The Magic Metric - What's The One Metric That Matters Most To Independent B2B Consultants?
Most people simply measure whether they get new clients or not. It's impossible to make good decisions if that's the only thing you're tracking. Let's do a deep dive into the metrics that matter.
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Don’t begin hiring staff once you have more work than you can handle.
The reason for this is simple. It might be a lucky blip. You might be having a tremendous outlier month (or quarter). If we go back to my earnings in the first five years of consulting:
There are some huge swings from month to month. Sometimes we had 4x the amount of work we had the month before.
Now imagine what happens if you have a tremendous month (or quarter), hire staff to satisfy the increased demand, and then have a couple of regular months afterwards.
You’re going to wind up either laying off staff you just hired (tech companies in the post-pandemic era know this well) or paying staff to do non-essential activities. This is what’s known as low staff utilisation.
This is a challenge I faced circa 2016/2017. I grew the team to support additional work, but we suddenly lost two big clients and I found myself with staff who didn’t have much to do.
I had made the cardinal site of reacting to sudden increases in work instead of looking at the long-term trends and making a strategic decision.
Is It A Blip Or A Trend?
Did you just get lucky last month? Or are things improving in your favour?
This is why you need to measure not just the outcome but the antecedents of that outcome.
What other metrics are you observing that show this is a sustained increase in the quantity of work vs. a random lucky blip?
e.g. It’s one thing if the phone rings tomorrow and Microsoft want to hire you. That’s lady luck smiling upon you that month. It’s another thing entirely if you’re seeing growth throughout the sales pipeline. That’s your hard work paying off.
If you’re seeing growth throughout the entire pipeline then you might want to consider hiring staff to handle the sustained increase in work.
The One Thing That Keeps Me Up At Night
It all comes down to the sales pipeline
Ok, that’s an exaggeration. I sleep pretty well (if a cat lets me).
But the sales pipeline is the one thing I fret about the most.
Given the choice between signing a huge client or having a bulging sales pipeline, I’d pick the latter every time. The drier the sales pipeline, the more I worry. You want a sales pipeline awash with promising opportunities.
More than that - you want to know the pipeline is fuller than it was the previous year. You don’t just want to see the pipeline full - you want to know that it’s growing.
It’s only when you see long-term growth in the sales pipeline that you should begin hiring more staff. That’s when you can feel confident it’s not a blip - but instead a long-term improvement.
You Should Use A CRM
Without a CRM, it’s almost impossible to gain useful insights
We use Pipedrive (a client) as our CRM - but there are plenty of options out there. Whatever tool you use, it’s important to:
Commit to it. It can be a little fiddly to use but the insights are important. If you don’t commit to adding the data and keeping it up to date you won’t get much value from it.
Extract insights from it. Pipedrive, for example, lets us compare our sales pipeline data year on year to determine if it has increased or not. It also gives us conversion ratios which makes the process more predictable over time. We know for example what % of prospects at each stage of the journey we usually convert.
This gives us data to make decisions such as:
Are our marketing efforts working?
Have we improved our ability to convert interested prospects into clients?
Are we experiencing long-term growth?
The answers to these kinds of questions will explain the right approach to use.
Breaking Down The Sales Pipeline
If I look at the sales pipeline right now:
It’s not as healthy as it usually is - but that largely reflects the Christmas period (writing this on Jan 31). There is a 2 to 3 month-lag.
Everyone has their own approach to the sales pipeline - often involving stages like (lead qualification, meeting, proposal, negotiation, deal won/lost).
That works fine - but it didn’t match our sales process. Our pipeline probably isn’t ideal but it closely matches how I think about the process.
We have six stages:
Expression of interest. Has the organisation expressed a specific wish to work with us either in person or through our contact form? (exclude organisations which aren’t in your ICP from this).
Discovery (pre-estimate). Have we had our first meeting with the prospect to gather the information we need to make an approximate cost estimate?
Discovery (post-estimate). Have we provided a rough cost estimate and did the client say that was within the right ballpark to work with? The difference between a client giving the green light on the rough estimate and not is huge.
Proposal sent. Have we sent the full proposal to the client?
Proposal agreed. Has the proposal been agreed by the key decision-maker?
Have we sent the contract? Or been sent a contract?
The final step is simply clicking the won/loss button.
Typically prospects move slowly through the early stages and quicker through the latter stages. In the latter stages, once the proposal has been agreed, no one wants to wait around to begin the project. That’s why it’s common to have five to eight prospects in the early stages and few, if any, in the last two stages.
Whatever your preferences for the sales pipeline, the critical thing is you have one and you have a CRM which lets you measure it.
The Most Important Metric
What Is A Consultant’s ‘Getting On Base’ Question?
If the sales pipeline is awash with promising prospects, that’s a good thing. But it doesn’t tell you whether it’s a blip or a trend. Again, you might just be having a good month.
So the the best measurement is to compare the sales pipeline year on year. If you see a significant increase, then you might want to hire more people. If you don’t, then don’t. And if you see a decline, then you need to consider changing your strategy or approach.
But there are six stages of the sales process - should you measure all of them? No.
If I had to boil down everything into a single metric I care most about it’s this:
YoY-EoI: Year on year no. of expressions of interest organisations which match our ICPs (ideal client profile)
In short, are more of our target clients contacting us about potential work projects than last year?
That’s it. That’s the ‘getting on base’ question.
More than any other metric - that’s the one I care most about. If that metric has risen significantly in the past year - then it’s probably time to hire more people.
Why not just EoI? Well, a typical EoI per month charge looks like this:
Because we’re only using integers, the data set is small, and there’s a lot of variability it isn’t always easy to see the long-term trends. One or two extra EoIs can skew data significantly as we see above.
This is why at the very least we want to use a 3-month average to account for monthly variability. This shows a similar, but cleaner, chart below:
This evens things out a little and we can see some clearer trends. Overall, we can see that things seemed to be growing until the tech space went through turmoil and now things seem to be getting back to where they are.
(aside - technically we should be using a bar chart for this - but this is easier to make a point for now).
However, when we look at this on year on year basis - we can see we’re still below where we were a year ago. On this basis, it’s too soon to bring in additional staff or predict long-term growth.
What Drives The YoY-EoI?
What Other Metrics Might You Pay Attention To?
The number of expressions of interest you receive? Two factors are most important.
The quality of your marketing efforts. This covers all the content you create, meetings you host, direct connections you make etc…You should be seeing increased reach, connections, and overall engagement with what you create. Be careful not to optimise for engagement at the expense of EoIs. It’s easy to get more reach by being controversial or frivolous - but that won’t lead to more EoIs.
The growth of your sector. The size of your sector will play as big a role in the number of prospects you attract as anything else. If you hold everything else even and your sector grows, you grow too (albeit larger sectors tend to attract more competitors).
All this means is if you want to go a step further back and see if you expect your EoIs will increase, you can simply look at the rate of growth in your followers, subscribers, and similar metrics (note: look at rate of growth not absolute growth).
This means other metrics you might want to consider include average 3-month YoY difference in:
Reach and awareness. If reach is declining on my primary client acquisition platform - that could be a concern. If it’s growing, you should see EoI-YoY increase. If not, you’re probably optimising your marketing efforts in the wrong channels. A good example for me was search traffic. We invested heavily in it over the years but realised it tended to attract poorer quality traffic.
Rate of growth in new mailing list subscribers. Unlike most reach metrics, this typically does correlate with EoI-YoY. If the number of subscribers you attract each month is growing, it usually leads to EoI-YoY growth.
Client satisfaction surveys. At the end of every project, you should ask a client to complete a satisfaction survey or testimonial. The number of testimonials/no. projects or the scores in the satisfaction survey are very important to know.
% of revenue from past clients. The % of revenue you gain from past clients is key to growing a successful practice. If your past clients aren’t coming back when they need help in the future, you’re going to find it extremely hard to build a sustainable practice.
The funny thing is once you start correlating EoIs with activities you undertake, you realise that it’s rarely the social media activities which have any impact.
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Thanks for reading,
Thanks, Richard, for these insights.