A formulaic approach to building a prospect list will help you decide quickly whether a new business has enough potential for growth.
Before investing in a new business, or expanding your current business into a new market, it helps to address several questions in order to gain a clear picture of the right business model to pursue. The first involves developing a well-tuned sense of your target customer. The second involves building a robust pipeline of customers.
As we’ve discovered during our own analysis of whether to build a new line of business, answering six questions will start you down the proper path:
What are our growth objectives for the new business? What can we realistically expect to achieve, in terms of revenue growth? What can we afford to invest, and how quickly, to ramp up the new business?
What depth and quality of pipeline do we need? Given our overall growth objectives, what should our pipeline goals be? How quickly do we need to get there?
Where can we best find potential customers? A professional services firm, for example, can tap into a number of sources for potential clients, such as former colleagues, other managers within current client companies, local executives, etc.
What approaches can we use to reach potential customers? How can we reach prospects when they are in a mood and position to buy? How can we become top-of-mind for them so that when they are ready to buy, they think of us first? In our case, we might be able to reach potential customers via marketing events, newsletters, lunches or dinners when we’re in town, or even the occasional e-mail.
Can we learn how to invest across approaches? When starting a new business, our goal is to learn what works best. Therefore we want to try many different approaches to the potential customer and carefully measure the investment required and success rate of each approach. Over time we expect to refine and solidify our formula for success.
How quickly can we ramp up our winning formula? Once we have learned best how to approach potential customers and build a quality customer pipeline, we must reassess the investment requirements for a quick ramp-up as well as the strain it will place on the organization. We want to bite off as much as we can chew when building a new business; no more, no less.
We have begun experimenting with a diverse set of customer approaches and are quickly learning what works. We have set a checkpoint in the next month to assess our results and learnings to date, and to decide whether we are confident enough in our formula for building a robust pipeline to proceed to the next step in building the new line of business.
What has been your experience in building a business? What successes and challenges did you experience when building your customer pipeline? What would you have done differently, knowing what you know now? Please let us know in the comments below or email us at firstname.lastname@example.org.
KARL STARK AND BILL STEWART are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark