Prequalification is the assessment of potential customers, usually business to business (B2B), to determine if they are a close fit for your company. Progressing with leads that aren’t a good fit wastes both their and your time. You should only engage with people who have a likelihood of becoming a successful customer. This post explores prequalification, mentions factors for a good fit and gives tips for business sellers as well as buyers.
Prequalification for Suppliers
Naive ‘New business’ often makes the mistake of chasing all leads at any cost. Your business plan should have already identified customer segments. When potential customers come from outside those segments you need to ask whether a) they aren’t a suitable customer or b) you might have got your target customer segments wrong. As your ‘new business’ becomes more mature you will experience less of b) and more of a). As a ‘new business’ you should also consider removing types of customer from your target customer segments when a particular type of customer is proving to be problematic or a poor lead.
As an example, previously as a mobile software developer, one man companies were difficult to deal with. With no partners or employees to moderate them, their ideas swayed with the (UK) weather. They were also the worst payers and always seemed to be dependent on people paying them before paying us. After a few of these I avoided such small companies.
More recently, in my current business, the opposite has been true. Very large companies, such as PLCs in the UK, have over onerous purchasing processes. They have what I call ‘professional buyers’ with lots of letters after their names from chartered purchasing institutions. They usually take over after you have agreed a price with the buyer. They try to squeeze the price down, insist on fixed pricing over unrealistic time periods and have tortuous purchasing processes. More often that not, such companies also tend to be ‘professional’ at managing cashflow as they are at purchasing which means they are bad payers. Here in the UK we can look this up via a Government site. Bad payers aren’t good prospects. If we say ‘no’, they sometimes find a way to purchase in a more reasonable manner typically involving a 3rd party who already supplies them.
There are three types of factors:
- Those from your business plan. These are things like size of the company, market sector, role in that sector and country. The role in the sector can sometimes be crucial, especially if they are an intermediary. I have also found that the country is often a determining factor as it relates to who can afford your offering, any import tax that can be considerable and trust. Another example in my current business is that we don’t supply to regions where we believe our software might be unlawfully copied. This isn’t paranoia but advice based on experience.
- Are they likely to buy? Do they intend buying or are they just interested? Have they said why they need the product, do they have the budget, how urgent is the need and are they in a position to authorise the purchase? The IBM BANT (Budget, Authority, Need, Timing) framework can be useful. Process Street have a useful BANT check list.
It’s important to determine intent without coming across too direct, pushy and alienating the prospect. Instead of asking “Why do you need xyz”, ask what challenges they have at the moment and what would be the implication of finding the right solution. Ask how they have tried to solve the problems so far including other products/solutions. The answers can also give you insight into your competitors’ weaknesses. Ask how quickly they need the solution, whether there are any deadlines and why they are looking at the moment. Enquire about the purchase process. Ask they if they already have a budget and whether it’s dependent on particular budget year. Ask who needs to be involved in the purchase decision, who has to approve it and how long approval usually takes.
Tip: If you are unsure as to their ability to purchase, for the first step after pre-qualification, test them out with a smaller purchase which might be something such as consultancy or a trial.
- Telltail signs. There are also telltale signs that you will gain through experience. I have found initial one sentence or partial sentence enquiries never leads to a sale. I guess if they aren’t motivated enough to express their requirement, they aren’t motivated to purchase. Another situation is people asking the price or for a quote before determining what we supply is suitable. More often than not this doesn’t lead to a sale.
The key to successful prequalification is assessing leads simply and quickly. Consider questionnaires, web forms or quick telephone chats depending on the minimum you can get away with in your particular industry.
Prequalification for Business Buyers
As a business customer we have probably all emailed or filled in a web form and never received a response. We think ‘What, don’t they want my business?’. In reality, they might not! This is the other side of the prequalification process in that if you don’t make yourself an attractive buyer, you might get ignored. Single liners won’t do. Give your name, company, position/role, reason why you need the product, an indication of the urgency and implicitly mention that you are authorised to purchase or recommend.
What to Do About Unsuitable Leads
There’s always the dilemma of knowing what to do when you come across an unsuitable lead. If you ignore them, many can be very persistent and keep trying to contact you. Ignoring also doesn’t project a professional company should they talk about you or you come across them in the future.
Another option is to explain why you can’t supply to them. Having tried this, I have found buyers can, again, be very persistent. For example, when explaining you don’t supply to their country they often say they know someone in our country who can buy for them. Just opening a conversation with unsuitable leads can lead to wasted conversations. Another option is to give a valid reason, but perhaps not the main reason, with which they can’t argue.
A tip I was once given was to avoid saying no. Say you can’t supply ‘at the moment’. This leaves things open should your company change route or you have more capacity in the future.
Another option, I previously used in my mobile development career, is to pass unwanted leads to similar companies who are more in need of work. The potential customer is happy, another company is pleased for leads and you might even earn a little referral commission.