Showing them what I'm worth

December 19, 2006 3:21 PM

A company has asked me to serve as a "lead generator" for them. I will be paid an hourly fee to call potential customers, and then turn interested leads over to the sales team. How do I show my employer what the potential benefit would be vs. the cost of paying me?

The sales cycle can take several months, but when they do close a sale it's for six to seven figures. I have no idea what the closing ratio will be. Would you use a spreadsheet to demonstrate the hypotheticals? What categories should I include in the spreadsheet? (much appreciation in advance!).

posted by Kibbutz to work & money (14 comments total)

That description reeks of "scam". How much have you checked into this? And how much did you have to pay them up front to participate in it?
posted by Steven C. Den Beste at 3:45 PM on December 19, 2006

I don't understand your question. A company wants you to generate leads for them, why must you justify the value of said leads? If the job looks good, take their pay. If not, don't.

As SCDB says, the leads business can be very scammy/spammy. Take cash up front, trust no one.
posted by b1tr0t at 3:52 PM on December 19, 2006

Let's repeat what b1tr0t said, because it's good advice:

Take cash up front, trust no one.

Sales is a nutty business, and the leads bit of it is a scam a minute. Especially when they start telling you that "once we finish the sales cycle and close a sale, it'll be lots of money." Translate this statement as: we want to pay you almost nothing and get away with it by stringing you along with empty promises. That's what it almost invariably means.

The moral: if you're being asked to do lead calls, it's on them to prove to you that this will be a good situation, not the other way around. Ask how much it will pay. If promised a certain amount, ask for it in writing. If what they're willing to give you in writing isn't what you'd be willing to make for the rest of your time working with them, then turn the job down, no matter how tempting the amount of money they say you "just might" make.
posted by koeselitz at 3:59 PM on December 19, 2006

Thank you so much for your concerned and thoughtful responses. Just so's we're clear on this, I'll be getting paid almost $100 per hour by a reputable company that I am very familiar with. I'll get paid every two weeks, so if I get ripped off I won't be out more than a couple weeks worth of work.

But I'm not concerned about getting ripped off--more how I might project the future months when I have absolutely no idea how to make a reasonable guess--and even if I could make a prediction, I wouldn't know what metrics to use.
posted by Kibbutz at 4:42 PM on December 19, 2006

I still don't follow. You are being paid an hourly fee now ("almost $100/hour"), so what do you need to estimate?

Are you trying to model your leads-generation process? Are you using a limited resource (your dad's yacht club membership list, for example) that will run out soon?
posted by b1tr0t at 4:50 PM on December 19, 2006

Are you trying to model your leads-generation process? Are you using a limited resource (your dad's yacht club membership list, for example) that will run out soon?

Good question, b1tr0t. I might not have phrased mine well enough at the beginning. They've never paid someone like me to do the kind of work they're asking for. The angel in me says they are trying to figure out how many closed leads I need to generate to justify my cost.

The devil inside says they're trying to get some numbers to hold me accountable (and fire-able) if I don't hit the projections. I prefer to believe the former, but you never know.
posted by Kibbutz at 5:19 PM on December 19, 2006

Yeah, something doesn't add up.

more how I might project the future months when I have absolutely no idea how to make a reasonable guess

What are you projecting?
posted by rhizome at 5:20 PM on December 19, 2006

What are you projecting?

If I make 1,000 calls, and generate 50 leads, and they close 25, and each one is a $500,000 sale, what will they net (vs. the thousands of dollars they paid me while I was generating the leads).
posted by Kibbutz at 5:22 PM on December 19, 2006

Okay, I see now. I may be cynical, but you're mentioning a losing battle in your sense of having to measure the closability of your leads. The thing is that the flipside of that measurement is the skill of the salesperson, so once all of the facts are canceled out you will be left with a "he said, she said" situation where the only option is for the sales people to impugn the quality of the leads, leaving you to stand up for yourself by challenging their sales skills.
posted by rhizome at 5:23 PM on December 19, 2006

1. $100/hour works out to $200k a year, if you work 40 hour weeks all year, with a week or two of vacation.

2. Most people are extremely happy living on $200k a year, unless they are unusually driven or live in an expensive area, or both. As a result the general rule of thumb is to set sales commissions so they top out around $200k. If commissions top out around $400k, the typical sales person will start to relax about midway through the year, after they've hit $200k. Your industry may be special, but it seems like your wage right now is close to what the sales guys should be making.

If you generate enough leads to keep 5-10 sales people busy closing six-figure deals all year long, then you will look like a good value to your boss. If you only produce enough leads for one sales person, and they take a lot of work to close, then your boss will wonder why the company is paying for both your pre-sales work and the actual sales person.

3. The problem with *you* justifying your wage directly is that the close rate may be highly dependent on the sales person working the leads. If your company sells entry-level sailboats, and you are working off the yacht club's new-member list, then anyone who sounds like they know their shit about sailboats should be able to close a good number of leads. OTOH, if they hire a big nerd who has been selling cell-phone contracts for the last five years, they might not close a single sale.

4. If they are paying you $100/hr now, and the new job takes roughly the same amount of effort as the old job, ask for the same amount of money. If it takes more, ask for more. You can estimate the close rate and then your company's return on the wage they pay you. That will give you a feel for whether your cost is trivial or significant to them, but you probably shouldn't share your model with your boss. Get the boss to show the company's projections to you instead.
posted by b1tr0t at 5:34 PM on December 19, 2006

Kibbutz, if you can't be a lot more clear in your lead generation activities, than you are with your questions here, you'll never generate enough leads to make this worth your time, or your employers. It sounds like you are trying to make an estimate of eventual revenues that will result from your efforts.

In some businesses, where the product is fixed with minimal options, and the price of the product or service is reasonable for the prospects you are working with, a simple method of estimation may be fairly accurate. You just need to estimate the closing percentage of the sales force from your leads, times the average gross sales price of the goods or services sold. Items/services in this category might be things like spa/beauty services, cookware, books or clothing.

However, if the product/service is not a "lump" type sale, but instead is heavily dependent on options, or has many follow on selling points, like subscriptions and service contracts, it is a lot harder to estimate a closing percentage, or an average gross selling price. But even if you could know the average sales price of a complex product fairly accurately for estimation purposes, you'd still need to know the average closing rate of the sales group, which can vary tremendously if you are turning over poorly qualified "leads" to sales people, who are expecting highly qualified leads to work with, who can then be upsold significantly, or vice versa. In every industry with complex sales products/services, there are industry norms for closing rates and average package prices, that are considered median measures of performance and profitability. Consumer durable goods like cars, boats, and electronics often fall into this category. Basically, the more involved the sale, because of options, ticket price, or competition, the lower the closing rate, but the higher the per sale revenue.

Without a lot more information about the specific product/service you'll be representing, I doubt AskMe is going to be able to give you a more specific answer.
posted by paulsc at 5:44 PM on December 19, 2006

lead generators usually do not get paid that kind of hourly wage, even for hi-priced items. but if they are willing to give you tat much, good for you.
it is usally the skill of the salesperson/closer that makes this deal viable.
posted by growabrain at 7:44 PM on December 19, 2006

isn't "lead generation" the same thing as "telemarketing"?
posted by bruce at 11:40 PM on December 19, 2006

I'm in marketing. I've done lead generation in the past and I've certainly hired several people to do this for me.

Put down the # people you are going to contact. Say 500 per month.
Put down the # you will get through to. (Say 20%).
Put down the number who will be qualified so that you can pass them along. (Say 10%)
Now you're passing along 10 people per month.
Assume your sales guys turn 10% of them into sales. This means 1 sales per month or $500k per month.
But you need to build in a lag of X number of months. So assume no conversions in first 9 months.

Is there an existing sales team? They should have metrics you can use. You might also want to mine their CRM.

If at all possible, contact people with whom the company has previously been in contact. You should be able to achieve a higher conversion rate there, especially with existing customers whom you could up-sell.



The sales cycle can take several months, but when they do close a sale it's for six to seven figures. I have no idea what the closing ratio will be. Would you use a spreadsheet to demonstrate the hypotheticals? What categories should I include in the spreadsheet? (much appreciation in advance!).
posted by acoutu at 2:38 PM on December 20, 2006