You’ve raised a Pre-seed, the clock is now ticking before you run out of cash and you need to prove you’ve got something to raise your Seed round.
Lead qualification, amongst other things, will help massively with this.
What is Lead Qualification?
An oversimplified pipeline looks like this:
At the top of the funnel, you have prospects you’ve identified as potential customers but haven’t engaged with yet, those prospects are called MQLs (Marketing Qualified Leads). MQLs then become SQLs (Sales Qualified Leads) through lead qualification which normally involves you getting on a call and asking questions. At a high level, lead qualification is unpacking the probability of the prospect becoming a customer through incisive questions that capture key information which lets you quantify intent.
It sounds simple but so many Founders don’t do it and in turn waste valuable time they don’t have.
Why is it important?
The commutative power of multiplication (it’s costly in both money and time)
Tomasz Tungz from Redpoint does a pretty good job at breaking down this point.
Let’s unpack it here.
Imagine you have 3 funnels for the same company, see below:
You then through some divine miracle improve the conversion rate at different stages for each funnel. That’s exactly what Tomasz did in the table below. In Funnel 1, the prospect-to-lead ratio increases by 10% as did Funnel 2’s lead-to-opportunity and Funnel 3’s opportunity-to-customer ratio:
Despite incremental improvements at different stages, the final number of customers is the same — this is the commutative property of multiplication. Yes, I was equally surprised by this. It’s intuitive but great to have the maths to back it up.
Where I’ve seen a number of Founders go wrong is that they don’t accurately qualify leads earlier in the funnel and end up spending a lot of time at the opportunity-to-customer phase. I’ve seen some leads stuck at this stage for months while other leads convert end-to-end in weeks.
If your answer is yes to any of the questions below, it may be worth considering implementing a qualification framework.
- Are you getting several inconsistent feature requests from leads?
- Are leads taking unusually long to close?
- Are you losing some leads to pricing while others are happy to pay?
As a Founder with limited time to get to revenue or prove out the company’s value, you need to ruthlessly prioritise and so being more structured at the beginning of the funnel makes more sense.
When you have calls with prospects, it’s important to have clearly defined questions you need answering. The good thing is you don’t need to start from scratch. There are well refined frameworks for qualifying leads that already exist. The most commonly used is BANT (Budget, Authority, Need & Time). I’ve explained them below with some examples of questions you can ask to get the information you need.
Budget — Can they afford your product or service?
- How much would you spend on similar products/services?
- Who is in charge of financial decisions?
- How much money is budgeted for this solution?
- What does your typical budget allocation process look like?
- Who leads the financial decisions in this part of the business?
Authority (understand the decision making process) — Are you speaking with the decision maker?
Decision-makers are those who will ultimately make the call and sign the paperwork. According to the Harvard Business Review, the average buying-group size is 5.4 people.
Advocates are those who will do the research, take the calls, and pass the information onto the decision-makers. You need to know if you’re talking to an advocate or decision-maker in order to frame your pitch.
- What is your decision-making process?
- How can I help you meet your expectations?
- Who on your team would be using this solution? What are their values? Obstacles?
- How can I help you position this for other decision-makers?
- Which team members will work with the solution daily?
Need (need to gauge their pain level) — What is their pain point? Why is your product/service necessary?
- What does your current process look like?
- Where do you run into hurdles?
- What problems are you trying to solve by looking at solutions like ours? How often do you run into those problems? How much do they bother you on a scale from 1 to 10?
- What motivated you to look for a new solution at this time?
Time — In what timeframe would the solution be implemented?
You need to understand where they are in their buying process and the urgency of it.
- Walk me through the evaluation process. How long have you been looking for a solution?
- What types of time constraints are you working with?
- What are the implications if you don’t meet the timeline?
- Are there any contracts from other solutions you’re already signed to? Until when?
There are other frameworks like MEDDIC which I would recommend as a great place to start for enterprise sales.
You can also build on-top of these frameworks and create one more relevant for your industry and buyer. One thing to note is that at Pre-seed you’re still figuring out the right questions to ask and what makes a lead, ‘qualified’. Eventually, through volume going through the funnel, won and lost accounts, and some reflection, you’ll be able to identify patterns and have a firmer understanding of what makes a lead qualified.
Does it work?
We’re practical investors. Beyond supporting our portfolio on qualification frameworks, you can find us building SDR compensation plans, watching recorded sales calls and making suggested improvements, leveraging our network and LPs to make introductions to prospects and also just hanging out with our Founders in our offices. If you’re looking for investment, reach out via our pitch-us form and we’ll respond within 14 days.