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?
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Business Transitions for Growing Companies - Taking the “Y” in the Road
Bill Warner Tuesday, August 04, 2009
Yogi Berra is often attributed to this saying about life. “If you come to a Y in the road, take it.” In business, there are lots of Y’s in the road, and you indeed have to move beyond them. These Y’s are business transition points. But, how do you know you are at a Y in road, if it is important or not, and how to choose which way to go?
Business transitions
Every company goes through transitions as they grow. It goes with the territory of being a successful company. No matter how good you are, these transitions will have to be dealt with. Successfully navigating these transitions is critical to the success of all small businesses. But how do you know you are at one. There are road signs; for example:
- Your people are complaining about their jobs
- Sales are not growing
- Customers are complaining
People tell all
One of the most obvious, but most denied, road signs is how your employees are responding to their job and work environment. It takes a pretty insightful leader and manager to be in touch with the state of mind of their employees. Often, what employees say is not really what they mean. The most convenient complaint is about compensation and the grass being greener at another company. If management has not been communicating well, employees will simply make up all sorts of stories about their dissatisfaction based on what they perceive to be true. Yup, they lie to themselves, and their management. Then, they decide to leave your company because they are not paid well enough. In reality, people are not motivated by money. They are motivated by having a challenging job and a great place to work. If they don’t get that, they will eventually leave for the greener pastures. If management has not created an environment of open communications and business process, along with clear roles, responsibilities and accountabilities, there is going to be trouble.
But, what is the Y in the road. In this situation, the Y has to do with the selection of experienced management that really knows how to lead and manage an organization of the size and complexity of your company and where it is headed. The choice is taking the road with current management and ending up in the ditch, or taking the road of enhanced management and keeping the company on the road to success.
Sales road blocks
Most small companies run into the dilemma of not appropriately getting their product or service into the market. The road sign is easily seen. Sales volumes are flat or down. But you would be surprised as to how many companies don’t respond to what the sign is saying. Hope takes over. Denial and excuses are pervasive. New forecasts ignore the past results. Extenuating factors explain what is going on. This Y in the road is decisive. If the wrong road is taken, the company runs into a brick wall and fails.
When faced with this choice, honest and objective evaluation of sales results is needed.
- Is it a market understanding problem?
- Are competitors winning?
- Is the price an objection?
- Are you selling to the wrong buyer?
- Is your solution not a priority for the buyer?
- Are your sales people ineffective?
To determine what direction to take at this junction, a detailed analysis of the reasons your company has not made its sales goals is critical. If you truly understand the reasons why you are not winning, you are on the road to adjusting your sales strategy to go down the right leg of the road.
Customers put up the signs
The most important sign to read is what your customers are telling you. If you do not have your eyes on this road sign, you are driving blind. All companies have a vision of what the value of their product or service is. And, they are proud of it. However, there is another viewpoint that the customer has. From the very beginning of your company’s history, you must be in touch with the customer’s view. If they are not satisfied, continually, they will eventually move on to other choices.
What you should be looking for is customer reaction to things like:
- Functionality and capability
- Support and maintenance
- Ease of installation and use
- Pricing structure
- Responsiveness to their needs
You need to watch for any dissatisfaction expressed in these areas. As companies increase the number of customers, it gets progressively harder to provide top notch customer care. If you miss this road sign, you will find that customers will abandon your solution for your competitor’s.
Your choice at this cross road is to make sure you are continually adjusting your customer care support structure so that you maintain customer satisfaction. If satisfaction erodes, you will be traveling down the path to disaster in the form of lost future sales and high support costs.
Watch the signs
When you decided to run a company, you automatically got your drivers license, and it is assumed you know how to read the road signs. Tune up those antennas that read what is going on with employees and customers and you will become an expert driver. Better yet, bring people into your company that are expert drivers that know how to make the turns easier to navigate.
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Lessons From Entrepreneurs
Bill Warner Monday, August 03, 2009
Here is a delightful article about 37 Pithy Insights From Street-Smart Entrepreneurs with some straight from the shoulder comments from entrepreneurs who have lived the experience of starting a company. Some of these are hard to grasp if you haven’t lived through the ups and downs of launching a company.
The need for passion
Certainly a lot more stuff happens when you are starting a company. Some days are just wonderful, like when you close your first sale, or collect your first check, or get accolades from your customers about your sevice. Some days are absolutely aweful, like when you have to fire a bad employee, or terminate a partner relationship, or face running out of money. The common denominator for the entrepreneur is his or her passion for the business. The passion is easy to show when you have great things going on. But, your passion may be the only thing that keeps you going when things aren’t going well. Like in a marriage, you are commited for better or worse.
If you feel like you have lost your passion for your business, then it may be time to get out. Otherwise, rely on it to take you through any situation.
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Read the Health Care Bill Yourself
Bill Warner Monday, August 03, 2009
Boy, did I get a lot of feedback on my blog post on the health care bill. I am not a political activist or even an expert on health care, but this bill gets me out of my chair and wanting to scream at somebody. This bill is 1,018 pages that spell out how the government is going to take total control of the health care system. Given that they have not run Social Security, Medicare and Medicaid too swiftly, what makes us have confidence in them running the whole health care show?
The bill itself
Here’s a link to the health call bill itself. It is hard to read and is not very straight forward. Serious readers will need a lawyer to interpret this thing. Here is a link to a controversial analysis of the bill, along with equally controversial rebuttals. Somewhere in this is the truth and I am concerned that it is not pretty for both individuals and businesses.
Now what
First, I suggest everyone use the analysis as a guide to go to specific section of the bill and read for yourself. Come to your own conclusion. Write down what you are still not sure about. Then, contact your US Congressman and ask them to clarify it for you. Go have a meeting with them, or attend one of their public meetings. My congressman is Brad Miller, who I have already emailed my concerns, and I will be going to his public meetings to ask further questions.
You have to understand, I don’t do this kind of thing normally. But I am now. I suggest you do the same, because this bill could change your lives significantly. Go to this link to find your US Congressman. Call them and tell them what you think and ask them for clarification. First, ask them if they have read the bill and understand its implications for people in his or her district. If they haven’t read it, or cannot answer your questions, then start asking when they are going to start representing your interests in Congress. This has to be one of the most important pieces of legislation in a long time. Your life may depend on the outcome of this.
