Why outsourcing lead gen fails 99% of the time.

Where startups goes wrong and advice on how to avoid the failure if you decide to outsource.

Outsourcing lead generation can sound like the magic bullet to solve all your pipeline problems.

It’s what all startups want. Hell, it’s what I want.

It seems to be a common knee jerk reaction for most early founders.

I.e. “I need someone else to find me the leads and do ‘the sales’ stuff because I need to focus on the product…”

Which makes complete sense, and I totally appreciate this desire. I think everyone wants to focus on the creative part of the business (product) - and leave all the messy/awkward sales work to someone else…

But in my experience - doing this too early tends to fail 99% of the time.

To clarify, what I mean by “outsourcing lead gen” is:

Getting an external source to take full ownership and responsibility of finding ideal buyers who want to speak with your about your product.

And what I mean by ‘fail’ is:

Resulting in an incredibly low return-on-spend, that creates little to no quality leads that eventuate into new customers. I.e. a lead gen strategy that is unsustainable.

If you’re not sure what I’m talking about, go check your spam folder in your email or the ‘other’ inbox in your LinkedIn…

Here’s one I got a couple of days ago:

Seems like a nice person, and says what I (and everyone else) would ideally want.

But having seen this play out many times before - it probably won’t work.

(On a side note - I don’t sell a ‘product’. So their targeting has already missed the mark if this is an indication of their approach).

For context, these agencies tend to (but not always!) do 1 of 2 things:

1. Bulk cold email the crap out of your market with crude templated pitch, or,

2. Run costly social media ads to a lead form with the same pitch.

Or worse, they come back to you with just a list of people who fit your ideal customer - and claim they are ‘leads’…

Their bulk spray-and-pray approach typically results in the following:

• Spamming everyone in your market.

• Getting your domain blacklisted by most email servers.

• Many people who don’t know you, now don’t like you.

• A bunch of angry replies.

• A handful of people questioning the email (who the agency will claim are leads).

• And maybe (if you’re lucky) a few legitimate leads who are open to chat.

If you feel this result isn’t too bad - then I’d advise saving your money and have a crack at spamming yourself! Try platforms like Apollo, Klenty, Instantly or Clay (there’s thousands of them).

But the problem is - people only respond to cold outbound because:

1. They perceive a legitimate person who genuinely wants to talk to them, or,

2. It is a simple, clear and highly compelling offer that’s highly relevant to them.

3. Or ideally both.

Reason #1 is hard to do outsourced in bulk, and typically relies on a highly manual approach.

So it is Reason #2 why outsourcing your lead gen typically fails.

A simple, clear and highly compelling offer that’s highly relevant to them.

Put simply - outsourcing lead gen fails because most startups haven’t yet validated their go-to-market fundamentals enough:

• They don’t know their ideal buyer persona enough.

• They don’t know their ideal buyer’s needs well enough.

• They don’t know their unique value proposition enough (i.e. why people should choose them).

• They don’t know how to clearly position what they do.

• They don’t know what gives their persona an Aha! moment.

• They don’t know where, when and how their buyer wants to be engaged.

Most startups haven’t yet proven what works repeatedly themselves.

Which is a massive issue, since:

outsourcing typically scales existing results.

If you’re currently getting terribly low reply rates - there’s a good chance a lead gen agency will probably yield the same result.

But at scale!

Furthermore, direct cold lead gen (i.e. demand capture) only works for those already in the buying stage.

Which is less than 3%. And most of them (82%) will have already made up their mind with another vendor who they are familiar with (more on that here).

Meaning, you’ve got about a 1 in 185 chance of getting a quality cold lead.

AND that’s only if you’ve targeted the right person, with the right message, at the right time.

Knowing your ideal buyer intimately takes conscious time and effort.

Like getting to know anyone in your life.

But many people want to skip this process when it comes to business…

I once knew a company who outsourced to a lead gen agency.

• The agency spammed millions of prospects in about 3-6 months.

• Each prospect got many, many emails.

• They ended up getting about 3-4 decent leads total.

• None of them ended up converting.

• It cost them >$10,000.

Their domain was ruined, and they were blacklisted everywhere.

They were left with dozens of angry prospects saying never to contact them again…

How to avoid failure if you decide to outsource

Personally, I’d never recommend never outsourcing lead generation entirely (especially in the form of mass cold outbound).

Since REAL lead generation is a company strategy, not a task (more on that here).

Good lead gen must be a sustainable strategy that helps you continuously fill your funnel.

A good lead gen strategy needs to be a mix of demand generation (targeting those not yet buying) and demand capture (targeting those who are buying).

Lead Generation = Demand Generation + Demand Capture

But more on that in another post soon…

Nevertheless, if your heart is set on outsourcing then make sure to nail your go-to-market fundamentals & messaging first!

I’d recommend doing this via the crawl, walk, run process (CWR).

Crawl:

• Start with manually reaching out to buyers yourself.

• If you have users, speak to them first. Find out what makes them tick!

• Be bold and ask them directly, “would you respond to an email like this?”

Walk:

• Start with doing some outbound to a small set of prospects (maybe 50-100 for a round percentage measurement).

• Test your messaging with small sets every couple of weeks to see what results you get.

• Keep iterating on each set until you find something that works.

Run:

• Then try ramping it up to see if you can scale the results.

• If you do, and you can, then consider outsourcing.

• When outsourcing be as prescriptive as you possibly can:

  • Give them heaps of insights into what you have found.

  • Help give them with direction on messaging.

  • Be highly involved at the beginning until you see things working.

  • Then step back out.

  • Regularly monitor…

While the allure of outsourcing lead generation is strong, especially when you're drowning in product development and craving growth, it's not a flick-of-a-switch solution.

The harsh reality is that successful lead generation requires a deep understanding of your market and the ability to craft messages that resonate along the buyer journey.

It requires an understanding of both you demand and lead gen strategies.

Before you even think about passing the baton to an external agency, make sure you've done your homework.

Know your buyer and know your message.

If you can nail these fundamentals and establish a clear, repeatable process on a smaller scale, then (and only then) outsourcing MIGHT amplify your results without compromising your brand's reputation or integrity.

Until you reach that stage, keep your lead generation in-house and keep iterating.

Because real growth is built on genuine engagement, in a sustainable system.

Not by spraying and praying into the void.

If you are unsure what to do with your lead generation strategy, I help early stage startups with their demand gen and demand capture strategies. Click here if you would like to chat about lead generation audit for your Startup.