Have you read? Pre-sales-to-existing-or-past-customers A good resource for this article.
Many managers set quotas for their sales people that begin with, “I need you to deliver X number of leads this week.” While all leads are good, some leads are better than others. This week we will be talking about the difference between hot leads and cold leads in the two ways that matter most. Length of sales cycle, and likelihood of closing.
Lead is a term used to describe potential clients, and leads are frequently described as cold, warm, or hot. A cold lead is someone you have no relationship with, no introduction to, and no detailed information about. A hot lead is someone you have a relationship with or an introduction to, and some detailed information about. A warm lead falls in between a cold and hot lead, and often is the result of networking or a referral.
Warm leads are better than cold leads
Already we can see the hot leads are better than cold leads. But, how much better are they? The answer to that question requires examining the length of sales cycle and the likelihood of closing the deal. The sales cycle is the average amount of time it takes to close a client from initial contact to signed contract. For example, if a homeowner calls you on Monday and you sign papers on Friday, then your sales cycle for the client was five days. The likelihood of closing, or close rate, refers to the percentage of all leads that you convert into clients. If 10% of all leads convert to clients, then you have about a 10% likelihood of closing each client.
Returning to our question, how much better are hot leads than cold leads? The answer is it depends. Assuming that your sales team is experienced, intimately familiar with your trade, and knowledgeable about the Construction Industry as a whole – hot leads should have significantly shorter sales cycles and much higher likelihood of closing. Actual values for those two numbers will vary from company to company but, they are very easy to calculate so you should be able to use them yourself.
Useful formulas for tracking hot and cold leads
Sales cycle = the number of days spent converting a lead into a customer
Average sales cycle = the total number of days spent converting all leads / the total number of leads
Likelihood of closing = the number of closed leads / the total number of leads
Likelihood of closing hot leads = the number of closed hot leads / the total number of hot leads
Likelihood of closing cold leads = the number of closed cold leads / the total number of cold leads
Share your best practices for finding hot leads and closing more sales in our member forums, or tweet your questions at us @uniteTObuild! Stay tuned next month for a discussion of preseason marketing and good luck out there!
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