Projected benefits should be specific and always involve financials.  For example, if you’re company is thinking about implementing an inventory management solution, the benefit may be inventory turns will increase from 5 times per year to 10 times per year.  When the company achieves this goal, inventory costs will be 50% lower resulting in a $600,000 annual savings.

Do not attempt to start a project unless you have quantified the benefit.  Without a strong value proposition, the project is unlikely to get off the ground.  If it does, it usually loses momentum and eventually dies.  Projects that do not have a tangible benefit fail because no one in the company understands what it is supposed to achieve.  How does management, or the company, know if the project is a success?

Quantifying benefits also helps the team determine a reasonable cost and guides them during the course of the project.  If the team understands the project is going to save the company $600,000, then they can easily identify solutions that make financial sense.  Most companies have a target ROI.  In the IT world, ROI is usually 1 or 2 years.

During the course of a project, the team will need to comprise on at least a couple of requirements.  Understanding the financial goal for the project enables the team to make the right decisions.  For example, any comprises that would significantly reduce the projected $600,000 inventory savings are not acceptable.

Before starting a sizable project, make sure management defined success.  Definition of success is not something nebulous like cheaper, better, faster because that means something different to every person.  Success is a specific number that means the same thing to everyone.

According the authors, Nicholas A.C. Read and Stephen Bistritz, of Selling to the C-Suite, their research revealed surprising results.  Executives are very involved with researching the problem and setting strategy.  For example, they want to understand why sales are declining or flat and not necessarily concerned about the solution until they understand the problem.  Surprisingly, 80% of Executives use the Internet to research the problem, not the solution.   Confirm your web site has good content about the problems your products address and not just the benefits.  You want executives to use your web site as a problem solving resource.

Executives are focused on the what & why rather than the how.  Executives tend to delegate researching possible solutions as well as recommending solutions and vendors.  Executives re-engage with their team to confirm their recommendation hits the mark, but will not overturn their decision unless there is a good business reason to do so.

Why should you care about this information?  Most sales people try to engage executives after they appointed a team to research the problem, or worse, when the team is evaluating vendors.  If you target executives during the sales process, you need to get involved early and help them understand the problem.  Better yet, help them uncover a problem.  Executives are busy and don’t always realize a problem exists nor do they always understand the magnitude of the problem.

Before contacting executives, take the time to understand the problems your product or service addresses, identify industries/companies likely to have this problem, and then contact executives and educate them about the problem.  Don’t sell – educate.  No one buys a solution until they believe they have a problem significant enough to warrant their attention.  There is a good chance you’ll need to help them understand all the costs associated with NOT solving this problem.  Don’t assume executives understand all the costs, they are very busy and don’t have time to think through all the implications.

Lastly, before you discuss your solution with them, confirm they believe the problem is significant.  I talked to a CEO that does not spend time addressing problems that are under $50,000.  He doesn’t have the time to worry about problems this small.

If you do a good job helping executives understand the problem as well as the associated costs of not addressing the problem, you’ll be well positioned to help them solve it.

Over the past few months, I’ve been researching the probability of success when cold calling.  According to Chet Holmes, author of the “Ultimate Sales Machine”, only 3 – 10% of the companies you contact have an immediate need for your product or service – they are ready to buy right now.  This is especially true for companies that focus on their product’s features.  Now consider only 5 – 10% of the people you call will pick up the phone (source: Honest Selling).  The latter statistic seems generous to me, but let’s use it to determine how many calls a sales person needs to make to get one appointment.

• Best case:                1/(0.10 answer * 0.1 interested) = 100 calls
• Worst Case:            1/(0.05 answer * 0.03 interested) = 667 calls

The numbers get even more interesting when you consider the following sales people’s statistics:

• 44% of sales reps quit after 1 no
• 22% quit after 2
• 14% quit after 3
• 12% quit after 4 (total is 92%)
• 60% of customers say no at least 4 times

Let’s incorporate these numbers into our calculations.

• Assume 40% say “No” on average 2 times before buying
  • (100/(/0.4 * (1 – 0.66)) = 735 calls to get 1 deal for 40% of the companies you target.
• 60% say no at least 4 times
  • (100/(0.6 * (1 – 0.92)) = 2,083 calls to get 1 deal for 60% of the companies you target.

Multiple the number of calls by the average length of a call and you’ll discover it takes days of continuous calling to get 1 deal.  Not a great use of time for most people.  Cold calling is part of the job for many sales people, especially new sales people.  There are a couple of things you can do to generate more deals.

Let’s examine the numbers that are in your control – the percent of companies that have a need for your service and the number of times a customer says no before buying.  It is possible to increase the percent of companies that need your service which requires you to re-think how your sales team sells.  When sales people focus on features, prospects are sold to which everyone hates.  Turn the tables and help your prospect buy a solution that addresses high priority problems.  In other words, don’t pitch your solution until the prospect has described the problem as well as the cost of the problem.  To get in the door, design a pitch that increases the percentage of companies likely to be interested in your product.  A good pitch will educate your target market about problems in their industry that they are not aware of.  Focus on educating prospects not selling.

Focusing on educating your prospects, helping them identify problems, and the cost of the problem before pitching your solution reduces the number of objections sales people face.  Identify all your prospects objections before describing your solution and you’ll significantly reduce the number of times prospects say no.

According to an article in Harvard Business Review, only 10% of the population has what is called the “learning mind-set”.  These are people who seek out and enjoy learning.  The rest of the population will only attend training if it is required.  You may find this statistic frightening, but it’s reality so deal with it.  Ninety percent of your staff will not try to improve their skills on their own.  A few will take initiative and train themselves, but the majority will wait for the company to send them to training.

If your company is going to invest in training, make sure the techniques learned during training are incorporated into the way you do business.  Otherwise, don’t waste your money on training programs.  I attended a sales training seminar in the late 90s.  The seminar was outstanding, but when I returned to the office, we continued to follow our old sales process and in a matter of weeks the concepts learned during training were gone.  Let’s face it, one and done training classes rarely make much of a difference unless the company changes as well.  Most people are back to their old ways or close to it after a few weeks unless they use what they learned.

Understanding these traits presents a huge opportunity for your company to gain a leg up on your competition by implementing on-going training programs.  If you don’t have the budget for on-going training, get creative.  For example, require your sales staff to read one sales related book a quarter and then incorporate 1 or 2 techniques into their sales approach.  Take it one step further and have each sales representative share new techniques that are working for them.  Give them an opportunity to pat themselves on the back as well as help others on the team.

If your company decides to implement on-going training, remember it can take months before you start seeing the benefits.  Realizing most of your competition will quit after a few weeks or months should give you the determination needed to ensure your staff receives on-going training and uses it.  After 6 months, you’ll begin seeing the benefits and your competition will be at least 6 months behind you – most will never catch you.

Would you rather hit a 5 iron consistently 190 yards give or take a few yards or would you rather hit randomly between 170 – 210 yards.  The obvious answer is consistently hit it 190 yards.  If you’re not a golfer, the figure below illustrates the point.

If your company is having a hard time predicting sales, you’re not alone.  According to The Hackett Group, only 1 in 6 companies (16.7%) regularly predict sales within 5% of forecast.  The selling power did a great job explaining the problems associated with over and under forecasting sales.  The following summarizes his points.

Forecast Greater than Sales

Let’s use an the Selling Power’s example to illustrate the problem associated this situation.  If a company has $50 million in revenues, a 10 percent over-forecast represents $5 million.  What is the impact of this forecasting error?

1. If you’re company produces a product, it needs to carry an additional $5 million in inventory.  If you’re a service company, you’ll need to increase your staff to accommodate your forecasted demand.  Let’s focus on companies that sell products at 50% margin.  That’s $2.5 million in cash flow that the company could invest in other opportunities.  The company could put the $2.5 million into tax-free bonds and earn $250,000 on that money per year.
2. The company has to finance that inventory. At a 6 percent interest rate, the cost is $150,000.
3. Excess inventory is likely to inflate the company’s payroll by 10 percent, which translates to about $500,000 in additional payroll expenses.

In this case, the financial waste of a 10 percent over-forecast translates into $900,000, which means that for every percentage point by which the company’s sales forecasting is improved, the company could save $90,000 a year.

Forecast Less than sales
Many companies would love to have this problem.  However, missing the mark in the other direction can be more costly because it could result in a poor customer experience.  People love to share stories about bad experiences.

1. If there isn’t enough inventory, the order may be lost. If your product has a fairly long lead time, let’s assume 50% of your customers cancel their orders. For a $50 million dollar company, that’s $2.5 million in lost revenue.
2. For companies with little excess capacity, the orders that do ship have a higher cost of goods sold due to overtime and express shipping costs.
3. It’s likely that products will have a higher defect rate if the company is pushed to its capacity limits.
4. If customers receive their orders late or with defects, customer satisfaction will drop.  If you’re lucky, they will only tell 5 or 6 people.

The cost of exceeding forecast is difficult to quantify as it may take months for all the associated costs to surface.  Exceeding forecast beyond a company’s capacity can be more damaging then missing your forecast.

What’s the Solution

Sales is a process just like order to cash.  The better you understand and manage your sales process, the closer your forecast will match actual sales enabling your company to improve profitability.

As your talking with your clients/customers, use the same approach.  Focus on helping them solve their problems as though you owned the problem as well as the company.  Most sales people try to convince a prospect that their product or service is right for them by focusing the discussion on features and generic benefits.  Prospects are too busy to try and make the connection between your services’ capabilities and their situation.  You shouldn’t expect them to do so.  That’s your job.

I met with a customer a couple of weeks ago and he asked me to tell him about the various services we provide.  I thanked him for the opportunity, but asked him to tell me about the challenges he is facing and I’ll evaluate our services to determine if we can help him.  My goal was to help him solve his top problems even if those problems did not directly benefit our company.

I also realized a long time ago that most people don’t care about what you do, they care about their problems.  As soon as you start talking about what you do, many will be thinking about their problems even if they appear to be listening. Explaining our services would have been a waste of time for both of us.

This customer’s challenge was implementing more structure in his business so that he can grow efficiently.  Sales aren’t a problem for his company. He had all the sales he could handle.  He wanted to avoid hiring more people because he knew automation would streamline his operation allowing him to grow profitably.  Had I accepted his offer to tell him about our services, it’s unlikely we would have uncovered this opportunity.

Prior to the meeting, prepare a list of good questions that help your contact identify their top problems and the root cause.  Approach the meeting like it is your own company and your money – you’ll do great.

Before you submit a proposal, follow the 4.5 steps outlined below to increase your proposal win rate.  Following these steps will also help you gain a prospects trust because you are putting their interests before yours.

1. You must find out the value of solving the problem and in many cases you need to help prospects determine the value.  It’s imperative your prospect understands how much it is costing them to do nothing.  Help prospects determine the value, but don’t do all the work for them and don’t use the proverbial ROI calculator.  ROI calculators are a waste of time in most cases because they assume every business is exactly the same and uses the same approach to solve a problem.
2. After you’ve determined the value, you need to understand what’s stopping them from solving the problem.  If you’ve done a good job in step 1, they may not have realized that the problem was significant.  If they already understood the value, take the time to figure out why your prospect hasn’t addressed this problem.
3. This is really step 2.5 because it is another way of finding out why they haven’t fixed this problem.  Ask them to list the top 3 priorities for the organization.  If the problem you are addressing is not on the list, ask them if they have the resources to implement a solution for this problem.
4. Assuming your prospects responses to the first 3 points are in your favor, it’s imperative that you understand the organization’s decision-making process.  Most mid-sized to large organizations have several people involved whereas smaller companies have 1 or 2 people involved.  You should meet everyone involved and confirm the information you gathered in points 1 – 3.
5. Even though multiple people may be involved, 1 person ultimately makes the decision.  Before you submit a proposal, do your best to meet with this person.  If they won’t meet with you, what is the likelihood that they will implement your solution?  Decision-makers want to meet with people offering solutions that will impact their business.

Preparing proposals is a time consuming task.  Before spending the time to put together a proposal, follow the steps above to make sure your company has at least a 50% shot at winning the business.

When you are at an event, make sure you collect business cards for the people that you want to meet.  A friend of mine, Chuck Blakeman, mentioned 85% of the people that take your card will not call you.  I’ve spent some time researching this point trying to verify his number.  While I didn’t find any statistics, the number seems reasonable based on my experience as well as the experience of others I’ve talked to about this point.  If this discourages you, it shouldn’t.  It’s great news.  You only need to compete with 15% of the population.  If you’re at an event with 100 people, keep in mind only 15 people will make the effort to build a relationship with others at the event.  If you’re one of the 15, that leaves 14 people.  If each of those people makes 5 contacts (70 people), that leaves 30 that won’t even get a call.

Another thing you should try is avoid giving a prospect your card unless they ask for it.  It sounds counter-intuitive, but your goal during an initial meeting with a prospect is provide so much value that they ask you for your card.  Virtually every sales person assumes prospects want their card and most people are put-off by this.  If you want to stand out, don’t do it and the walls will start coming down.  Focus on helping this person identify problems and benefits of solving them.  Most people will ask for our card if you just do this.  Offering potential solutions puts your value off the charts in their mind.

If you decide to try this, you must be prepared to accept the fact that some people won’t ask for your card especially the first couple of times you try it.  Don’t beat yourself up.  Learn from your experience.  It doesn’t take that long to improve.  You’ll be surprised how many people ask for your card.  If they don’t, it’s probably not a good fit for your services anyways and chasing them is a waste of your time.  If you like this approach, but know you need to change the way you think, I recommend reading the Power of Purpose by Peter Temes.  This book offers great suggestions on how to connect with people which is a must for sales professionals.

Chet Holmes, Author of The Ultimate Sales Machine, describes how a carpet cleaning business doubled sales in 6 months by implementing new recurring services (i.e. semi-annual carpet cleaning gold service) as well as a more effective marketing approach.  Analyze your services to determine what else you can offer your customers that add value and drive sales.  The key is, and this is very important, your sales team needs to focus on helping customers rather than driving sales.  Develop messaging that describes how your service benefits a business rather than describing your service.  Do you care how a car works?  I doubt your customers care how your service works.

Companies can also drive more business by leveraging relationships with existing customers.  A recent poll of businesses showed that nearly one third of businesses receive less than half of their business from referrals, while 14.1% of businesses surveyed got 100% of their business from referrals.  Close rates vary by industry, but warm referral close rates are significantly higher than cold-call closing rates.  If you’re looking for some ideas to help improve referrals, click here for 10 tips to improve your referrals.  I also recommend Endless Referrals by Bob Burg.

Here is the good news for those of you that decide to implement a referral and cross selling program, 80 – 90% of your competitors do not have the discipline to implement these programs effectively.  Many quit after a few months because they don’t see immediate results or something “more important” pops up.  You need to give these programs 6+ months and you must manage it closely.  Everyone hates change and will fight you for a few months.  Don’t give in.  Larger commission checks will win over your sales team.

• 2% of sales are made on the 1st contact
• 3% of sales are made on the 2nd contact
• 5% of sales are made on the 3rd contact
• 10% of sales are made on the 4th contact
• 80% of sales are made on the 5th-12th contact

What is really troubling is 92% of the sales people quit after 4 contacts.  The Bridge Group found that it takes an AVERAGE of seven touches to “convert a suspect to a prospect.”  These touches may include phone calls, direct mail, email, webinars, or face-to-face encounters among others.

• 44% of sales reps quit after 1 no
• 22% quit after 2
• 14% quit after 3
• 12% quit after 4
• 60% of customers say no at least 4 times

I admit in the past that I took “no” at face value and stopped pursuing prospects.  Thinking back on past sales, I realized that virtually everyone said no right off the bat.  You need to acknowledge “no”, but don’t stop asking good questions, questions about your prospects problems and challenges.  Every business has problems; you just need to ask the right questions to find them.

Before you go out on your next appointment, make a list of 5 questions that are likely to make your contact stop and think.  If you’re looking for a good book to help identify questions, I recommend SPIN Selling by Neil Rackham.  He has an outstanding approach for handling sales calls – a good question is much better than a good answer.  Keep in mind, the person asking questions is in control of the conversation.

Each time a prospect says no, you’re getting closer to the sale.