Plenty of scams over the years have wiped out massive amounts of personal wealth.
I have a distant family member who lost millions of dollars in the Stanford Ponzi scheme back in 2009. All total, Stanford took his clients for more than $7 billion dollars, forfeited $5.9 billion in personal (stolen) wealth, and ended up with a well-deserved 110 year prison sentence.
Lessons abound here, but I won't go into the obvious "too good to be true" nature of the promise of outsized market returns.
The lesson I want to focus on is diversification. So many victims of the scam gave Stanford their life savings. It was part of his scam. I assume his logic went like this: "it's hard enough to find a mark for a scam, might as well take 'em for everything they have." As for the victims, they were compelled by greed to place all of their trust and money in the hands of someone promising impossible returns.
Had they diversified their investments - say, only gave Stanford 10% of their savings - they would've limited their downside. Hindsight is 20/20.
Diversification is an important aspect of your business, and in particular how you acquire clients and grow you firm.
Chances are pretty good that you have some diversification, but if you're not using outbound lead generation for your agency, then you're putting your firm at risk.
In this article, I'll tell you:
- What outbound lead gen is
- Why your agency should incorporate some amount of mechanical, outbound lead generation into your marketing mix
- Why referrals aren't enough to fuel your growth
- The implications of outbound lead gen
- And why mechanical channels are crucial to an exit
What Is Outbound Lead Gen For Agencies?
Let's start with a quick definition, just to make sure we're on the same page.
Outbound lead gen is when you initiate a communication and send it directly to a specific person.
This is opposed to inbound lead gen, whereby you create something, offer it up, and a few people take you up on the offer, but you have little to no control over it.
Outbound lead gen for agencies is the same as any form of traditional prospecting: you find someone who matches your ideal client profile, and send you them something. How you find them, what you say, and how you say it are all large questions, but this is how outbound lead gen could work for your firm.
And just to be clear, this is what happens before your sales process starts with the first client meeting.
Why Referrals Aren't Enough
If I could summarize the prevailing wisdom of new business development for agencies, I only need four simple words: "just do good work."
It certainly works for some firms. On the other hand, it's insufficient for others. Then there's all the firms in the middle, who do equally good work, but don't see the returns promised by just doing good work.
What explains the difference?
I think about the nature of referrals on several dimensions:
- How your industry is organized, and how tightly
- The network structures of your particular clients
- The influence and personality of your particular clients
- The likelihood that referrals are a primary means of identifying agency options
This is what people are missing when they say "just do good work." It's pretty clear that referrals are still the best lead source, and that many buyers of agency services prefer referrals to other channels. I'll give you that.
Here's a picture of the "just do good work" referral system:
The problem with doing great work as a singular strategy is that 1) your ability to deliver more work scales very slowly, or you'll lose quality, 2) you have very little control over what your clients say and who they interact with, and 3) the feedback loop is quite slow.
Referrals also tend to oscillate over time, leading to the cashflow and utilization rate rollercoaster. Compare that to a mechanical lead gen process - like a traditional prospecting approach, through email, LinkedIn, or other channels - where you exert more control over the inputs, and therefore the outputs:
Word of mouth has ups and downs, and will outpace your outbound lead generation efforts for months, or even years. But we play the long game around here.
Keep in mind that referrals are still the best form of lead gen, assuming that you're already playing in the right market. If that's the case, you can expect referrals to close at a higher rate, often for a higher amount, and certainly will trust you and hold you in higher esteem than other, colder forms of marketing. So it goes.
But outbound lead gen efforts give you things you can't have with a strictly referral-based approach to your business development strategy.
The Implications of Outbound Lead Gen
There are so many implications to a successful outbound lead gen strategy. Before I get into the details, let's look at two pictures. Here's how outbound lead gen works:
The main differences between outbound and a traditional referral approach are speed and scale. Which is to say...
Outbound lead gen for your agency is a totally mechanical process. Yes, there is art to your message, understanding your clients and where their problems lie, and targeting the right people at the right time. None of that is free, nor is it inevitable that you'll get it right. But if you do, you completely own the process, and control the amount of input. The promise of the book Predictable Revenue is predicated on the aspiration that, once you know your numbers, you can dial up or dial down your outbound machine as needed.
I've found it to be far less exact than that, but much more reliable than, say, the wait or hope approach to business development.
You'll also learn a lot faster with outbound. A thriving agency that services a dozen clients in a year may be lucky enough to receive two referrals from each client, or 24 total opportunities in a year. You can learn a lot from 24 sales opportunities, to be sure, but what if you were able to double that number? Or we can go more conservative and target just one meeting a month from outbound - an anemic result - but that alone would increase your pipeline by 50%. How much more would you learn under those circumstances?
And as you learn more, with learning comes scale. You learn not just what works and doesn't work in your sales process, with pricing and packaging, and with your messaging. But you also learn what happens when you reach new clients with new offers. Or reach more prospects. Or decide to double your prices. Or you try to hand off the sales process. Or supplement your outbound with advertising. The learning is unlimited. And as you learn, apply your improvements, and ramp up your outbound lead gen, your two channels start to look quite different over time:
Your word of mouth referrals will continue to increase linearly, and continue to be better prospects on average. But eventually your outbound, mechanical lead gen process will outpace your referrals by orders of magnitude. Like any new marketing initiative - your positioning strategy, running a podcast, publishing, whatever - it's going to take a while to be any good at it, let alone see results.
But here's the thing: once you start building more pipeline, you not only have opportunity to grow your firm, but the stakes of each sales interaction are much lower. You're more confident. You have more swagger. And you don't mind if you lose a deal, because many more are on the way.
Over time, you'll build in-house capabilities that become critical to your business strategy. Think of outbound prospecting and lead gen as a critical piece of your overall growth strategy and intellectual capital. If you can create more of the right clients in less time, you'll have a better chance of balancing the needs of your sales and hiring pipelines. It'll also you give you many more options for how to monetize the business.
And the last point. Exits are easier to come by and more profitable when you have a repeatable system in place. Now, you may have no desire to sell your agency. That's fine. Even without an exit in your future, having more control over client acquisition will be better for the business as a whole. But if you want the option of someday exiting the business, it'll be worth a lot more if it's less dependent on you.
From Referral-Only to Multi-Faceted
However you decide to run your firm, diversification is an important aspect of de-risking liability and planning for growth. Typically diversification is applied to delivery functions, not sales and marketing.
If I haven't convinced you by now to adopt a mechanical, outbound lead gen program in addition to referrals, then I give up. Almost.
One last try.
If you're currently pursuing a thought leadership strategy, or plan to, then outbound will pair nicely with your effort and multiply your impact. The hardest thing to solve in your outbound strategy is what's in it for the recipient. Having world-class content to offer is a good start. And the process of creating great content will help you understand the depth of your own knowledge, how to explain it, and what makes your insights compelling to clients.
If you'd like to get started with an outbound lead gen strategy for your agency, there are a few ways you can go about it.
One option is to outsource. You should expect to pay several thousand dollars per month, at a minimum, for competent help from a dedicated agency. Some will start with just LinkedIn lead gen (please don't do that), some will start with a multi-channel approach like LinkedIn and email, and others may require both outbound plus content creation (which is the best option, but also most expensive).
If you'd like to try it yourself, commit to a six month timeline, but a year is better. It helps to have someone in-house who can run and manage the project. There are a few different options you can use for your outbound strategy:
- Direct outreach with an offer
- Direct outreach with content
- Invitation to join your podcast as a guest
- Invitation to be part of your original research
- Invitation to speak at an event
- Channel and referral partnership offers
Now, you might not have a podcast. You might not be doing any research. You might not have any content. And you might be running any events.
Herein lies the problem. As I said previously in the article, you absolutely can run your direct outreach with an ask for someone to meet with you, but the volume will need to be high because conversions will be devastatingly low. Just know that going in.
Whatever you decide, I wish you luck, and if you decide to try it out, let me know what happens.
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