The general strategy is: Find a distressed property in an attractive neighborhood and make an offer to buy it from the current owner. If the owner accepts our offer, we assign the purchase and sale agreement to a third party who will actually purchase the house, fix it up, and sell it or rent it. We take a finder’s fee for our effort.
How does this help us prospect in today’s down market?
Digging deeper into the document, we see the problem-solving homework required to make this strategy work. Note, particularly, steps 4, 5, and 6:
- Choose a desirable neighborhood location.
- Find a partner (to whom we will assign the P&S after an owner accepts our offer).
- Drive around the neighborhood to identify distressed properties.
- Do the research — understand the market values, rents, and current inventory of comparable properties for the target neighborhood location. Estimate the value of comparable properties.
- Choose a target house and, once we’ve identified the target house, get the details about that house, e.g. when the house last sold, annual taxes, loan taken to purchase the house, contact information for the current owner, plat map.
- Determine the likely value of the house and the price we want to offer for the target house – likely value after fixing up less repair expenses less desired profit – and compare this to the likely balance on the existing mortgage.
- (AT LAST, make the ‘prospecting’ call) Contact the owner to say we’re interested in buying the house right away and asking whether the owner would be willing to sell the house.
So, what’s the connection to our prospecting?
The deal-maker in this scenario is approaching the current owner of the house (the prospect) with a specific idea or offer that is designed to relieve the current owner of a nagging problem that may have been a headache for a number of years. There’s no snappy chatter. It’s very straight forward: We’ve done our homework. It seems like you may have a problem. We’d like to talk to you about a specific solution to your problem.
Too many times, prospecting sellers look for silver bullet snappy chatter that will “get them in” to a decision maker prospect’s office thinking “If she’ll just meet with me, I know she’ll like me and then I can help her/sell her something.”
That’s just not good enough. Neither is calling to pitch a new product offer or pricing special.
Other prospectors will identify an industry or economic issue and attempt to open conversation with that issue, its impact on the companies like the prospect’s company, and the prospector’s experience in addressing similar problems.
Something like: “I understand you’re launching a new product. One of the critical challenges is managing pre-launch marketing and sales. We’ve been able to help companies double their sales productivity during the four weeks before and after launch.”
This is the minimum table stakes. Short of this, we’re showing up with little more to do than beg for an appointment.
Best case, our research about the company leads to a list of its specific challenges (this is like finding the distressed property). We look for comparable experiences in our own company’s experience with addressing these challenges (this is like looking at comparable real estate properties), and outline a specific value our company can bring (this is like the price we’re willing to offer for the house, in the example). There’s a specific value associated with the call.
Will we have guessed right about the prospect’s challenge each time? No.
Will it increase our odds of successful approaches? Yes, particularly if we can be referred in.
Even if the prospect doesn’t have the specific problem quite the way we thought about it, our mastery of the company and our specific recommendation will catch their attention.
Can we afford to do this with every prospect? Depends on size, largely.
If we make our living selling to a high volume of low profit prospects, this probably isn’t the right approach. Too time consuming, relative to the “numbers game” we’re playing. If we’re playing with larger opportunities, particularly where our prospects are senior officers or owners, this is a productive path.