What it means
In this expression, an elephant is a major customer or contract, and the opposite is a "rabbit", a small, quick, easy sale. A company that hunts elephants puts senior time, specialist staff and marketing budget behind winning a handful of large accounts.
Typical elephants include government contracts, big corporate supply deals and large financial institutions. The attraction is scale.
One elephant may be worth more than hundreds of small customers, and once the account is won, the relationship can last for years. Large clients also add credibility, since winning a well-known customer helps with winning others.
The costs and risks are real. Elephant deals often take 12 to 24 months, involve many decision-makers and require tailored proposals or even product changes.
If the company loses, most of the investment is wasted, and if it wins, a dependence on one customer can become a risk of its own. Finance teams assess the strategy by using expected value, which weighs the size of the prize by the likelihood of winning.
They also consider the cost of the sales effort, the working capital needed to serve a large customer and the payment terms demanded, since big buyers often pay slowly. A deal that looks huge on paper may produce modest returns after these costs.
Relationships are central. Elephant buyers usually want to meet senior people, see references and test the supplier's financial strength, so a small supplier may need to show healthy accounts and sound insurance before it is even shortlisted.
Reputation built in earlier smaller deals often opens the door. Many companies use a mix of both approaches.
A steady flow of smaller customers supplies reliable cash flow, while a few carefully chosen elephants supply growth. The important discipline is to qualify each target early and to walk away from pursuits that are unlikely to be won.
In practice
Real-world examples.
Example
A cybersecurity firm with 40 staff spends a year pursuing a national bank as a client. The deal is worth $3,000,000 a year, which would double the company's revenue if won.
Example
An advertising agency targets five global brands instead of 200 local shops. Its founder estimates that winning two of the five would cover the cost of the whole campaign.
Example
A packaging supplier decides to stop chasing a retail giant after two years of meetings because the buyer demands 120-day payment terms. The finance director calculates that the working capital cost would erase most of the profit.
Formula
Calculation
Expected value of a pursuit = Contract value x Probability of winning
Expected value per sales hour = Expected value / Hours of effort
Suppose a company pursues an elephant worth $1,200,000 with a 5% chance of winning, which needs 600 hours of effort. The expected value is $1,200,000 x 0.05 = $60,000, or $60,000 / 600 = $100 per hour. A rabbit worth $40,000 with a 25% chance of winning needs 20 hours, so its expected value is $40,000 x 0.25 = $10,000, or $10,000 / 20 = $500 per hour. On a per-hour basis the rabbits look better, so the elephant only makes sense if the true win probability is higher than 5%, if the contract renews for several years, or if it brings credibility that lifts other sales.Case study
Seen in the real world.
Summit Payroll Solutions is an illustrative, fictional software company with 900 small business customers paying an average of $4,000 a year, or $3,600,000 in total. The founder wanted faster growth and decided to hunt elephants, starting with a national retail chain that employed 25,000 people.
The sales effort took 18 months and involved five staff, three product changes and a pilot in two stores. The contract, when won, was worth $2,500,000 a year, but the retailer insisted on payment after 90 days and a discount of 15% for the first two years.
In this illustrative story the company's finance team found that the account still earned a healthy margin, but the retailer now made up about 41% of revenue, since $2,500,000 / $6,100,000 is roughly 41%. The board agreed to keep hunting elephants while setting a rule that no single customer should exceed 25% of sales within three years. The lesson is that a big win brings concentration risk along with growth.
Watch out
Common mistakes.
- Focusing only on the size of the contract without weighing the probability of winning and the cost of pursuing it.
- Ignoring payment terms and working capital, when big customers often pay slowly and demand discounts.
- Letting one elephant become so large a share of revenue that losing it would threaten the business.
Questions
People also ask.
What is a rabbit in sales?
A rabbit is a small, quick-to-close deal that costs little effort, and companies usually mix rabbits with elephants for steady cash flow.
How long does an elephant deal take?
Often a year or more, since large organisations involve many decision-makers, formal tenders and legal checks.
When is hunting elephants a good idea?
When the prize is large enough, the company can fund a long sales cycle, and it can handle the delivery and concentration risk if it wins.
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