple, fundamental, and game-changing principles.
- Unless we deeply understand our Buyers, we cannot help them. All we do is make noise, and increase the size of the haystack from which these Buyers will have to search for their needle (their ideal solution).
- In order to deeply understand our Buyers, we have to laser-focus on them—we have to deeply understand their industry, how money is made, the trends of opportunities and challenges in that space; what they as decision makers do in their organization, what their responsibilities and goals are, what risks and challenges they face, how they are compensated…
- Once we deeply understand them, then we must put them first and show them how we can help address their challenges. It has to be all about them. Every email, every voicemail, every text message, every conversation has to add new value to them. Win trust and confidence first, then win their business.
- Make it easy for them to find us. They need to find the needle (you) in the haystack. That means a lot of very good SEO and a lot of hours spent crafting email subject lines and preview texts, voicemails, and text messages. Differentiate yourself not just from the ten other B2B companies you compete with, but also from the thousands of B2C companies that target your buyer.
These four changes are the foundation for the new revenue math: PRG@DCC
- Increase your sales pipeline by 10% and the quality of the pipeline by another 10% and you will see a 21% increase in sales at no additional cost.
- Increase each by 15% respectively and you will see a 32% increase in sales at no additional marketing or selling cost.
How B2B Sellers Can Control Costs with New Revenue Math, while Driving Predictable Revenue Growth
A very wise man called Peter Drucker once said, “The less an organization has to do to produce results, the better it does its job.” This is a profound observation that can fundamentally change the cost structure of any organization.
What Drucker is telling us is that results are found in the quality, not the quantity of what we do.
And yet, as we have lamented above, most B2B Sellers focus on the quantity of activities they produce. Activities are just another name for cost. When we increase the number of activities, it is almost a given that we also increase costs, but there is no reason to assume sales will grow as fast, let alone faster than the costs.
Nine simple initiatives to see a 21% increase in sales at no additional cost:
- Identify your Ideal Customer Profile (ICP) – forget meaningless “verticals” like manufacturing or healthcare. Each can be segmented into dozens or even hundreds of highly profitable ICPs.
- Make sure your CMO focuses all of her marketing budget and resources (email, social, advertising, event and other campaigns) on these few, highly targeted ICPs
- Make sure that your Sales Development team is focused on only these ICPs and that each SDR focuses on only one ICP and fully understands what’s going on in that ICP.
- Ensure that each SDR intimately knows the three personas for that ICP—the target role that needs the benefit derived from the solution you are selling, his or her boss who is the final decision maker, and the manager under your target role. Your SDR must clearly understand each persona: his or her role in the company, responsibility, top-of-mind concerns and pains, and how your solution can remove these.
But also:
- Ensure each SDR has no more than 100 accounts with the three personas at any given time so he or she can adequately reach out to each in order to connect with them. It is far better to call 300 people 10 times than 3,000 people once.
- Arm your SDRs with at least six (6) emails and voicemails per persona. Do not let them write their own emails or craft their own voicemails. That’s when your team becomes part of the problem. Have the emails and voicemails crafted for them professionally to use.
- Emails can be automatically sequenced, but calls must be made manually after researching the company and understanding what the company sells and to whom.
- Once your SDRs connect, they must talk at a high level to immediately prove to the prospect that your company is different, understands their challenges, and can really help them. Then, having earned permission, your SDR can ask a few questions to pre-qualify, and if appropriate, book the meeting for the Sales Rep.
- Use automated nurture emails to send high-value content to the prospect to keep her engaged, and have your SDR call to remind the prospect 48 hours before the meeting and then the day before the meeting. Each voicemail should add a new value, perhaps a quick customer story, or an interesting stat.
Change the size and quality of your pipeline
These nine fairly small initiatives will change the size and the quality of your pipeline—by at least 10% each. If you do that, you will see a 21% increase in sales from the pipeline developed.
But it is also very possible that you can increase the size and quality by 15%, or even 20%. In that case, you will see a 32% or 44% increase in sales respectively. You can do the math yourself and verify.
To summarize, improve the quality of your prospecting programs and see a dramatic increase in sales without any increase in your sales or marketing spend. That’s powerful. That’s the new revenue math for the modern B2B Seller.
About SOMAmetrics
SOMAmetrics builds and delivers solutions that drive predictable revenue growth at the lowest cost by dramatically improving our clients’ pipeline development operations.
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