Start-ups should focus on winning back lost leads.
For startups, measuring foregone potential revenue is even more important than calculating revenue growth or profits.
George Deeb, managing partner at Chicago-based Red Rocket Ventures and author of the book “101 Lessons for Startups,” posed a thought-provoking question in Forbes: Startups typically close only 20% of their potential customers and miss out on the remaining 80%. What if the startup managed to capture another 10% of the missed group? Then the startup’s revenue would increase by up to 50%.
“Forgiveness, therefore, becomes a more important metric than the profits or revenue growth a startup achieves,” George Deeb asserts.
In fact, there are many reasons why startups lose potential revenue. Some reasons originate from the startup itself, such as the product, price, sales and marketing policies… are not attractive enough to customers. Some other reasons may be related to the purchasing company, such as changes in costs, purchase time; or the employee sent to purchase is not the person with the authority to make the final decision…
If it is not an objective reason from both sides, it is very possible that the personnel involved in the buying and selling process are having problems. For example, the start-up's sales staff do not have enough knowledge and need further training; the start-up's staff and the buyer have problems with each other... Sometimes, other external reasons can also affect the effectiveness of the transaction, such as the competitor suddenly offering a more attractive price that the start-up cannot react to, causing customers to lean towards the competitor.
George Deeb stressed that founders need to find out the exact reason why each potential deal fell through, then carefully document it in a report and come up with contingency plans for similar situations in the future. According to this investor, startups can ask questions directly to the buyer and founders will be surprised at the amount of information they can collect, if they are truly open-minded and know how to ask the right questions.
Focusing on missing revenue opportunities is the process by which startups find ways to save costs, optimize production processes, and improve product and service quality. At the same time, startups can also build better relationships with customers, thereby minimizing the risk of losing revenue in the future.
“In business, there are many factors that you cannot control. So, what you can control and measure, try to do well, so that more and more potential customers will turn from saying 'no' to saying 'yes'. My advice is to focus on the 80% of potential customers that are missed, instead of paying attention to the 20% that are achieved,” George Deeb advised founders.
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