- Blog post
Asking tough financial questions can lead to bigger and better deals
One of the biggest stumbling blocks in today’s economic environment is financial justification. Businesses are justifiably tight-fisted when it comes to spending.
Any significant capital expenditure is under tremendous scrutiny, jobs are on the line over career-killing mistakes, and prospects are uber-cautious.
Many sales reps are reluctant to dig deeply into financial issues. They may fear offending a prospect by asking about things that seem confidential – or even personal, in the case of privately held companies.
But it is important to get over this reluctance, for two good reasons:
- Executives often need help justifying their decisions based on the financial impact on the business.
- Including financial justification and return on investment (ROI) in your proposal will help you stand out from the competition and win more business.
Go beyond the BASICS
The good news is that you don’t need an MBA in Finance to move a sale forward and provide the solid justification buyers need nowadays.
You do need to go a step beyond establishing the benefits of your product or service, to quantify the financial benefits to the prospect company.
For example, let’s assume you’ve met with the plant manager, safety director or another executive who will benefit directly from your offering. They’ve confirmed that your solution is an improvement over the way they are now doing things, and you are at the proposal stage.
Now is the time to candidly admit that the best features and benefits may not be enough. Try language like this:
“I know getting funding for a new project these days can be tough, and the financial impact is critical. Will you introduce me to the financial people so we can work this out?”
If they are convinced of the value of your offering, the prospect should be willing to set up a meeting with Finance.
Questions to ask finance
When meeting with the CFO or VP of Finance it helps to understand what they are up against, and have a feeling for how they think. Their frame of reference is likely to be ROI, juggling scarce financial resources, and dealing with competing budget demands. Questions to ask include:
- What are the company’s goals in terms of top line revenue for this year and the next? How many new customers must you add in order to achieve that goal? Once you know the revenue target and the number of new customers required to achieve it, you can tailor your solution around those business payoffs.
- In today’s environment, how do you evaluate buying decisions from the financial viewpoint? What data do you look for? Questions like these give you a feeling for how the finance people think and what it will take to get buy-in.
- What is the required rate of return, return on capital, return on assets or other metrics that you use to evaluate financial alternatives? You want to frame your financial justification using their language and their metrics, not yours.
- Would you treat this as an expense or a depreciable asset? What methods of depreciation would you use? What is the tax impact likely to be? (While often overlooked, tax benefits can be significant.)
- What metrics do you use to measure productivity or efficiency gains? What about scrap rates, job reruns, product quality? Here you want to get at cost savings available from your solution. Getting this from Finance helps put the proposal in terms of numbers they use.
- What other “soft costs” would you take into account when evaluating the financial impact of making a change like this? Let’s not leave any stones unturned when it comes to framing the discussion in terms of financial payoff to the company.
Of course you need to adapt these questions to your offering and the prospect you are calling on. The bottom line is that you need to dig deeper than the surface level information you (probably) already have from the online research and other “homework” you did.
The point, of course, is that each of these factors has a dollar value and a positive impact on the business that you can point out in the proposal. With the relevant data at hand you can contrast the current situation with the expected financial gains from implementing your solution.
Next on the agenda
Consider reviewing a preliminary analysis of the financial payoffs with your own in-house financial wizards, and using their input to help strengthen the financial justification and ROI talking points.
Before presenting a final proposal, review a “pencil rough” with the prospect. If the numbers are accurate and the justification is realistic, the executive(s) who will benefit most will be even more committed to helping sell the idea internally and getting the necessary funding for implementation.
For best results, include the financial people when you present the final written proposal. That way any financial questions can be addressed on the spot.
Making the effort to incorporate financial justification and ROI into your sales process takes more time. But it sets you apart – and leads to more approvals.
Source: Sales consultant Don McNamara, at www.heritage-associates.net