Edmonton Business Consultant | Why A 100% Closing Rate Is Bad
It’s going to limit their growth beyond a certain point. Because you know, doing work for free is not scalable because when you post ads on them on indeed and tell people I want you to work for free so I can keep my closing rate high, it’s not going to go very well.
Yeah, I can see why I can, ah, cause it’s mad. Hi,
thanks for tuning in for another episode of ask spurl CPA today as the avenue to business consultant, we’re talking about why 100% closing rate is bad. So as the m a business consultant, we’re telling you that, why 100% closing rate? No one’s often bad. So I have Denise here with me today. So Denise, have you kind of senior year we, we, we’ve been, uh, we’ve been in this together for a few years now. Edmonton Business Consultant, have Edmonton Business Consultant seen how some businesses think that booking every customer is a good customer? Yeah, we’ve done it ourselves, right? Yeah, yeah. And uh, you know, the hundred percent closing rate to them, it’s not all it’s cracked up to be. So the quote that we have here today, it’s a zig Ziglar quote and it says, it is unwise to pay too little. When you pay too much, you lose a little money. That is all, but when you pay too little, you sometimes lose everything because the thing that you thought was, it was incapable of doing what it was bought to do.
And the common law business balanced prohibits paying a little and getting a lot. Most customers know that, right? Um, this is just stick that we have is 50% of all came businesses go out of business within five years and 29% of these failed businesses will list running out of cash is one of the primary reasons that their business fail making money on a cash. You’ll the second most common reason for business failure and the story that Edmonton Business Consultant see time and time again are business owners that come in and they’re proud. They’re actually think it’s a good thing. They say they’re closing 80%, 90%, 100% of every lead that they get a of every proposal for their product or service. Um, and unfortunately it’s not all it’s cracked up to be. So Denise, what are the questions that these business owners should be asking who are closing all of their proposals?
So, Josh, the first question I have is, um, how much money are the businesses that are booking all their leads making slow? Generally when Edmonton Business Consultant look at the businesses, you know, yeah, they’re booking all the leads, but when we compare them, you know, if we compare that contractor who’s booking all of their leads, so the contractor who you know, who’s only booking a third of his leads, the guy who’s only booking a third of his leads, he’s actually the one who’s making more money. So, you know, booking 100%, obviously you don’t want a book, 0%, that’s a problem too. Uh, but booking a 100%, when we look at it, uh, of the scale of all our businesses, you know, that, that we help whether they’re contractors or medical or everything in between, if they’re booking 100% of their proposals, generally those aren’t the businesses that are making money.
So are these normally one person businesses or businesses with small teams? Normally the guys who are booking everything, they’ll be the ones who, you know, they’re either a solo preneur, they got one, two, maybe three guys. Um, they’re not the bigger business. They’re not the five, 10, 15, 20, 50 employee clients. Uh, they have, uh, no, it’s just themselves or it’s a very small team. So we’re looking at, you know, what’s the common denominator of their booking all their jobs, the ones who come into us and say they’re booking all their jobs, they’re generally not making the most money and they have the smallest teams. So that’s just what we’re noticing. Uh, you know, with the businesses that come in and say they’re closing all of their, their leads. And so do they normally have enough of a budget to hire people to do all the work required?
There it is. So they close the project, but a lot of times they’re closing the project only because they’re not charging the market rate for that project. So when they’re not charging a market rate for that project, they don’t have enough money to actually hire the people that’s necessary to do all the work with that. Um, so you know, that’s just what happens. They book, sure they book at a high percentage, but they actually don’t have enough money to hire a team to help them do that and deliver that product or service. So does this mean that the business owners, uh, effectively working for free? It does. So the business owner feels very good about I’m booking 80 to 100%, but it’s very easy to book 80 to 100% when you’re effectively agreeing that you’re doing half of the project or a third of the project or 10% of the project for free.
Um, you know, customers tend to go for free. They’re getting a component of the project for free if you’re underpricing. And so it’s not that you’re an amazing sales person. That’s a humbling conversation to have that these business owners that you are not booking these because you’re an amazing sales person. You’re booking them because you’re agreeing to work. And do some of the projects or certain product or service for free. Yeah. So does this time limit eventually make it impossible to grow beyond a certain point? 100%. Every business owner only has 168 hours in the week. So they can only do a certain percentage of the projects for free. Uh, you know, if they can’t, if they’re not charging enough to hire people at market rates to do the project, they can only grow so big because there’s only so much work that they can do in a, in a week for free.
So it’s going to limit their growth beyond a certain point because, you know, doing work for free is not scalable because when you post ads on them on indeed and tell people, I want you to work for free so I can keep my closing rate high, it’s not going to go very well. Yeah. Um, so do these owners also have a false misconception that the price is the most important? Most, most of the time. So those tend go hand in hand? No, those, that’s the, you know, the, the rookie entrepreneur, you know, the early stage entrepreneur, uh, usually goes hand in hand. They think that the only way to book clients, you know, to make sales is to be the cheapest. Um, so they, they, they get into that false misconception that, you know, it needs to be the, uh, the, the cheapest in order to make the sale.
Right. So they’re, they’re too scared to sell anything other than the cheapest because they think it’s impossible. Right. That’s the, Edmonton Business Consultant, you know, the employee mindset catching up with them. What are some considerations that customers normally normally value more than price? Yeah. A lot of times its features, you know, everyone looks at the, the cell phone that you have, you know, the cell phone that you’re using is not the $20 gas station phone. The $20 gas station phone is the cheapest, but it’s not the one you’re using because it doesn’t have the features that you want. So customers value the features, customers value of the reputation of the company that they’re doing business with. They’ll pay more for someone with a good reputation than someone with a bad reputation. You know, customers value things like warranty. If the warranty as longer, they’re going to pay more.
Uh, they often value speed. If you can deliver it quicker, sometimes it’s they need it now. Um, you know, if you have a basement that’s flooded, you’re going to hire the plumber that’s available now and not the cheapest plumber, even if he’s available a month later because your basement is flooded now. Uh, so there’s a lot of other considerations out there that customers value more than price and Edmonton Business Consultant use them ourselves. And when you start pointing them out to business owners, you know, the vehicles that we buy, they’re the cheapest. The phones that we buy aren’t the cheapest of clothes that we buy. You know, isn’t the cheapest clothes at value village. And we’re not buying the cheapest things ourselves, but you know, they’re business owners. They think that the, the cheapest is the only way to go. And the, it’s a false misconception and there’s a number of things that although prices important, it’s involved in the, in the, in the buying decision, it’s usually not the highest consideration.
So once you have a differentiated value proposition, will it fit every customer? So then what you have to do is you have to establish, you know, am I going to be the quickest to, or is this the one with the best reputation, right? Going to hire the best people. Edmonton Business Consultant, and you’re going to have these, you know, we’re looking for this particular type of client, but when you’re looking for this particular type of client, the leads that are going to come in, they’re not all that particular type of client. You know, some clients, let’s say you’re going after to be the quickest, okay? You want to be the quickest. So then the person calls and they’re looking for the one with the best reputation. Well, they’re not going to pay that extra value. Uh, they’re not gonna value that, that speed as much. So they’re not going to be willing to pay a premium for that speed.
So that customer is not going to fit into your box. So not every customer, once you develop that really differentiated value proposition, now it’s not gonna fit every customer. So some customers are not going to choose the service and that will cause your closing rate did decrease. Um, that’s just a natural, you know, uh, uh, that’s this natural chain of events by establishing a differentiated value proposition. So, well, some customers be willing to pay more for a specific value propositions. Yeah. Then you get, so now you have these two customers in one values, reputation, one value speed, and you’re the guy who’s, you know, who’s the quickest and you make it really clear that you are the quickest. Now that customer, so you have, you had, you know, two leads come in, you’re only booking one of them as opposed to two, but now that customer’s willing to pay more for your specific value proposition.
Uh, and that’s really the, that’s the key. That’s what business is really, you know, competing on prices is almost a fool’s game is very difficult to do for small businesses. Uh, Edmonton Business Consultant don’t have the deepest pockets. Like the big guys, it’s really flushing out that value proposition and finding, hey, what are the things that the customer really values and they’re willing to pay more for a, so can you then use that extra profit on each transaction to build a team and scale. That’s exactly what a business is. Now you establish that specific value proposition of, you know, you make it really clear of what you’re able to do, what you’re gonna do better than your competitors. And you find the customers who value those considerations and they’re willing to pay more and now you’re making more. Although you’re not, not everyone is falling in on everyone’s a good customer.
The ones who are willing to pay more. And now you can use that extra, those extra profits that x or gross margin on each trans transaction. And you can actually hire the team at fair market race to actually execute that. You know, the, the, the components of, you know, providing that product or service rate from the sales to the execution to the follow up. And you’re no longer just getting a work because you’re willing to work for free. And do the things below market rates because you know you can’t afford to, to actually hire the people on it. So that, that’s really the key. I mean that’s, that’s what business is, is defining what your value proposition is. And once you define what your value proposition is, you have to come to the realization that not every customer, not every lead that you get is going to be a good fit for that value proposition.
And you’re willing to sacrifice them because you know the ones that it is a good fit for are going to be willing to pay more and now you can actually use those extra profits to actually build a team to execute the components of the business so you can actually scale this business and make more money. Right. So that’s, that’s really the, the key. So I think that’s what Edmonton Business Consultant have here today. Thanks so much for, for joining us. As always, we, when Edmonton Business Consultant enjoy any feedback that you have, please leave it in the comment section so we can respond back. And a, use your input for future videos. And as always, you know, please hit the like and subscribe buttons. So we continued to deliver your tips on how to beat the odds at business. Thanks very much.