Cold calling is out of vogue – basically uncool. Marketing and startup pundits bash cold calling as a waste of time and “pushy.” Instead, they say you should pursue partnerships, content marketing, public relations, social media, request referrals, or other cool methods. (By the way, content marketing is really cool!)
Cold calling is selling (i.e., via phone or email) to prospects without an introduction and without them contacting you first. I’m a staunch supporter of cold calling. About 50 percent of my new sales with my first startup, First Research, came from cold calling. One-third of the business for Vertical IQ, my next startup, stems from cold calling. My bias for cold calling is influenced by: a) my sales background; b) my opinion that it is a low-cost, scrappy method to win new business; c) my belief that one learns a lot by building a business model from the process of cold calling; and d) my success at it. Basically, the education you get from cold calling enables you to build a better product and company.
Product Price Influences How You Cold Call
Let’s compare three successful startups that used cold calling to gain initial traction. The first startup’s average price per year is $18,000; the second $1,200; the third $35 per month, or about $400 per year. All three were successful; each with completely different methods.
The startup with an $18,000 per year price is Vertical IQ. Because of our high average price, our cold call method can afford to leverage high quality “touches” and gives us the ability to patiently wait a year or more to earn a demo in front of a key decision maker. Each salesperson makes about 20-30 touches per day. We research prospects before contacting them. We mail them $25 umbrellas in a Vertical IQ-branded box. We offer to fly to a prospect’s office for a 15-minute in-person meeting. We are not pushy. For example, if a prospect picks up when we call, the first thing we say is, “I’m sorry to interrupt your day – may I make an appointment to speak with you about Vertical IQ when it’s convenient?”
The second startup is vastly successful financial software firm Sageworks. Its first product was Profitcents, which provides financial advice via artificial intelligence. In 2002, Profitcents’ average price was about $1,000 per customer per year. Due to its lower price point, using the same effort and time as Vertical IQ wouldn’t yield them a profit. Sageworks chose to try telemarketing in higher volume than Vertical IQ to sell to CPAs. Through trial and error, they discovered that customer acquisition was a lot like a manufacturing process—if they made a hundred calls, they’d talk to four people and get one demo. For every two or three firms that took a demo, one would sign up as a customer. “You could line them up,” cofounder Brian Hamilton said, “and predict that one out of 300 would close.” Hey, it worked.
The third startup is a provider of scheduling software to independent restaurants, Schedulefly. In 2008 when starting out, Schedulefly’s price was about $35 per month. They couldn’t really afford to only contact 100 firms a day via phone like Sageworks; they needed greater volume. To get started, cofounder Tyler Rullman sat in front of a computer for hundreds of hours, devoting himself to the mind-numbing grunt work of looking up the email addresses of restaurants and contacting them one at a time, personally offering them the benefits of giving Schedulefly a try. Progress was slow and difficult. Tyler recalls, “I emailed thousands of restaurants. You know, every night and all night long, sending emails, and you’re only getting two or three customers, it’s like, ‘Oh, man, c’mon!’” Eventually, a fair number of restaurants signed up for the free trial. For the record, Schedulefly doesn’t cold call anymore and hasn’t for years, but hey, it got them started.
Cold Calling Works
Cold calling is not for every startup, but I have proof right here that three very successful firms gained adequate traction by cold calling, eventually turning into thriving companies. I can also tell you about dozens of other cold calling success stories. Simply said: The better you are at cold calling, the better chance you have for being successful. I’m just sayin’.
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