How many prospects do I need in my pipeline?


Q and A by C.J. HaydenWhile the exact number of prospects each independent professional needs in his or her pipeline will vary, there are several useful guidelines that can help you compute this number for yourself. First of all, you need to determine how many new clients you want to land each month. If your business typically works with multiple small clients or projects simultaneously, you will need more clients than someone who serves only one large client at a time.

A useful way to consider this question is to find the ratio between the amount of your average sale and your gross revenue target for the year. Let’s say you are a life coach who charges your clients $225 to get started, and $300 per month. if a typical client works with you for six months, then your average sale would be $225 + (6 x $300) = $2025. If you want to gross $60,000 this year from coaching, you’ll need to land a total of 30 clients. Spread equally throughout the 12 months of the year, that means you’ll need 2.5 new clients each month.

On the other hand, if you are a management consultant, and a typical project would take about 100 hours at a rate of $150 per hour, your average sale would be $15,000. To gross $60,000 this year from consulting, you would only need a total of 4 clients. Spread equally throughout the year, you would only need .33 new clients each month (one new client every three months).

A third type of business model might be to offer public seminars. If your typical seminar costs $297, and you want to gross $60,000 this year just from seminars, you’ll need to sign up 202 students per year. If you offer your seminar monthly, you’ll need 17 new students per month.

Once you know how many new clients you need on a monthly basis, you can use that number to estimate how many prospects you need in your pipeline. The best formula to make this determination depends on the style of marketing you are using.

If you are primarily marketing to people one-to-one, for example, you follow up with your prospects individually through a series of phone calls and personal letters or emails, then present your services to them in a live meeting or phone call, use the “One-to-One Marketing” guidelines. If you are primarily marketing to people en masse, for example, you are following up by sending direct mail pieces and email broadcasts, and presenting your services only via your website or marketing collateral, use the “One-to-Many Marketing” guidelines. Use the formulas below to calculate the number of prospects you need in your pipeline.

ONE-TO-ONE MARKETING

Desired number of new clients per month
times Number of presentations needed per sale
equals Number of presentations

times Number of prospects needed per presentation
equals Number of prospects needed

Example

Desired number of new clients per month: 2
times Number of presentations needed per sale: 3
equals Number of presentations: 6

times Number of prospects needed per presentation: 10
equals Number of prospects needed: 60

Definitions

Number of presentations per sale = This is the number of prospects you must present to in order to get one sale. A presentation is defined as giving full details about your service, and asking for their business. Don’t confuse presentations with follow-up conversations, which might happen before or after a presentation. You are counting people, not conversations. If you don’t know what this number is for you, assume 3 until you learn otherwise. As you get better at qualifying and presenting, you may be able to reduce this number to 2 or lower.

Number of presentations = Number of new clients multiplied by number of presentations per sale. This is the number of presentations you must make each month to reach your sales goal.

Number of prospects per presentation = This is the number of people you must make contact with to set up one presentation. If you don’t know what this number is, assume 10. “Making contact” can take a wide variety of forms — it doesn’t necessarily mean a one-to-one conversation. For example, if you give a talk to an audience of 30 people in your target market, you might expect that 1 in 10, or 3, of them would turn into presentations. As with presenting, you may be able to reduce this 10 to 1 ratio as your prospecting skills improve.

Number of prospects needed = Number of presentations multiplied by number of prospects per presentation. This is the number of people you must contact (or who must contact you) each month to meet your new client goal. These don’t necessarily need to be new people every month. As long as someone remains a viable prospect, you can count them in your prospect total for every month that you re-contact them in some way.

ONE-TO-MANY MARKETING

Desired number of new clients per month
divided by Conversion rate
equals Number of prospects needed

Example

Desired number of new clients per month: 15
divided by Conversion rate: 1%
equals Number of prospects needed: 1500

Definitions

Conversion rate = This is the percentage of people who receive your direct mail piece or email broadcast, or who visit your website, who ultimately become clients. If you don’t know what this number is for you, assume 1% until you learn otherwise. As you get better at writing compelling copy and targeting the right markets, you may be able to increase this rate to 2% or higher.

Number of prospects needed = Number of new clients divided by your conversion rate. This is the number of people you must reach (or who must reach you) each month to meet your new client goal. These don’t necessarily need to be new people every month. As long as someone remains a viable prospect, you can count them in your prospect total for every month that you reach them in some way.

As you can see, there is a significant difference in the number of prospects needed when you use one-to-many marketing vs. one-to-one marketing. There is also a substantial difference between the numbers needed when you have a low average sale vs. a high average sale. I often find that professionals believe they have approached “lots of people” without seeing enough results, without realizing the kind of numbers that are really required for their business model or the type of marketing they are using.

When you are using one-to-one marketing, it often takes 30 conversations to get one client, even if you are doing everything right. So you shouldn’t give up on the simple strategy of talking to people because you think it’s not working. It may just be that you haven’t talked to enough people yet.

When you are using one-to-many marketing, it often takes 100 mail pieces or broadcast emails to get one client, again, even if you are doing everything right. So you need to factor those numbers into your marketing plans from the outset.

The most accurate way to calculate the number of prospects you need is to track your own results over time. For example, some one-to-one marketers become good enough at defining their target market that they find one out of every 5 people they reach to be interested in a presentation. Others become so good at converting presentations to sales that they land 1 out of every 2. So for a person whose ratios are that good, they would only need 10 prospects per client instead of 30. But your ratios can also be worse than average when you have an ill-defined target market, a service that isn’t positioned well, or inadequate follow-up or sales skills.

I find the 30-to-1 ratio for one-to-one marketing, and the 100-to-1 ratio for one-to-many marketing to be fairly valid assumptions for most people to begin with until they are able to calculate their own ratios. It helps you determine not only how many prospects you need to be reaching out to (as most people underestimate this), but also can reassure you that you are on the right track even if most of your prospects don’t buy on the first approach.

Related Topics

View more answers by this author or in related categories.




Reader Comments

Want to comment? Email us!