Last week, I wrote a post about the analysis that we did of our sales funnel and the conclusion that we reached to open a lead-generation center in Pittsburgh. On Twitter, the post elicited a particularly important question: ?How are you managing CPA with the addtl overhead??
The Twitter post came from Mike DeLuca, a friend of mine who is vice president for sales and business development at Groupon and has had a phenomenal sales career at EMC, Yahoo, Yodle and Savored (before it was acquired by Groupon). He was asking a basic question: how can we afford to spend money on a lead-generation center? Had we calculated the impact of this additional expense? And how will it affect our average cost to acquire a customer (a?k?a cost per acquisition, or C.P.A.)?
Our interest in opening a lead-generation center was based on our strong close rate after in-person meetings, 52 percent, and the opportunity to increase sales by increasing activities at the top of the funnel. Ultimately, the decision hinged on this question: While we would have to increase our absolute sales cost, could we generate enough sales that we would nevertheless be able to decrease the cost per sale?
Here?s what our math looked like:
In our current sales regimen, we know the cost of our account executives ? we define the fully loaded sales cost as base salary plus benefits plus incentive compensation. We also know the number of activities that those account executives produce every month, the number of meetings that are scheduled as a result of those activities and the number of deals that are closed because of those meetings. In addition, we track our conversion rates: 52 percent after an in-person meeting and 1.2 percent from the initial lead to the closed deal. Finally, for individual account executives, we divide their total monthly compensation by the number of deals that they close in a month to arrive at the average cost of sale.
When we add this new lead generation center, with one account development representative assigned to each of our five markets, we know that the total we spend on sales will increase. However, because these account development representatives will be focused exclusively on generating leads for our four or so account executives per local market, we expect the number of leads they produce to nearly double the leads assigned to each account executive. Assuming our conversion rate stays the same, however, this will have the effect of nearly doubling the number of deals they close each month, which ultimately would reduce the average cost per sale by 41 percent.
We believe the financial logic for the lead-generation center is sound. Now we just need to interview enough qualified candidates to staff it.
Last week, our head of talent, Rebekah Rombom, went to work. To fill the recruiting funnel in Pittsburgh, she started a variety of recruiting tactics to identify good candidates. First, she worked with Tom MacLeod, our head of sales, to write the copy to advertise this new position:
H.Bloom is the fastest growing flower delivery service in the world. It offers weekly flower delivery, plant installation and maintenance, corporate gifts and events to corporate customers: hotels, restaurants, retailers, offices and buildings. Current customers include the Ritz-Carlton Hotel, The W Hotel, Hugo Boss, Lululemon, Tesla Motors and Omega. ?
Started just three years ago, H.Bloom is headquartered in New York City and operates in five cities around the country: New York; Washington, D.C.; Chicago; San Francisco; and Dallas. It is opening an office in downtown Pittsburgh to focus on lead generation and account development for these local markets.
As an inside sales specialist, you will work in a fast-paced, competitive, sales-oriented environment. You will call on potential corporate customers in each of our cities via e-mail and phone, identifying whether they are a good fit for our services and setting up in-person meetings for our account executives in those markets.
Responsibilities include:
- Lead generation: Identifying corporate customers for subscription service, events and gifts
- Building lists of potential customers
- E-mailing and cold-calling leads
- Entering data into Salesforce
- Coordinating with account executives in local territories
- Achieving quotas for daily activities
Key attributes include:
- 4-year degree
- Cold-calling and cold-e-mailing experience
- Lead generation or client research experience
- Self-motivated and competitive
We tested two titles for this position: account development representative and inside sales specialist. We saw, through the response rate of our different recruiting channels, that inside sales specialist performed better.
Using an application called the Resumator, Rebekah kept track of all recruiting advertisements, responses, r?sum?s and interviews. Just as Salesforce allows us to analyze the statistics in our sales funnel, Resumator affords the same opportunity with our recruiting funnel. This campaign yielded the following results through Friday based on a variety of recruiting channels: InMails through LinkedIn; advertisements on LinkedIn; job boards like Indeed and Craigslist; our own careers page; specialty sites like Levo League; and, of course, employee referrals:
Campaign Source?? Applicants???? Interviews?? Response Rate
InMails sent??????????????????????? 130????????????????????????? 6??????????????????4.62%
Indeed ?????????????????????? ? ? ? ? ? ? 23????????????????????????? 4?????????????????? 17.39%
Craigslist??????????????????? ? ? ? ????? 13????????????????????????? 4?????????????????? 30.77%
LinkedIn Ad??????????????????????????? 2???????????????????????? ? 1??????????????????? 50%
H.Bloom Jobs???????????????????????? 2????????????????????? ? ?? 1?????????????????? 50%
Levo League????????????? ? ? ? ? ? ? ? 1??????????????????????? ?? 0????????????? ? ??? none
Employee referral????? ? ? ? ? ? ? 1?????????????????????????? 1?????????????????? 100%
Total applicants???????????????? 172??????????????????? ? ?? 17???????????????????? 10%
We want to hire five inside sales representatives, and our goal is to interview five times that number of candidates. Rebekah worked through the weekend to fill the remaining eight interview slots.
Next week, I?ll report on the final recruiting statistics. I?ll also provide insight into the interviews we conducted in Pittsburgh and the outcome of our efforts.
Bryan Burkhart is a founder of H.Bloom. You can follow him on Twitter.
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