Nope, business development is not just about “relationships” – it’s strategy too! In this episode, Christy Cunningham challenges us to see that referrals generated from business development efforts are not free and that it’s time to recognize the need to change our investment and strategy to be successful today and beyond.
Hello and welcome to Bridge the Gap Contributor Wednesday. I am Christy Cunningham and it is November folks. Holy cow, the end of the year is near. I can’t believe it. I hope that this year so far has been much better than the last, and that you are gearing up for a strong finish to the year. From the folks that I’ve talked to out there, it seems like we have some really nice momentum going into the end of the year, so I hope that you’re experiencing that wherever it is that you are. Today I’m going to talk a little bit about business development.
At the Smash Conference last month, as you can tell, I’m a big fan of the Smash Conference, I had the opportunity to do a round table discussion with some professionals who were really concerned about business development efforts and how they could be better in their business development efforts, especially during this time of COVID where we have some impediments that weren’t necessarily there previously. And our discussion, you know, was a nice little brainstorm, but it was also kind of a philosophical discussion about business development in general. And one of the questions that I asked the group and that I want to ask our industry is: even before COVID, were you getting the results from your business development efforts that really truly justified the investment that you were making?
Because there is a fallacy, probably dating back 20 years ago, that business development is the best way for us to fill our buildings. And there has been a habitual heavy investment of labor time and resources into our business development efforts to generate professional referrals in our markets that has been a part of the fabric of how we’ve grown our industry really over the last 20 years. But starting even 10 years ago, we started to see that the shift was moving away from that business-to-business sort of referral engagement into more online inquiries coming in. And from what I can see, and from what I hear from my own experiences, moving through the industry working coast to coast, I think that what we’re experiencing right now is a diminishing return on our investment in business development, yet our behavior, yet the labor and resource that we put into it is not really adjusting as quickly. So, you know, there are expectations across our industry of salespeople to spend 50% of their time up to 50% of their time out of the building trying to generate professional referrals.
Yet depending on what level of care you’re in, the percentage of inquiries that are actually coming from business development efforts are pretty small. You know, independent living sees about 4% of the inquiry volume coming from non-paid professional referrals; assisted living, it’s 8% of total inquiries are coming from non-paid professional referrals, and memory care, that’s about 6% coming from non-paid professional referrals. And, and this data, guys, I’m looking at the 2020 benchmark data from Inquire, and what I’m referencing in that, you know, proportionally, we’re asking salespeople to set, to spend a significant amount of time out of their building, 50% of their time out of the building, yet such a small percentage of the overall inquiry volume that’s coming into our buildings is actually coming from professional sources. So, you know, this to me, I think is something to point out for all of us is: what really is the value of business development?
And I’ll go into some of the deeper statistics here in a second, because it definitely has some value and definitely delivers some move-in volume to our buildings, but how much is too much? And recognizing that these business development, that the leads that we’re generating through our business development efforts are not free, that we are seeing some diminishing returns, which does require us to think a little bit differently about our tactics. And even when we are out doing business development, there are some questions that would be really important for us to know from our professional sources that are really, actually, uncommon. If you asked a sales person these three questions really uncommon that they would be able to answer all three of those definitively and then actually have a strategy to, to be based on that. So in this podcast, that’s what I want to be talking about is those three things let’s dive in.
The idea here that we should be investing a high amount in business development comes from a logic that says yes, even though, in today’s world, even though we are seeing such small overall lead volume from our business development sources, I can already hear the echoing in the ear, the logic that we use to say, well, why is it worth investing more in such a small percentage of inquiry generation is based on the idea that we have such high conversions of those inquiries, which is somewhat true. You know, we can see anywhere between a 34 to 37 percent conversion from those professional referral sources, which is a really strong conversion ratio and technically higher than what we see from, let’s say a web source, that sees anywhere between 17 and 29 percent conversion. Right. The problem though, is that because that inquiry volume is so low, even though you have that higher conversion ratio, you’re not getting enough ink or enough move-ins to, to justify it.
So for example, independent living, if you look at the, again, I’m, I’m using math referencing the 2020 benchmark report from Inquire, if, if you do look at the math of the overall inquiry volume, that’s average, the percentages that exist for volume from professional sources and the conversions, independent living could see about seven move-ins per year. Building, an independent living building, could see about seven move-ins per year, assisted living could see about twelve move-ins per year, and memory care could see about eight move-ins per year.
Definitely, I’m thinking of my regional friends and my other, you know, VP, you know, friends who would say, heck, you know, each of those move-ins is, you know, a good amount of revenue, like that’s worth the investment right there. The problem is that when you overinvest in business development, especially when in the, proportionally, you’re getting such a small amount of your overall move-in volume from those sources, when you overinvest in it, what happens is that you are missing opportunities for leads that are coming in from other sources, like the web that are generating somewhere between 20 and 46 move-ins per year, depending on the level of care, according to the data. So you don’t want to be overinvesting in your business development at the same time missing opportunities to really maximize the bulk of the volume that’s coming into your building and with some really hefty numbers to support it.
So this is where our habits as sales managers, sales leaders, and, you know, community level salespeople, need to align to the data and recognize that, hey, maybe this is one of those places that our world has changed, and the tactics that worked in generating inquiries 15 years ago are not going to be the same ones that work today. And at our table at Smash, you know, the discussion was, well, how has COVID affected this? That COVID has really been the one barrier that has changed the access that we have to our professionals, changed their willingness to refer directly to us, they’re more likely to refer to, you know, some sort of listing service than, you know, ever before. We’re getting fewer direct referrals and they’re, we’re citing COVID as the issue, but when asked and when we were discussing it, what we all realized was that these problems existed prior to COVID as well.
We feel it a little bit more right now, maybe because we’re a little more desperate for move-ins, I don’t know, but we are feeling it right now. We can’t blame COVID for this change. And COVID, isn’t the only barrier. These are years of change in access to professionals, the prevalence of listing services that provide a service to our professionals that we can’t provide, in that those services are able to, you know, provide multiple options at multiple price points, with a single referral, as opposed to a social worker, discharge planner, making a referral to a building only to find out that the, you know, prospective resident can’t afford to live there or has some other mismatch in terms of what they need, and now that social worker does search planners, having to expel a lot more energy just to find the right place for that person so that they can do their jobs.
It definitely makes more sense when you think about their job and their efficiencies, to consider why they would be direct referring to a listing service as opposed to us. So that was a dynamic that existed far before COVID, and again, it’s something that we’re resisting. And I, I think that we’re at a point here where we need to really consider the amount of investment because business development is not free. The leads that we’re generating through our non-paid professional sources are not free, guys. You may balk at some of the percentages of your move-in fees that you’re paying to a listing service, which I understand, they’re hefty, but when you consider 50% of somebody’s salary and what that is, plus the additional missed opportunity cost, plus the additional expenses of the goodie bags, and the events, and everything else, when you put all of that together, and you divide that by the number of move-ins that you’re actually getting, you’ll see that those move-ins aren’t free either. You are paying hefty amounts for those move-ins as well, and we don’t necessarily need to be going quite so far with our investments in my opinion.
So what, what do we do then? If we need to stop over-investing then what, what do we do? And my recommendation here guys, is that we start to look at what does proportional investment of resource look like for business development? How much time and resource should we be spending on business development efforts? And what really is our goal? Again, the antiquated approach is looking at a certain percentage of time spent out of the building, or even a certain number of sales calls that are being completed. Both of those things, incentivize wasted time and wasted contact out in the world. So you might be doing 50% of the time being out in the building, you might be completing the necessary sales tasks, but if those were arbitrarily built on historical rules of thumb that worked 15 years ago, then ultimately what you’re doing is incentivizing your sales team to be out there wasting time, calling on professionals that aren’t strategically benefiting the community, in order to satisfy the time requirement out of the building, or to satisfy the number that has been given in terms of overall sales calls to make.
So, you know, if we want to stop over-investing in business development, we really need to think about what, what is it that we’re trying to achieve, and what is the most efficient way for us to achieve it, and does a percentage of time out of the building, or even does our existing quotas for business development, does, does that even really make sense? And, and maybe those need to be scaled back quite a bit, so that the time the resource is more proportional to the percentage of move-in volume, that’s coming from those sources. Now I can imagine that what I just said might excite people who say, but wait, if it takes this amount of time investment, if it takes this amount of resource investment, in order for me to get those move-ins, then there’s a fear that says, well, if I pull back, if I’m no longer investing all of that, then am I even going to get the move ins that I had been getting historically?
And again, I go back to the fact that if you focus your energy on what’s truly effective, and be more limited with the efforts that are not really generating results for you, then you should be just fine. If, however, you cut back on the overall quota, you come back, cut back on the overall time spent, but the behavior of the sales person, the strategic behavior of the salesperson doesn’t change, they go out there and call on their besties and call on the people that just help them check the box on the number of sales calls made or time spent out of the building, and there isn’t a real effort and around the results that they’re generating, then yeah, you are going to see even fewer results.
So the, the idea here is invest proportionally, but then have a strategic focus. Otherwise you risk investing proportionally, not having a strategy, and having these old habits of field level salespeople that drive poor results, and then you’ll blame Christy Cunningham for telling you to do it different, but it won’t be my fault, right? It will be the fact that these two things need to play in the same sandbox together.
So business development is not free. The leads that we generate are not free. The investment that we’re putting into our professional referral generation should be proportional to their return. And number three, you need to have a strategy for who you’re going to go see and how you’re going to prioritize the professionals that you work with. So when it comes to business development strategy, I know that there’s a lot of ways that we approach that. I want to just share three key questions that when I talk to field level regional level salespeople, and I ask these three questions, it is very rare that I have someone doing business development that can answer these three questions. And without them, there is no way for you to strategically prioritize who you’re investing in and why.
So here are my three questions for you. Question number one: do we truly know about their business, well enough to know whether their business aligns to our business? Meaning is their business related to ours? Do we actually have a direct relationship to one another? Okay. That should be an easy question. Hopefully, because a quick Google search, almost, could reveal that. Number two: do they have the potential or do they currently refer to businesses like mine? So let me say that question again. Do they have the potential or do they currently refer to businesses like mine?
And if the answer is yes, here’s the kicker: yes equals how much? Now this is what’s surprising to me, is that question of how much, and even the definitive answer of, do they currently give referrals or do they have the potential for referrals is vague when you ask a, when you ask a sales person, they’re very vague around this concept. And I think that there’s a feeling that it’s almost intrusive to ask whether someone would have the potential to refer to my business or whether they’re currently referring to businesses like mine, and then if so, let’s how many referrals might you be giving in a year or in a month? But this is the real key critical question, because if there is no potential for them to refer, or it’s very remote, or let’s say that they are actively referring and they’re referring an X quantity, it’s important for you to know that. That’s how you decide, well, where do I spend my time? Well, this is a pretty key question to that.
The other thing that it helps with is sales folks that I’ve talked to who feel real excited about the fact that they have a professional referral source that’s giving them a steady stream of referrals. Maybe they get one to two referrals per month from a professional source. So then I ask them this question. Well, all right, clearly they currently refer to businesses like yours, but do you know how often? How many referrals and how often are they delivering to businesses like yours? And they look at the reports and they say, well, Christy, they’re giving me one to two per month. I say oop, but that’s not the total that they have to give. How do you know if this is truly a top referral source for you if all you’re seeing is what referrals they’re sending you?
You need to have some insights into the total number of referrals that they’re giving. So let’s say that this business is actually giving 10 referrals per month to businesses like yours, but you’re getting one to two. Wow. That’s pretty revealing of the missed opportunity and the potential for that relationship, and for that business, that’s unrealized. So we may think that this is a top referral source, we may be in maintenance mode, but what we may be missing is that, that percentage of the total referrals that they have to give might not actually be coming our way to a degree that we would like. So it’s important that we know, do they have the potential, if they’re not currently referring, or are they currently referring to businesses like ours? And if so, how much? Right. And really get a quantity around them.
And then the third question that we should be asking to strategically invest in our professional relationships is: are you open to a relationship with a business like mine? And I don’t want to sound defeatist here, but there are some communities across our country that have strong loyalties and even established partnerships with competitors. And when that is the case, we shouldn’t be over-investing in, in those people. We should be focusing on people who are open to a relationship with us, right. If they’re not open to a relationship with us, even if they have all the potential in the world to refer, even if their business is directly related to our business, then that should temper our investment.
Okay. So all three of these questions, is their business related to my business? Do they have the potential or are they currently referring? And if so, give me a quantity. And third, are you, are they actually open to a relationship with you? And have we asked them that directly? Or do we know that for certain? Those three questions are really rare that people who are out there focused on business development actually know the answers to this. And even rarer that they’re using the answers to these questions to dictate: who am I investing my time with first? If I have learned time and resource, who am I making sure that I’m satisfying strategically first? And it doesn’t mean that folks who maybe answer you “no” on any one of these questions that you don’t touch them at all. It just means that the investment that you put into those relationships is going to be, maybe, minimized in some way, or maybe it’s going to be very strategic so that it really carries the maximum potential and impact without being an over-investment of your time.
So what I’m suggesting here from a strategy standpoint is that we really look at the answers to these questions for our professionals to determine how much energy and resource are we putting into them, combined with the overall proportion of time and resource that should be going into business development efforts in general, based on the results that we’re getting. The 20 year fallacy in senior living when it comes to professional referral development, is that it’s all about relationships, right? It’s all about relationships, relationships, relationships, relationships. If I had a nickel for every time, I heard that I’m sure that even during this podcast, there has been many times that that word has crossed your mind. That’s what we’ve told ourselves that successful business development is, is just relationships, but it’s not just relationships guys. It’s strategy too. And strategy is being able to look at the data, recognize, change, invest your resources and time proportionately, and be strategic, truly strategic about where you’re investing that time and resource.
Because you have to recognize that your labor, the budget that the building is spending on business development, that, that it all has a cost. You’re not getting leads for free, right? So especially in a world where we’re seeing the time of our field level sales people being so torn between external efforts in business development and community outreach, as well as the internal efforts of being responsive to the leads that are coming in based on our kind of broader marketing efforts, it’s really, really important that we reconsider the habits, we reconsider the quotas, we reconsider what we’re basing our strategies off of from a business development standpoint, so we can be just as, if not more, effective in business development, using less time and resource and allowing us to really maximize the potential of our sales teams across the board.
So I know that this episode is just a little bit cerebral, I’m bringing in some statistics. But I hope that it’s an episode, that’s getting you thinking about the business development efforts that your teams are executing in a little bit of a different way. And I’d love to hear more from you in terms of how you might be changing your business development efforts to meet the needs of today. I’ve heard some really great ideas around the use of social media, even some throwbacks to broader community outreach and community partnership, sort of strategies, to play the long game, as opposed to the short game in terms of referral generation. I love, love, love hearing about the things that we’re doing. So please make sure that you like, share, comment, message me on LinkedIn. I love hearing the feedback from you from these episodes. It’s a lot of fun to banter back and forth. And I know that there are some diehard business development people out there who may have a different view of this than I do, and I want to invite that debate to the table. So, so let’s, let’s do it. But anyway, I hope everybody has a fantastic finish to the month of November. Look forward to hearing from you on this topic. This has once again been a great episode of Bridge the Gap Contributor Wednesday, have a fantastic day.