Your incubation period is important
What’s your incubation period? That is, how fast can you sell a client? I’ve helped a lot of clients figure out where to price their stuff based essentially on how fast you get to the decision maker and get the purchase order. One step further, can you believe I’ve even reverse-engineered entire operational costs, hires, employee numbers, and everything that spawns off that from doing some speed tests on the time from initial meeting (cold or hot) to close.
I remember specifically one client had built a software for sharing and editing documents, one that seemed to be taking a strong foothold among attorneys. It makes sense, have you ever seen a document markup between lawyers on a case? It looks like a red pen exploded. So, his software allowed for docs and markups in real time online. Anyhow, the pricing model when we met was a “per seat” cost, meaning that there was a monthly fee for each attorney in the firm, regardless how big the firm was. My client figured that the larger the firm, the better the client, the easier the close, and the more money per close. I agreed with at least the last part, but not necessarily the former ones.
How LONG does it take? Regardless of how you get your lead, whether they’re word of mouth, or you reach them via telephone, or you use online ads, practically any business can sit back and come up with a general answer for this question in regards to client acquisition. Are you trying to go top down (attack the large players first, and the smaller ones will eventually follow) or the other way around (start with the low-lying fruit, go for volume, and the bigger guys will eventually take notice)? Sometimes, your business already dictates that you must go in one direction or another, but generally, this question exists in some form for every business. Large volume sales, lower cost or low volume sales at high margins. Usually, doing some math based on speed can help you determine which way to go.
Back to my client, I asked him about the larger firms that he was trying to target locally to start. How many partners did these firms typically have? Over ten. What is their protocol for making firm-wide tech decisions? They make them in partner meetings. How often do they have partner meetings? Quarterly. How do they vet the software they’re about to buy? They have an in-house tech guy. How many lawyers are in these firms? Twenty to fifty. How many firms do you have the capacity for your sales staff to manage in a pipeline? Thirty or so.
I then asked him some questions about smaller law firms. One to two partners. Firm decisions are made at any time of relevance because they are just two-man decisions. Way less diligence on software testing, if any. Three or four lawyers total. Initial meeting to close within a month. His sales staff could handle a larger volume.
So, we used all these metrics to, frankly, figure out which route was going to make his firm the most money. I’m not saying that the answer is always the smaller, faster close, no way, in fact very often it’s the very opposite. Another client of mine is selling five-figure software with a three-month incubation, but it’s WAY more profitable than trying to sell at volume. In my old firm, Emochila, we used to sell SaaS clients at $70/month for an entire accounting firm. People always used to ask us, why don’t you go for the BIGGER firms and sell them for a grand or more a month? The answer is – we tried that, and after trying to convince nine partners it was the right software, trying to convince a tech guy that it was a great compliment to the company and that we weren’t trying to outsource his job, doing training webinars whence one of the partners would always have to cut out on in the last minute, and proving to their legal team we were compliant, we just couldn’t price it high enough to NOT go for small firms. One close on that model took us a month, and we were selling ten new clients a day at $70. And then we built our entire firm accordingly.
It’s the need for speed.