When Was The Last Time You Walked Away From A Sale?

Bill Warner Wednesday, August 05, 2009

The answer for most of us lies somewhere between I can’t remember and never. It is totally counter-intuitive to everything we expect to do. Yet, we all have memories of deals that we wish we had never won or opportunities where we wasted too much time, before finally losing out to a competitor.

The fact of the matter is that there are times when we would be much better off cutting our losses early and moving on to a more attractive opportunity. These situations generally fall into one of two categories: Bad Business and Low Probability of Sale.

Bad Business

The most unfortunate characteristic about this category is that it derives from a conscious thought process, with deliberate and calculated intent to win a business deal. In other words, it almost always happens by choice. But when we review the fruits of our labor, a few billing cycles later, why do they feel so much less rewarding?

The possibilities are numerous:

  • Your costs exceed your revenues, for this project.
  • You are having collection problems.
  • Your resources are now focused on issues that are not your core business.
  • You are under attack by the customer for not providing the contracted items.
  • You have an on-going adversarial relationship with the customer.
  • You are facing liability issues you don’t have with other customers.
  • You have not realized additional sales opportunities your were counting on.

So, let’s examine the harbingers of doom that preceded this fiasco, because at some point we misread the opportunity to stop the sales process and move on. This typically happens when we are so emotionally driven to capture a new customer that we fail to validate the legitimacy and fundamental value of the sale. Here are a few examples of how and when the wheels fall off the sales cart:

  • The deal margin has fallen below your minimum and it is not a strategic customer. Often, the sales team will rationalize this with the explanation that all future sales, which they will assure you will be many, will be at the normal price. Don’t believe it; it rarely happens that a customer orders more and does not demand the same pricing.
  • You do not have the resources to deliver the product or service. This is an immediate red flag that should cause you to evaluate the reasons for booking this business. One-off products/services are not only costly to deliver, but disrupt your normal business process and impact other customers.
  • The terms and conditions of the contract are unfair or unreasonable. Lopsided contract terms not only increase your exposure, but they are also indicators of a potentially flawed customer relationship and unreasonable customer expectations.
  • The risk-reward ratio is too high. There are many variables that can cause this type of imbalance, but none of them can rationalize it. If it appears that you will have to assume unusual risk in order to satisfy a contract, proceed cautiously.
  • Sales team convinces you to make concessions that are too aggressive, because there will be numerous, higher margin orders to follow. Don’t believe this either. It will not happen.
  • The customer has a reputation in the market for being unfair, unreasonable, or no-pay. The amount of time you will spend trying to make things right for this type of customer merely delays the inevitable. A good business relationship should benefit both parties.
  • Minimal due diligence in your sales review process will provide sufficient insight to evaluate and/or prevent this situation from occurring. Avoiding them will allow you to focus your resources on more rewarding opportunities, lower your risk, and improve productivity.

Low Probability of Sale

This category represents one of the most frequently misunderstood elements of the Sales process. It is the root cause of missed Sales forecasts, overstated revenue projections, frustrated executives, irritated boards, and pre-mature celebration by optimistic sales representatives. But, it doesn’t have to be that way.

Think of each situation as a puzzle with ten pieces, but the customer holds all the pieces. Your challenge is to guess the picture created by the completed puzzle. Your annual bonus depends upon how quickly and accurately you guess the picture. If customer A is willing to give you four pieces of the puzzle and customer B is willing to give you eight pieces, where would you spend your time? But, if customer C is also willing to give you eight pieces, in half the time as customer B, then where would you spend your time?

The amazing thing is there is a pattern of reasonably accurate predictors (the puzzle pieces) that can be obtained from most customers and interpreted to determine if and when to move on to the next opportunity. There is a correlation between the number of correct predictors (pieces) your sales representative can gather and the likelihood of a positive outcome. If it appears there are too few correct answers to support an opportunity, maybe it’s not really an opportunity at all. Here are some examples:

  • Who is the sponsor for this project for your product/service? It must be someone with enough credibility and influence (ideally at the executive level) to get a commitment from the decision maker and overcome other obstacles. In a typical technology-based sale, a sales representative is likely to interact with a techie-type, who, although enamored with the product and a great source of encouragement, cannot carry the ball into the end zone.
  • Who is the decision maker? Everyone in the process is going to claim to be the decision maker, until you ask about ownership of the budget to cover the check and/or signature authority to sign the check and/or who else has authority to veto his or her decision. That, ladies and gentleman, will be the real decision maker.
  • Is the project requiring your product/service on the corporate priority list? If it is, where on the list does it appear and do they expect to get to it in the current fiscal year? If the answer to either question is no, move on.
  • Is this project funded in the current budget? If not, you have an uphill battle, depending on the amount of money involved. Occasionally, monies can be reallocated from another part of the budget, but be prepared for a fight, which requires even more executive sponsorship.
  • Your competitor is the brother of the wife of the CEO. Find another opportunity!
  • Is it a must-have or a nice-to-have item? Unless it is a must have item, you will not likely get enough attention from the executive level (CEO, CFO, decision maker, etc.). The worst case will drag your organization through numerous demonstrations and proposals before fading into the sunset.
  • The tangible savings are minimal or non-existent. In today’s climate, it is all about cost containment or, better yet, cost reduction. If your proposal doesn’t contribute to this goal, you are unlikely to succeed, unless it satisfies the next point.
  • Does it add to revenue generation or increase profits? This is the corollary to the previous item and has obvious value. The challenge here is to quantify the value in a credible way.
  • The customer has the ability and inclination to do it themselves. This is especially true for IT projects, primarily due to the perceived threat to job security. You will need strong sponsorship and a top down directive to win this battle. Even then, expect a lot of resistance.

Summary

At the end of the day, this part of the sales process is all about probability, profitability, resource utilization, and risk management. It requires focus and commitment to provide the appropriate training, review steps, and enforcement. However, the benefits are attractive: accurate forecasting, better sales productivity, better customer relations, better margins, less frustration, and lower cost of sales associated with wasted effort.

Can you really afford the alternative?

Filed Under: Business Operations, Sales Tips & Strategies



Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the Chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.

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