You probably pulled a face when you read the headline for this article. We all know it’s counterintuitive to be disqualifying potential customers, and this is especially true in the startup space.
Even though it may sound illogical at first, disqualifying potential customers is an effective SaaS growth strategy built upon the idea that by concentrating your sales and marketing efforts on only the most qualified leads most likely to return a profit, your business will become more efficient and more suitable for growth.
The importance of a selective acquisition mindset
“Acquisition” is a word you eat, sleep, and breathe. The thought of turning large numbers of potential customers away is enough to strike fear into the heart of even the most resilient founder. But what if this acquisition mindset is actually hindering the growth of your startup?
Could being more selective about your potential customers help you reach your startup’s growth goals faster?
We’ll take a look at the benefits of having a selective acquisition mindset and why disqualifying potential customers is a business growth strategy that’s overlooked by many startup companies. Strategically excluding specific customers from your list of prospects can actually grow your business faster. We’ll bring to light why this is and how to decide which prospects to disqualify, so your sales team can focus on potential customers who are the most qualified leads.
Why disqualifying potential customers is an effective growth strategy
Hope springs eternal, but unfortunately business resources do not. Being choosy about who you let into your sales funnel is a smart business growth strategy.
Funnels that let anyone and everyone through can drag your sales and support teams down with too many unqualified prospects that don’t intend to go the distance with your product. After all, the more time and effort you waste chasing down the wrong potential customers, the less bandwidth you have to close the deal with those who will be most valuable to the company over time.
For any startup, acquisition dollars spent and the energy of a team can be sucked away by spending too much time dealing with ill-fitting leads. If your sales team ends up wasting time and effort — facing daily frustrations by trying to convince skeptical leads to purchase — the reality is they’ll get demoralized pretty fast, all of which can hinder startup growth.
If you’re a company selling high ticket items, or you have a long sales cycle, it’s especially important that your teams are clear on what a good potential customer looks like for your business. Focusing specifically on closing highly qualified leads gives you stronger opportunities for growth over the long term.
By specifically concentrating your efforts on acquiring highly qualified customers who truly need your product, your business can grow more efficiently, with a lower overall customer acquisition cost (CAC), greatly improved customer retention, and a higher customer lifetime value (LTV).
Developing a disqualification mindset for your startup
How do you know that a lead is going to turn bad? They self-identified, they showed interest, they signed up for a demo. These potential customers are clearly looking for a solution, and they chose you. That’s good…isn’t it?
While this lead might seem ready to buy, with a fistful of sign-up dollars in their hand, this can often be misleading for your sales team. Time spent on a bad prospect is time that could have been better invested moving a qualified prospect further along your funnel.
For example, if your sales rep has a $500,000 annual quota to meet, then their hourly rate works out at around $240. Now, think about the time they spend talking to every potential customer that:
Doesn’t really have the budget right now
Isn’t sure your product is exactly what they’re looking for
Thinks your product might be too difficult for them to use
In dollar terms, those ill-fitting prospects might be costing you — big time.
It’s important to develop a mindset within your team that disqualifying potential customers is good for business and good for them. Failing to do so can hurt your business in numerous ways.
3 reasons to disqualify potential customers
1. Lost revenue
Most sales reps have quotas they need to hit each month. Depending on the structure of your company, your sales reps might even be given extra incentives to go above and beyond their quotas.
For any salesperson, it’s important that they promote the value of your product, demonstrate why it’s a perfect solution for a customer, and ultimately close the deal to meet their obligations as part of your team. Closing deals is their job, so the natural mindset is that the more deals they win — the better.
The problem with this method is that if your sales reps are working on closing everyone that seems like a good fit, quota figures will look great; but, on the flip side, your sales revenue and retention metrics will end up suffering due to high numbers of customers dropping out.
When you disqualify potential customers and allow your sales reps to focus their efforts on highly qualified leads, you can expect increased revenue through higher conversion rates and better retention rates, combined with lower acquisition costs.
2. Wasted time
Time wasted on numerous bad leads means less time for your team to focus on more qualified potential customers, which means less revenue for your company, and in turn — a disheartened sales team.
Chasing quantity over quality can result in low morale for your sales team, and for your startup as a whole. Your marketing and sales strategies should align so that only the most qualified prospects are entering your funnel.
When you’re thinking about disqualifying potential customers, you need to weed out the people who seem qualified but aren’t quite ready, willing, or able to become a customer at the present time. These prospects can be scheduled for follow-up a few months down the track, freeing up your sales team to concentrate on the best potential customers to sign up today.
3. Skewed metrics
Metrics are one of the most useful tools you can look at to direct your marketing and overall growth strategy. If you’re dealing with too many unqualified leads and spending too much time wooing them into signing up, your metrics can end up working against you:
Sales cycles might appear longer than they need to be
Acquisition costs may be inaccurate
Retention rates will drop
Sales revenue will decrease
Having the wrong metrics at hand can cause you to make bad decisions about the direction of your business. Your metrics might be masking the fact that you have a bad (or non-existent) customer disqualification strategy which is giving you bad data.
If you’re unsure, it’s time to do some in-depth analysis to see whether improving your processes can boost your numbers before you make any big business decisions.
How to decide which potential customers to disqualify
Developing an ideal customer profile can guide your team in the right direction when it comes to disqualifying potential customers. By creating a framework to narrow down your best-fit customers, your sales team can save a lot of time from no longer chasing prospects that don’t match this profile.
Your “ideal customer” will change as your business evolves, so any profiling needs to be revisited and tested regularly to ensure it remains effective.
Alongside your customer qualification details, you need to look at the customer success potential. Can you ensure from a technical, experiential, and financial position that each lead will find success with your product?
Qualified leads look different for every business, but the theory remains the same. Your qualification process needs to address the likelihood that each prospect can use and find value in what you’re offering.
Your team can develop questions that can quickly filter out less qualified prospects. These might include things like:
Is our solution a nice-to-have or a must-have for you at the present time?
Are you looking at any other similar solutions on the market?
Our product is highly technical with a steep learning curve. Does your team have the time and willingness to implement it?
How soon are you looking at making a decision?
Questions will vary depending on your business, but the more granular and strategically positioned they are to qualify a lead, the faster your sales reps can decide if the conversation is worth continuing.
If a potential customer is unable or unwilling to use your product to its full extent at the present time, this person is more likely to belong in the “maybe” or “no” bucket. Your team can schedule a follow-up at a later date when they might be more ready to engage fully with your product.
Next steps
Once you’ve identified how to qualify and disqualify potential customers, analyzing your most profitable potential customers with a variety of consumer research methods will help you create unique customer segments and buyer personas, providing additional insights that your sales team can use to better communicate and more easily convert qualified leads.
If you’re going to put the effort in to disqualify potential customers and concentrate your efforts on only your most qualified leads, you should also be prepared to custom tailor your marketing funnels and sales strategies to fit the specific characteristics of those leads.
Once you’ve sorted out this process and are done wasting time, frustration, and analysis on a poorly designed sales process, you’ll see your business grow more quickly. This is because every dollar spent acquiring new customers is being put into productive avenues of inquiry that are likely to bear fruit.
Making this a priority will help you turn more of your potential customers into paying customers and keep your business growing steadily. Not only will you get more deals closed per dollar invested than you were before, but your team will be more motivated, and your customer success metrics will provide a true sense of how to tweak things to make the process even tighter.
Final thoughts on disqualifying potential customers
Remember: More doesn’t necessarily equal better when it comes to closing deals. It’s vital that your startup focuses on quality over quantity to avoid wasted time and a frustrated team. This is why looking at methods of disqualifying potential customers is important when you’re growing your business.
There’s no way to disqualify all of your potential “bad leads.” Much of the time, it will come down to the acumen of your individual sales reps. In addition, as your business grows, today’s bad leads might be your ideal customer of the future.
Talking to and understanding how your customers are using your product and experiencing success is vital. This can help you create an ideal customer profile that can enable you and your sales team to identify lookalike customers who will make the best prospects, save your team time, and boost your sales revenue in the long term.