Issue #2 - The Power of Cold Outreach
by Tim Ludwig, Partner at Majority Search
The Power of Cold Outreach
When I was in high school I read a book written by a partner at McKinsey & Company that introduced me to the profession of management consulting. As nerdy as that, and I, was, it ultimately led me to reaching out to a local office of the firm and connecting with a friendly recruiting contact that politely and kindly fielded my occasional career-related inquiries throughout college (spoiler: I interviewed, but never received an offer from McKinsey). At one point, as I was readying for a year abroad in Bogota, Colombia, I connected with her again and it turned out that her husband was involved in some import-export operations and I became a remote consultant for him, working to source opportunities from Latin America. I wasn't very good and nothing came of it, but at 19 years old, it was a heady experience and validated something that has stuck with me:
Reaching out to people can lead to amazing and serendipitous experiences and opportunities.
I've benefitted ever since.
More recently, cold outreach has moved from physical mail and phone calls to email, text, and social media. This makes the outreach much easier to scale and people more accessible than ever. Over the past 15 years, I've watched scores of recent MBAs eager to buy and lead small companies develop very sophisticated methods of identifying and contacting business owners whom they hope to convince to sell their companies. With enough effort and diligence, it often works. Imagine that! A cold outreach leads to a successful, life-changing transaction involving millions of dollars.
The Techniques are Still Effective, but New Tools and More Effort are Required
The current state of the market involves trying to achieve 'mass personalization', whereby standard multi-channel templates are created and then embellished with variables (example: Hi {first_name}, etc.) that create the appearance of a carefully hand-crafted and personalized message delivered to each recipient. These efforts have become quite sophisticated. Software vendors, with names like Outreach and Reply, have taken notice and further fueled the market by creating a whole class of solutions designed to automate and facilitate large parts of this process, from contact list development to A|B testing that quickly improves message open and reply rates. This new version of cold outreach began over a decade ago, beginning in Silicon Valley where email was more embedded, but then quickly expanded to many other industry sectors. In my experience, there are still large communities that have little to no awareness of these tools, or even that they are being used on them on a daily basis.
From a sales perspective, which is the most common application, while it has certainly made life easier for BDRs (business development representatives, a frontline sales role popularized by this approach and responsible for creating templates and outreach campaigns, and then managing the initial outreach process to prospects), it has also created a lot more email traffic for, in our case as investors, the business owners with whom we want to connect. To break through this avalanche of inbound and unsolicited communication, buyers are reaching out to more people more frequently. They are also adapting their methods to add even more customization. Ultimately, the net effect is that it is becoming harder for buyers to differentiate themselves in this market. At least until new tools and techniques are developed...and, so, the never-ending game continues!
Worth a Listen...
In author and speaker Malcolm Gladwell's first season of Revisionist History, his successful podcast series, he recorded an episode dealing with philanthropy in the education sector (My Little Hundred Million, see below) and how best to allocate those charitable dollars. That alone is fascinating, but he also introduced a topic that has stuck with us ever since: the differences between weak-link and strong-link organizations. You'll have to listen to get the full explanation and a great example from the world of sports, but essentially strong-link groups are driven by the performance of one or a few stars while weak-link environments thrive when the overall average of the group is raised. This framework also shows up in business and is a useful framework to use when considering where to make investments for growth at an existing company, develop teams, and even which industries to pursue as an acquirer.