Want more leads? Chase the Right Revenue.

Norm Brodsky is my hero. I’ve been reading his column in Inc. magazine for a long time. As I was explaining the differences between good revenue and bad revenue to a client recently, Norm popped into my head.

Norm has always harped on chasing the right revenue. So I visited his blog this morning and sure enough, in a recent response to a young business owner’s question, Norm wrote:

“Gross- and net-profit lines are far more important than sales. I'd greatly prefer to have $20,000 in gross profit on $50,000 in sales than to have the same gross profit on $100,000 in sales. Why? Because I'd have fewer headaches, fewer shipments, fewer people, and on and on.”

Lead generation is by far the most important priority with most business owners and marketers. The success of Hubspot confirms this. I’ve found that, too often, marketers leap into lead generation without first assessing their revenue targets. Result: high cost per lead, weak conversion rates. As Norm says, choose the right revenue first.

Simply put, choose revenue that is easy-to-win and profitable. Norm addresses the profitable part above. The easy-to-win part goes to cost-of-winning. Here’s an example: Ad agencies. (Wow, is their business model in trouble!) Their cost of sales has skyrocketed. Despite the volcanic growth in social networking and electronic communication, most agencies still rely on the face-to-face sales call and proposal presentation. Plus, the value of their business model is dropping like an obsolete satellite falling from orbit.

So, cost of sales is high and the value of their product is dropping rapidly. Conclusion: Bad revenue segment. Winning new revenue is very difficult and costly, and the revenue they win has shrinking margins.

Before you launch your lead generation program, review your revenue segments. Assess them. How difficult is it to win new revenue? How profitable is the revenue? If you’re like most mature companies, you’ll find your core business is your worst revenue target. Winning more revenue in your core segment may cost more and deliver less profit than any other option. As Norm says, more is not always better.