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Sales Insight - May, 2005

by Rich White May, 2005 A Simple Prospecting Plan for the Small Business Market     Return to Prospecting & Sales Insight See the new columns by Klein and Lovas.

In this era of Do-Not-Call restrictions and growing competition, it’s not easy to prospect for new business. That’s why you need a prospecting plan that is strategically focused and easy to execute. This article points you in that direction with a plan you can start implementing tomorrow in seven simple steps.

This plan is based on three basic ideas:

1. Focus on small business owners in specific local industries that contain attractive prospects for your practice
    
2. Offer to help these owners interpret the economic environment in which they are making decisions.
    
3. Cultivate “industry-based referrals” by networking among owners who share common interests. Sponsoring a quarterly “small business roundtable group” is a great way to start.

The power of this plan is that it connects your strengths in client service and advice with critical concerns of small business owners. You don’t have to be an economist to implement it, because the insights that you will offer are based on official U.S. government research designed specifically for small businesses. And it will work regardless what products or services you offer to small business owners—for either their businesses or personal planning.

Why Focus on Small Businesses?

Many financial professionals now recognize that it is more rewarding to prospect among businesses than consumers, for several reasons:

• Only consumers are covered by national and state Do-Not-Call initiatives. These rules do not apply to most businesses. (Consult your firm’s guidelines for details.)
   
• You can easily identify small businesses in your market and access data about them.
   
• Small businesses owners always have financial needs to address. Unlike some consumers, they can’t afford to “stand pat."
   
• You can develop powerful referral networks by focusing on specific industries or types of small businesses.

Step 1: Be conscious of industry codes.

The first step is to become more conscious of industry codes, starting with your existing clients and prospects. Two coding systems are used in the U.S.: 1) the four-digit Standard Industrial Classification (SIC) system; and 2) the six-digit North American Industry Classification System (NAICS). The NAICS system is recommended because it is used by the data bases you will consult in Steps 2 and 3 below. You can download the IRS Instructions for Form 5500, which contain a list of NAICS codes, here:

http://www.irs.gov/pub/irs-pdf/i5500.pdf

(NAICS codes are listed on pages 64-66. Another set of valuable codes, discussed later in this article, is located on pages 18-19 of the same guide.)

Suppose that you have a client who works as an electrical contractor (NAICS Code 238210). The IRS list also identifies several other related codes for “specialty trade contractors,” all starting with the same four digits (2382). These contractors probably work on some of the same construction projects, so they may know each other. They also share some of the same business goals and concerns such as when to expand or contract payrolls, how much to pay for labor, and when and where to borrow money.

Step 2: Use the BLS Quarterly Census to determine industry trends in your area.

The U.S. Bureau of Labor Statistics (BLS) has developed a valuable new online tool called the Quarterly Census of Employment and Wages. You can access it for free here:

http://www.bls.gov/cew/cewsnote2.htm

Each quarter, the BLS updates data on the number of business establishments, their employment, and wages paid – for each state and county in the U.S. You can use this data to evaluate and select the most attractive industries in your market. The example below demonstrates how.

Suppose you live in Oregon and want to know how many specialty contractor businesses (NAICS Code 2382) there are in your state. The BLS Quarterly Census provides the data below.

Specialty Contractors in Oregon (as of 5/1/05)
 

You also could evaluate this same data for each county in Oregon (or any other state). The data serves two purposes in your prospecting program: 1) It helps you identify attractive industries in which you can build prospecting and referral networks; and 2) It becomes part of the economic overview that you can offer owners in these industries, to help them see where they fit in the regional economy.

Note: Extracting data from the BLS Quarterly Census is a task that can be delegated to an administrative assistant or intern.

Step 3: Use EIN Finder to identify other businesses in the same industry.

Now that you know how many establishments operate in a given industry in your state or county, how do you find them? The best answer is the EIN Finder utility that is part of FreeERISA. For a small fee, about $15 per month, you can subscribe to EIN Finder and conduct up to 100 searches per month. The most effective way to create a list of businesses in your market within a given industry is as follows:

• Leave the “Search For:” field blank.
   
• Enter: 1) Your state; or 2) A four-digit or five-digit zip code. The four-digit code can be useful for searching a metro area.
   
• Under “Limit Search to Industry Code,” enter one or more NAICS Codes. By clicking on this link in EIN Finder, you can access a menu that allows you to search a variety of six-digit NAICS codes with a single click.

EIN Finder will generate a prospecting list of establishments (mostly small businesses) in the same or related industries. The list will include company names, addresses, Employee Identification Numbers (EIN), and in some cases telephone numbers. To learn more about using EIN Finder as a prospecting tool, you can reference:

http://www.freeerisa.com/InsightNew/nov_2004.asp

http://www.freeerisa.com/InsightNew/sept_2004.asp

You can try your first three searches in EIN Finder for free, if you wish.

Step 4: Conduct further research through Form 5500 filings.

From within EIN Finder, you can quickly access links to the more detailed information that is available in many Form 5500 filings of the same company. This data can be valuable in helping you identify key decision-makers and determine the number of plan participants (on Line 7a).

For more information on using Form 5500 Filings to research small business prospects, you can reference:

http://www.freeerisa.com/InsightNew/may_2003.asp

Earlier in this article, we mentioned a set of codes contained in IRS Instructions for Form 5500 on pages 18-19. These codes identify the type of plans that the company offers, such as participant-directed 401(k) plans (Codes 2G or 3H). You can find this information on Line 8a of Form 5500.

At the end of step 4, you will have identified the most attractive small business prospects in targeted industries along with the names and addresses of their key contacts. In the next step, you will start turning them into clients and referral sources.

Step 5: Create a simple mailer and follow up by phone.

Send a mail package quarterly in a regular (#9 or #10) business envelope to every small business on your prospecting list. It should contain three items:

• A two-page (or one-page, printed front-and-back) economic overview designed specifically for small businesses by the Small Business Administration (SBA) and published quarterly. (See Step 6 for details.)
   
• A one-page cover letter in which you interpret key data contained in the enclosed SBA briefing, and also perhaps a summary of industry data relevant to the prospect from the most recent BLS Quarterly Census.
   
• A postage-paid reply card invitation to attend your next quarterly small business roundtable meeting.

Send this package systematically to every small business on your list every quarter. Include a checkbox on the postage-paid reply card for the recipient to “opt out” of receiving future mailings. Also, you may wish to give prospects the option of receiving the same data as an attachment to an e-mail. The cost to prepare and mail this package should be less than $1 per name per quarter.

Step 6: Interpret the SBA’s Quarterly Indicators for prospects.

The mailing insert that you will send quarterly to small business owners in your market, the SBA’s Quarterly Indicators, is found here:

http://www.sba.gov/advo/research/sbei.html

It is a concise two-page overview of U.S. economic trends that affect small businesses. Since it is published by the SBA’s Office of Advocacy, a U.S. government entity, it is not copyrighted and may be freely distributed (subject to your firm’s compliance guidelines). Quarterly data includes:

• A “Small Business Optimism Index” which indicates how positively business owners feel about the economy, updated monthly.
   
• Employment trends in major sectors.
   
• Economic indicators for consumer and producer prices, consumer sentiment, oil prices, and interest rates.

In your cover letter analysis of this data, you can summarize recent trends that affect specific industries you are targeting. If you wish, you can supplement this data with specific data for your state that the SBA publishes annually in its Small Business Economic Indictors. These may be downloaded from the same URL shown above. The SBA’s State Economic Profiles, updated annually, are available here:

http://www.sba.gov/advo/research/profiles

Step 7: Sponsor a quarterly small business roundtable meeting.

The purpose of sending a quarterly mailing to small businesses is to let prospects know that you care about their welfare and want to help them succeed. Even if some prospects throw the SBA data in the garbage, it will help to build awareness of your services, especially if you follow up each mailing with a phone call. What do you say in this call? You cordially invite the business owner to attend your next quarterly small business roundtable meeting. Here are suggestions for conducting these meetings:

• Keep meetings simple and informal. Even if only a handful of business owners show up at first, you can build attendance over time through referrals.
   
• Begin each meeting with a brief review of the SBA’s most recent Quarterly Indicators. Ask business owners to explain how they are being affected by economic trends. Encourage them to discuss their most important goals with the group.
   
• It’s okay to have a specific theme for each quarterly meeting such as “how to retain key employees” or “how to borrow money at low cost.” You may want to invite a guest “host” with special knowledge in the theme subject. Discourage lengthy formal presentations and encourage group interaction, questions and idea-sharing.
   
• You may want to help roundtable group members pursue projects or lobbying that advances their common interests. For example, the group could work together to develop sources of affordable employee benefit plans.
   
• At every meeting, ask for referrals by encouraging attendees to invite their peers to the next meeting. It’s okay to ask business owners to chip in for the cost of the meeting, but try to keep costs below about $15 per head to promote attendance. You don’t have to sell yourself at these meetings to generate business. Just help small business owners understand and discuss the economic issues that affect them, while helping them interpret valuable information such as the BLS Quarterly Census and the SBA Quarterly Indicators and State Economic Profiles. (Note: Try to generate attendance at these meetings that represents women-owned and minority-owned small businesses. These are among the fastest-growing segments of the market, and diversity is healthy!)

By focusing your prospecting on specific local industries, you will develop special expertise and become known as an advisor who works well with targeted groups of business owners. You then may be able to expand your activities to other prospects in the same industries, beyond your local market. It’s the smartest prospecting plan you can pursue in these competitive, challenging times.

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