More Leads. More Salespeople. More Advertising. Still Not Enough Profit?
Picture this. It's Monday morning, and your sales manager walks into your office with a brilliant idea.
He wants more leads.
Apparently, your salespeople could close considerably more business if they had more qualified prospects to talk to. Your advertising agency agrees and has a proposal for a new campaign that promises to deliver exactly that.
Your sales manager also believes another salesperson or two would help. After all, if the company has more prospects, somebody has to sell them something.
Everyone seems enthusiastic, and everyone has a plan. Naturally, every plan requires more of your money.
You authorize the expenditures because you've built a successful company and understand that growth requires investment. Besides, these are experienced professionals, and their recommendations sound perfectly reasonable.
Six months later, your company has more inquiries, more appointments, and perhaps even more revenue. Your marketing agency presents an impressive report, and your sales manager assures you that things are headed in the right direction.
But when you examine your bottom line, something doesn't add up. You're spending considerably more money, yet your profits haven't increased nearly as much as you expected.
So you ask your advisors what they recommend next. Their answer? More leads, of course.
Sound familiar? After 40 years in marketing and sales, I've seen variations of this situation more times than I care to remember.
And I've learned that the problem isn't always a lack of leads, salespeople, or advertising. Sometimes the real problem is that nobody has correctly identified what's preventing the business from becoming more profitable.
What If You Already Have Enough Prospects?
Suppose your company receives 1,000 qualified inquiries annually and converts 20% of them into customers. That's 200 sales.
Your sales manager wants another 500 inquiries. At the same conversion rate, those additional prospects produce another 100 sales.
But what if you could increase your conversion rate from 20% to 30% without purchasing another lead? You'd produce the same additional 100 sales from the prospects you already attract.
Now, I'm not suggesting that improvements to your sales process are free or that every company can increase its conversion rate by 50%. But before you invest another quarter of a million dollars in advertising, wouldn't you want to know whether the greater opportunity exists in the prospects you already have?
Perhaps your salespeople fail to communicate why your product deserves its premium price. Perhaps your sales presentation emphasizes features that prospects don't particularly care about while it overlooks benefits they would gladly pay more to receive.
Or perhaps your company simply allows too many qualified prospects to disappear without an effective follow-up process. If that's the case, more advertising doesn't solve your problem. It simply gives you more opportunities to lose sales.
The Curse of Misplaced Cause
In my book, Persuade. Profit. Repeat., I discuss something I call The Curse of Misplaced Cause. It's what happens when you identify the wrong cause of a problem and devote substantial resources to a solution that cannot deliver the results you want.
Imagine your car won't start because the gas tank is empty. You replace the battery, install new tires, and hire the finest mechanic in town to inspect the transmission.
You can spend a fortune on repairs, but until somebody puts gasoline in the tank, that car isn't going anywhere. Yet I've seen the business equivalent happen repeatedly, often in companies led by exceptionally intelligent and successful people.
Consider a company whose salespeople consistently lose business to lower-priced competitors. Management concludes that its prices are too high and authorizes discounts to become more competitive.
But what if price isn't the real problem? What if prospects simply don't understand why the company's products or services are worth more?
Now the company has sacrificed profit margins without addressing the real reason customers choose someone else. You can execute the wrong solution brilliantly and still lose a fortune.
More Revenue Doesn't Necessarily Mean More Profit
Here's another problem I encounter far too often. Business owners receive reports that celebrate increases in inquiries, appointments, website traffic, and even revenue without a clear explanation of what those results contribute to profits.
Suppose your company invests another $250,000 in advertising and generates $300,000 in additional revenue. Your marketing agency calls the campaign a success, and your sales manager points to the additional sales as proof that the investment was worthwhile.
But suppose those sales produce a 40% contribution margin before the new advertising expense. That means the additional revenue contributes $120,000 toward the cost of the campaign.
You've spent $250,000 to produce $120,000 in contribution, leaving a $130,000 shortfall. You have more leads, more sales, and more revenue, but less profit.
And everyone wonders why you're not enthusiastic about the results. After all, the reports look impressive, and the numbers appear to move in the right direction.
I'm not suggesting that every advertising campaign must produce an immediate profit. Some investments create valuable customer relationships and future revenue. But those benefits need to be measured and justified, not simply assumed.
Your business doesn't exist to produce impressive marketing reports. It exists to produce profitable sales.
What If the Best Opportunity Is Already Inside Your Business?
If you've built a successful company, you probably have substantial resources at your disposal. You have customers, prospects, employees, established relationships, and a reputation that took years to develop.
The question is whether you're making the most profitable use of those assets. And if you're not, how much additional revenue and profit could those same resources produce?
Could a more persuasive sales argument increase the percentage of prospects who buy? Could a different approach to your existing customers produce more repeat business or additional purchases? Could better prospect selection help your salespeople devote more time to the opportunities most likely to generate substantial profits?
These aren't necessarily problems you solve with another advertising campaign or a larger sales department. They require a clear understanding of what actually limits your results and a strategy designed to address it.
After four decades in this business, I've learned that some of the most valuable opportunities aren't found in the next great marketing idea. They're found in the sales you should already be making, the customers who would gladly buy more, and the profits you never realize because nobody asks the right questions.
So before you approve another expensive proposal, I'd suggest you ask one question. Are we certain we need more leads, more salespeople, or more advertising? Or do we simply need to make more money from the opportunities we already have?
The answer could save you a substantial amount of money. More importantly, it could reveal a far more profitable way to grow your business.
Let's Find Out What's Really Limiting Your Profits
You've already built a successful business, but that doesn't mean you're capturing every profitable opportunity available to you. Sometimes a fresh perspective can reveal possibilities that another advertising campaign or additional salesperson never will.
At Conquest Marketing & Sales, we help successful business owners who sell high-value products and services identify overlooked opportunities and develop strategies that produce more profitable sales.
You know your business, and I bring 40 years of experience in marketing, sales, strategy, and persuasion. Let's find out what's really limiting your profits before you spend another fortune on something you may not need.
Let's Talk About Your Business →
Russell J. Martino is a marketing and sales strategist, direct-response copywriter, and author of Persuade. Profit. Repeat.