The Law Of Large Numbers

We’ve all heard that sales is a numbers game. Those words flew out of the mouth of my first sales manager on an hourly basis as I slaved away in the sales pit at KLSY-FM in Seattle. But they meant very little until somebody showed me what he meant. First, let’s take a detour for the research that backs the fact that sales is a numbers game.

The Law of Large Numbers comes from probability theory. It’s the idea that the average of the results obtained from a large number of random occurrences will, with a large enough sample, return to a predictable value. Think of tossing a coin with every toss being a 50/50 chance of returning a heads or a tails. Toss the coin five times and you might come up heads four times. That’s a 75% return for heads. But toss the coin 500 times and you will in all probability get close to 50/50. It is the classic bell curve.

In B2B sales, we have some predictable values when it comes to prospecting. For every 100 attempts you make to reach a new client, you will connect with that person about 10% of the time. It’s important to define an attempt and a connect. An attempt is any communication where you ask for an appointment with the client. It could be an e-mail, a note on LinkedIn, a text or best of all, a phone call. A connect is when you get a response to that ask: an answered phone call or an email or text reply with a yes or a no.

The predictable values continue. For every time you connect with a prospect roughly 25%-30% will agree to meet with you.

The Law of Large Numbers comes into play in two ways here. First, and most important, is that these numbers only become predictable with a large number of attempts. Ten phone calls will not net you three connects. The sample set is too small. Secondly, cold-calling is hard and it is an iterative learning process. Your first ten calls will likely be an order of magnitude worse than your 90th, 91st and 92nd calls.

So, how to explain this to a salesperson? Start with what they care about: their commission check. This is what a grizzled vet did with me in the sales pit during my first couple of weeks. He worked an exercise called backwards math. Start with how much commission you want to make that year, or month. Divide that by your commission rate and you have the billing you’ll need to generate to make that commission. Divide it again by the average deal size and you have the number of clients you need to close. Divide again by your close rate and you get the number of presentations you’ll need to generate and so on and so on and so on.

Here’s a screenshot of the Excel worksheet I use with new salespeople.

The Backwards Math Calculator Spreadsheet

Click on the link above to access the spreadsheet itself. The yellow cells are where you enter the variables, the rest calculate themselves.

In a very short time you and your salesperson will see the absolute necessity for a significantly larger volume of outreach than they thought. And the magic is that with this necessary volume both the predictability of large numbers and the learning that comes with repetition will make their appointment books fill with potential clients.