Outbound Prospecting Unit Economics (How to Build a Commission Only Sales Team)

Nick Kozmin

Transcript

Alrighty. So in this video, I'm going to explain and go through the outbound prospecting inside sales funnel, explain when to use it, how to use it, why it's so powerful. And hopefully I can save you a ton of time and and help you guys. I did a video on the paid traffic inside sales funnel, economics, where I walked through all of the the different steps. And when it makes sense and what you got to watch out for, and I got some great feedback and I had some people email me back and say, Hey, Nick, can you do one on the outbound prospecting inside sales funnel? So yes, I will. So first let's define this outbound prospecting inside sales funnel. So what is outbound prospecting? What is it? So essentially it's the process of doing some sort of cold outreach. So either a cold emails, cold calls, cold LinkedIn messages, cold scented letters, whatever the heck you want to send it's, you're sending a message that's called you're knocking on someone's door, and then you're pitching them over the phone.

So you're not paying for traffic. You're not doing content marketing. You're not doing events. You're not doing speaking of arrangements, whatever you're, you're just going out and you're spearing people and then you're demoing them or pitching them over the phone. And you're closing business over the phone. So why is this so, so powerful? Well when I was 20 years old, I learned how to, I was a top door to door salesperson for this company called Canadian property stars. And there was, I was number one out of 400 sales reps. And the guy that was running at Ben Stewart was making so much money. He had this imagine an army of door to door commission, only sales reps going out every single day for 12 hours a day, knocking on doors and bringing bringing money back. And when I was 20 years old, I just thought this was just how business was done.

Right. I was just like, why is, Oh, okay. So I just learned how to do business. You go out and knock on doors and you make sales and you deliver whatever you sold. Right. and it wasn't until later when I figured out that not a lot of people knew how to do that. And I realized how powerful it was or how powerful that skill was when you applied into other markets. So why is it so powerful? It's B a, the first reason is it's basically free. You just need to, the, the only energy expense is your or the only expenses, your energy and your time. It doesn't take money to do outbound prospecting. So you can test offers really, really quickly. You can make sales really, really quickly. If you're ever up against the wall and you need to pay bills, you can just go out and knock some doors and make some money if you have this skill.

And also it scales really nicely. If you have a team who's who can do this. And I watched, when I was 20 years old, I watched Ben operate this 400 person sales team commission, only sales team. And I watched the guy make 50 grand a day. And so it is really powerful if you learn how to harness it and you learn how to build a team around it. So let's walk through the the economics of a outbound prospecting inside sales, inside sales funnels. So first things first, you're going to have to get some contacts, right? So you're going to have to do your research. You might have to buy contacts. You might have to buy information and or you can just scrape it. There's tools out there that allow you to scrape emails for free. You can use LinkedIn, right? Linkedin premium is like 29 bucks or something like that.

So usually it's not too expensive to get the contact data. So the next step is you're going to be sending a cold message. This is so, so, so, so, so important. And most people mess this up. They don't know how to write cold messages, that spark, that prospect's attention. They don't know how to hit the nerve and get, and get a response. So first things first, so you have to figure out, you have to find the data. Then you have to send a cold message. And we're looking at a 2% demo booking rate or appointment booking rate. So if you send a hundred emails, you shouldn't be able to get at least two appointments. Now we've been able to get like 7% in the in sales process. I yell when some of our clients we've been able to really push the limits and do this.

And, and it's really interesting what we're doing, but on average, you should be getting at least a 2% demo booking rate. Okay? So with this, you can see here that the only expense is the cost per lead cost. It doesn't cost you very much. It's essentially free. Yeah. Getting a demo. So the show up rate is like 65%. It's a little bit lower than pay traffic because it is cold. And the close rate is usually the same. It's around 20 to 25%. So obviously if you're just selling by yourself, you can bring in customers, you know, it's the cost to acquire customers like nothing, right? If you're the founder, you're the CEO and you're just doing this or you're commission-based salesperson. And you're just doing this. The cost to acquire a customer is very, very low. So let's take a look at this model for the outbound prospecting.

So let's say you're doing this at scale. You're a CEO and you're hiring end-to-end salespeople. And they're so end to end means they're going out and they're sourcing their own contacts. They're generating their own appointments. And they're closing their own deals. What you can pay is about 30, 20 to 30% of the gross contribution. Okay. So let's talk, let's pretend that you're selling something for like $10,000. Okay. And you're selling something that's upfront and you're paying a sales person $3,000 to close a deal for you. So that's pretty standard. So if a sales person comes in and closes the deal, they make three grand. And yeah, the return on the return on your marketing is outstanding. You're not really spending much to do this. So outbound prospecting is super, super, super, super effective if you know how to do it, and it's pretty straight forward.

Now, how does let's talk about an end to end sales. This is like the Holy grail of operating a sales team. So what is end to end sales? Essentially, you're hiring commission only sales people to go out and line up their own opportunities and close deals over the phone and just go out and, and, and, and hunt. Right. that is obviously really, really powerful. So let's talk about how to make that happen because most companies would love this, but they don't understand how to actually implement as a sales team like this. So first things first, we need to make sure that what you're selling makes an outside sales team the economics make sense. So minimum for an outside sale. It's like eight to $10,000. Okay. That's the key. So outside sales, like an end to end sales team, won't really work.

If the ticket price is less than eight to $10,000, and the reason is doing this generating appointments can take, like they're doing like two a day, right? And their, their close rate is 20%. So they might be closing one every two one every two days, or maybe they're doing like two a week on average, they can an end to end salesperson can do like two to three deals a week. If they're selling something for like $3,000, right. Or even, let's say $2,000. And they're making like 20%, they're only an end to end salesperson. Even if they sell like three deals a week, they're only making $1,200 a week. That's not enough to sustain a family and someone who's really, really good at this. It's just not going to make sense. They're not going to want to do it right. The way to get this machine working is to sell something for like $10,000.

Okay. And so these sales people can make that 20 or 15 to $20,000 a month. That's the key. So you're in order to get this thing working, you need to be selling something that, that is high enough such that you can incentivize really skilled people to work for you. Okay. So first order of business, make sure what you're selling is like North of $8,000. Okay. You can do it for lower, but it's going to be really, really hard. And you're going to be hiring some really scummy salespeople, and you're going to have to run like a sweat shop, and you're going to have to do some magic to make them perform. So, anyway, first things first, make sure you're selling at least eight to $10,000 ticket prices. Second thing, this is the key. As the founder, the CEO, the head of sales, you have to be able to do end to end deals.

You have to show you. You have to be able to go knock on some doors and close business, okay. And close like three a week for you to bring on a commission based sales person. Because commission based sales people, they can work wherever and they just want to work for the best. They want to work for the best offer. They want to work for the business, with the best offer. And if the founder's unable do it, they're unable to prove it. There's no way in hell. They're going to convince anyone with skills to work with them. So as the founder, the CEO, it's your responsibility to actually get good at going out and hunting. And if you can't do this, why the hell are you in business? Anyway, if you can't, if you can't go out and sell, then you're like, Whoa, like there's no, you have no business being in business.

Because if, if everything goes to shit and you have to save the company, you're going to have to go out and get some clients. If you don't have that skill, that your business is going to fail. And every so often there's bottlenecks. And the CEO has to go into wartime mode and actually make things happen. And so if you can't do that, then why should anyone follow you? Why should anyone trust their life and their livelihood in their family with you? So yeah, as the CEO or the founder of the VP sales, you have to have the, the ability to go out and close deals and end. Once you're able to do that, you can attract you. All you need to do is show people what you're doing and they will work for you. So that's the first, the first step is to get the ticket price.

High enough. Second step is do it yourself. You need to do this yourself. I was, when I was doing my sales engine, I was the first guy. I was the one prospecting. I was the one closing. I still do that. Okay. Just because I need to show everyone that it's possible and that all they need to do is follow these steps. Okay. So that's the second order of business. Third orbit, third order of business is you want to start your prospector or your, your end to end sales person as what's called an SDR, a sales development rep. So what the first, the first hire is going to be someone who's just going to be doing the prospecting for you and lining up appointments and qualifying deals or qualifying opportunities, but they're not necessarily closing. So they're lining up appointments against your calendar. Okay. So VP sales, CEO, founder, whoever you're hiring someone to just do the outbound prospecting for you.

And then eventually you're going to be generating enough opportunities such that you're able to give the prospect or the demo overflow. So then they're like S like a month, two months in, they're going to start doing their own demos. Okay. And then eventually they're going to be doing their own end to end deals. And they can, they're kind of like Bambi. They're kind of standing up and then all of a sudden they're walking. Right. And and then that's, that's where you want them to be. And then once they're at that level, then you're going to hire another outbound prospector to support that newly ramped rep. Cause eventually they're going to be the best use of their time is going to be closing and following up with prospects instead of prospecting for new opportunities. Okay. So does that make sense? So first order of business, you want to make sure that your ticket price is high enough that the model works.

Okay. Second order of business is you gotta learn how to do this yourself. Okay. If you can't do it yourself, why in the world would anyone want to work with you? That's crazy. The people are smart. They're not gonna, they're not, it's too risky. A third order of business is you're going to bring an outbound prospect or under you to drive, to drum up appointments against your calendar. Then that person is going to start taking the overflow and delaying up their own deals and doing end to end deals. And then the next step, it's kind of like a little pyramid scheme. You're bringing in another outbound prospect or underneath them to support their calendars. That makes sense. And so this is it's, it's, that's what I've done. I've always been successful with this model, the salespeople that are good at making a crap ton of money.

Obviously they get really good at sales. And the another thing is here's a huge benefit to using this model and starting with outbound prospecting, the salesperson values the hell out of an opportunity because they know how much effort it takes to get one, right? So when you start turning on paid traffic, you start doing content, you start doing inbound stuff and, and more, more inbound marketing and start filling, calendars that way. Then the sales reps really value those opportunities. And they're able to, if they're able to close outbound opportunities, the inbound stuff is going to be layups are going to be layoffs. Okay. So it's really valuable to start. It's really important to start your sales reps as outbound killers. And then eventually they'll be able to get on the calendar for inbound opportunities and start making you like 300 grand a month. That's eventually what will happen.

Now, this is really important to some people will start some some people will just hire inbound reps and they, and one of the biggest problems is, Oh, I don't know how, I don't know how to hire really good reps. I don't know if they're good enough. I don't know if they're, you know, they're superstars. This is like a clear, clear way to determine superstars. This is what I do. If the, if the guy can't or the girl can't prospect and they can't close end to end within like a month, or they can't line up an opportunity than a month, they can't close in a month, then their gut, the garbage get rid of them. Okay. It's you don't have to spend a salary. You don't have to start nurturing them, give them counseling to, to, to make them good. It's very clear if they can't do an end to end deal, then they're not a sales person.

That's it. If it does, if you give them two months and they can't do an end to end deal, it doesn't matter what they're going to, what, what they can do or what you're, what you do and what you offer. Then they're not just get rid of them and bring in more. And so very quickly you will start to see the superstars. The superstars will just rise like a superstar within a week. They're closing their own deals within two weeks or within a week. They're closing their own opportunities within two weeks of closing their own deals. Okay. And it's very clear like, Oh, this guy's a superstar. Perfect. And then that's when you start investing into them and making them really, really good at investing resources, investing training, making them really, really good. So it's kind of like the Spartan test, you know, when Spartans used to have kids, at least in the movie 300, they would have the kid, they would hold it up and they would inspect it.

Right. And this is a little controversial, but they'd hold it up. That if it was that there was any defect or there was, you know, there's, they, they weren't up to snuff. They would get rid of it. Right. And the Spartans had this really aggressive screening process, essentially. That's what you're doing in your sales organization. You're bringing these salespeople in, you're inspecting them, you're giving them little tests. And then if they pass the test, then they're probably gonna make like $200,000 a year, 300,000, $400,000 a year. And if they're not get rid of them, because in a sales organization, most of your, most of your revenue is going to come from like the one to three superstars. Okay. It's very it's. So the key to running a really, really effective sales organization is just nurturing the hell out of those superstars and getting rid of the people that don't make the cut as fast as possible.

So hopefully that makes sense. We've been able to build multimillion dollar businesses using this model, bootstrapped making tons of money and miss sales reps make tons of money. And yeah. So where do people mess up? So first things, first, most founders and VP sales, they mess up with the messaging. So this, this number here, this 2% is like, like 0.5% or one or 0.3%. So the first trap, or the first problem that most people have is this messaging. And so if you don't know how to do this messaging, or you don't know how to write really compelling messages, that that generate opportunities, then you should probably talk to us. We'll show you how to do this. We have a program, we have consulting services that will show you how to do this. The second thing that, that a lot of people mess up.

So there's only really two problems. First is the, the, the the lead to the, the lead to appointment booking rate. The second is the close rate. They just, some people that are just like little flowers and they don't know how to close deals over the phone, right? You should be closing 20%, 20%, at least cold. And if you can't do that, then you're not as skilled as you might think. And there's, you're going to start off with like 5% close. Right. And then eventually it should get good. And if you're really, really good in the CEO, the founder should be able to close like 40% of the time. Okay. So there's usually two problems. A you can't generate opportunities, which means your messaging is wrong. B you can't close your way out of a paper bag. And that means your, your sales skills are not up to snuff.

Okay. Let's just call it how it is. If you didn't spend years in the trenches, getting your doors slammed on you and, and pitching your face off then, and you didn't develop these skills, then you're probably gonna need to learn these skills. Okay. There's nothing wrong with that. I trained my sales guys all the time. And I and I ran people up really, really quickly. So if you probably only have two problems, leads, closing rate, and if you have those problems, jump on a call with us, we'll show you one tree steward training program. Let's just introduce it to our consulting services. And we can help you build an engine similar to this one that's depicted in this model. Okay. Thanks for the attention. And we'll see you on the call.

 

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