Five Reasons Hosted ROI Calculators Trump Excel Spreadsheets

When prospects come to your website, do you make it easy for them to see how much money you can save them? Do you have ways of clearly showing on your website how much more revenue you can help them generate?

Moreover, when your sales reps actually get to interact with prospects, are they well equipped to show the value of your solution in dollars and cents?

Whether for lead generation or closing deals, many sales and marketing teams have generated spreadsheets using Excel to illustrate the value of their solution or product. However, spreadsheets pose a number of problems — in the worst cases, these problems result in prospective buyers moving on to the next vendor’s website or dropping out of deals altogether.

An online ROI calculator built using a dedicated platform can help you avoid these challenges. Consider the following reasons spreadsheets fail and why hosted ROI tools are typically superior.

1. Salespeople dislike overly complex marketing assets. Whenever sales reps think a spreadsheet looks too complicated or dense, they usually opt to leave it by the wayside rather than incorporate it into their selling process. This is a waste of marketing dollars and needlessly leaves reps unable to illustrate your solution’s value. Consider the complexities in the image below, which is from an internally-created ROI calculator shared with me by one of my clients, a $1.2 billion technology company. One of the reasons they came to me is they were looking for a simple, attractive user interface to overcome sales resistance, an example of which is also shown below.

Spreadsheet SummaryROI Tool Summary2. It is difficult to create compelling summary reports within spreadsheets. Again, from my same client, the images below show the difference in presentation. Prospects today expect reports that not only look professional but also are easy to share with colleagues.

Spreadsheet ReportROI Tool Report3. Spreadsheets are notoriously error prone and difficult to maintain. This is one of the biggest reasons spreadsheets tend to fall into disuse. By contrast, ROI platforms are centrally managed and maintained, and thereby eliminate version control issues, outdated data, field modifications, and unauthorized usage.

4. Prospective buyers question the credibility of spreadsheets created by vendors. Generally speaking, ROI calculators created by third parties are viewed as more trustworthy than homegrown spreadsheets.

5. Spreadsheets are not mobile-friendly. Mobile devices limit the user’s ability to access and easily view spreadsheets. Contemporary ROI tools are designed to accommodate all types of devices.

Changes in B2B buyers’ behavior and the ubiquity of mobile devices have converged to make spreadsheet-based ROI tools passé. What’s a savvy B2B marketing and sales organization to do then? Many companies decide they’ll build a tool on their own. However, based on my experience, this usually incurs internal costs that can be far higher than simply contracting with an established vendor that creates ROI tools. My recommendation is to find a vendor with an ROI platform that can easily deploy, maintain, and update your ROI tools. This will allow you to drive the most incremental revenue and to do so with a cost effective budget.

What are you doing today to show prospects the value of your solution? What are the pros and cons of your approach? Please share your experience below.

Read This before You Talk about ROI

How frequently do you use the term “ROI” in front of customers and potential buyers?

I frequently hear sales and marketing professionals talk about “ROI” inaccurately. In a casual conversation, people might still give you the benefit of the doubt and have faith that you know your stuff. However, if you’re making a formal presentation or having a serious conversation with a prospect who’s well versed in financial terminology, any misuse of the term could obviously leave a disastrous impression about you and your company.

For example, I hear both sellers and marketers say things like this all the time:

“Your ROI is $100,000.”

Why this is incorrect: If you’ve ever expressed ROI in terms of dollars, you’ve likely confused ROI with net present value (NPV). NPV answers the question, “What is the cash benefit minus the expenses required to achieve the benefit worth in today’s dollars?” ROI is not a dollar amount — it’s a percentage. Specifically, it’s a percentage that represents what your net gain will be on any investment.

ROI = Gain of Investment – Cost of Investment / Cost of Investment

In other words, if your benefit is $100 but you spend $50 to achieve that benefit, your ROI is 100%.

NPV is still an important consideration because the term takes into account the value of a dollar over time. Obviously a dollar today is worth less than a dollar five years from now. Let’s say you invest $100,000, with an expected return of $120,000 within the next two months. That investment would be worth more to you than an investment of the same amount of money, with an expected return of $120,000 five years from now. The reason is that $120,000 is worth more two months from now than it will be five years from now.

Speaking of periods of time, I’ve also heard sellers and marketers say things like this:

“You’ll get a six-month ROI with our solution.”

Why this is incorrect: If you’ve ever expressed ROI in terms of a period of time, you’ve likely confused ROI with payback period. Again, ROI is always a percentage — never a period of time.  If I invest $100,000 in a project, the payback is the length of time it takes for the cumulative benefits to become greater than the cumulative investment.  Payback period is always measured in time (typically months).

During my first job out of college as an engineer, I became an economic evaluator. That meant part of my job was to evaluate capital investments and decide whether they represented a good investment for the company (including evaluating the payback period, NPV, and ROI). So that was where I learned a lot about financial analysis and how to talk about numbers with CFOs.

The magic of these financial metrics is that together they give you a great picture of the impact of an investment. Essentially, you can measure ROI on anything. The formula is simply to subtract the cost of your investment from the gain of your investment, and divide it by the cost of your investment. That’s how we’re able to build ROI calculators for so many different scenarios for our clients.

People confuse financial terms all the time, so if you’ve gotten this one wrong in the past, don’t feel bad. Just don’t let it jeopardize your ability to close a deal.

What’s your understanding of the term “ROI,” and how frequently does it crop up in your discussions with prospects and clients? Share your thoughts in the comments section. 

Strengthen Your Sales Pitch with a Business Case

During my conversation with Kevin Purcell of Hewlett Packard some weeks ago, we discussed the idea that a business case has become a staple of success in sales. Not only has it become a staple, but we also agreed that this is a permanent condition.

Here’s more context. When the economy was good, sales and marketing would generally expect to rely on deeper pockets and looser budgets. CFOs or other budget-minded decision makers were not necessarily as likely to be involved in every purchasing decision, unless it was a major investment. However, in a slow economy, a strong business case was necessary to get budget allocated even for smaller investments. Without solid numbers to support their position, sales and marketing didn’t have a lot of leverage to close deals.

What I see happening now is a permanent shift toward needing a business case. Whether the economy is soft or strong, everyone is thinking like CFOs and scrutinizing projects for indication of a measurable ROI. For example, this recent blog post, “Six Steps to Building a Better Business Case,” on Inc.com takes for granted that a business case is a necessary component of a successful sales pitch. The very first question they advise asking when assembling a business case is “What is the potential value in this situation?”

“A strong business case begins with a logical financial and strategic foundation for value creation.  If you are selling a product, this is as simple as explaining why the product creates more value for the customer than any alternative. If you are selling the idea of a business partnership, you’ll want to focus on why the partnership will create a high return on investment.”

The days of being able to “wing it” and close deals without a compelling economic business case and cost justification are over.  The new normal requires that we all help customers to cost justify our solution to be included in the business case portion of their budget authorization.  If you aren’t doing that, then chances are you aren’t closing as you should be.

What are you doing to help customers cost justify the investment in your solution?

Why Sales Reps and Marketers Should Avoid Spreadsheets

Have you ever made calculations in Excel to help convince a prospect to invest in your solution, only to find that a simple data-entry error foiled your analysis?

If so, you’ve got something in common with two economic professors, Carmen Reinhart and Ken Rogoff. In 2010, they published a paper, “Growth in a Time of Debt,” in the American Economic Review.  Based on their data, which they stored in an Excel spreadsheet, they estimated that countries with 90% debt levels experience negative economic growth. Their findings had an enormous influence on the economic community; their data was used widely in economic analysis, particularly during the height of the Greek banking crisis.

Along with the attention, however, came a backlash. And last week, a group of University of Massachusetts economists tried to run the same numbers and ended up exposing the fact that Reinhart and Rogoff made an error in Excel that essentially “caused an entire subset of countries to be excluded from their data set.” Reinhart and Rogoff have since come forward to acknowledge the data-entry error.

In my view, this mishap is a great example of how quickly your credibility can circle the drain with customers and prospects. As Paul Krugman pointed out in his New York Times column last week, Reinhart and Rogoff had already established their credibility with the economic community based on a widely admired book they wrote on the history of financial crises. But what happens to that credibility now that this simple (and avoidable) error has come to light?

business people with chartsIn my mind, the use of Excel in this case is a cautionary tale for sales and marketing professionals. Any company trying to convince customers that its service or product is a sound investment cannot afford to base its business case on numbers generated in a manual spreadsheet. According to a 2008 analysis of multiple studies on spreadsheets finds that “88% of spreadsheets have errors,” and that “Spreadsheets, even after careful development, contain errors in 1% or more of all formula cells.”  A simple mathematical mistake is easy to make, and even a small mistake in a complex financial analysis can throw your analysis off wildly and undermine your credibility.

The fact is, a complex sale typically involves complex calculations. The more faith you put in manual data-entry into spreadsheets, the more you risk making a simple error that could potentially result in a mistaken conclusion. This is exactly why we’re strong advocates for automating calculations in an ROI calculator. Not only will an ROI calculator prevent data-entry errors, many prospects are more inclined to put their faith in numbers generated by a calculator that’s been created by a third-party vendor. The end result? Your credibility stays intact.

For more information on how to build a quantifiable business case with value calculators and ROI tools and to see examples of value calculators, visit www.stratavant.com.

Do Sales Reps Need to Be Financial Experts?

I contend that your sales reps need to be financial experts about as much as your CFO needs to be a master of working a room.  Recently I read a great post on Inc.com, “Selling in the Post-Internet Age” about how the Internet has fundamentally changed the buying and selling process.

As the author points out, customers today are better informed, and the buyer education process has been turned upside down. Customers are doing research on you and your solutions before you get a chance to talk with them. And you’re not necessarily in control of the information that’s out there for them to discover on their own.

Customers are also overwhelmed by choices. When buyers do engage with you, they want a different level of help, and the job of a salesperson has become a lot more complex. It’s no longer enough to simply deliver information. Buyers want you to help them understand how your product or solution fits their unique needs and will deliver results.

I strongly believe — and many successful salespeople will agree, that there are no shortcuts when it comes to helping customers identify the magnitude of their problems. As the post states, “Today, selling to businesses requires business acumen and in-depth industry experience, so that the seller can take responsibility for key functions inside a customer’s account. Selling often requires the ability to build an ironclad case for ROI.”

This last point is a great one. In fact, one of my recent blog posts was about how building a strong case for ROI can help reps gain credibility with prospects. But one point I’d like to make is that reps by no means need an MBA in finance to make that ironclad case.

A financial expert could build a financial analysis from scratch. They would take into account the benefits, how to calculate those benefits, an understanding of the customer’s financial statements, and other details like cost-of-capital to build a cost justification analysis.

spreadsheetHowever, it would likely take a financial expert around 40 – 80 hours to build this kind of analysis from scratch. That hardly seems to be worth the time, especially when it would need to be done again for each opportunity. A better approach would be to embrace an ROI calculator that can be used over and over again with prospects in your target segment. With simple navigation and ease of use, an ROI calculator built upon a software platform can easily uncover the costs of buyers’ problems. These sales enablement tools seamlessly calculate the key financial metrics (e.g., ROI, NPV, IRR and payback period) that buyers are interested in when evaluating whether or not to invest in your solution.

The key takeaway for sales leaders is to make sure your reps are focused on understanding your customer’s business first, and then provide them the tools to help with the financial analysis. In other words, don’t try to make them financial experts. If you do, they’re likely to make mistakes, which will probably hurt their chances of making the sale.

Another way to think about this is to consider what sales reps are good at. You probably wouldn’t dream of asking your CFO to act as an account executive. Why? You’d likely wind up with a really great spreadsheet and no sale.

Sales reps are typically good at building rapport, understanding business problems, negotiating, etc. Given the proper sales tools, they can strengthen their repertoire by establishing customer dialog around business value. I believe that is how sales organizations will succeed in the post-Internet age.

What are you doing to arm your sales reps to win in the post-Internet age? Post your comments below.

Help Your Sales Reps Build Credibility with Prospects (Why the ROI Calculator is Not Quite Dead)

When I read this recent blog post, “Death of a Sales Tool: The ROI Calculator,” by Drew Zarges, one of the first things that came to mind was a brief scene from Monty Python and the Holy Grail.

The character Concorde (played by Eric Idle), trusted assistant to Lancelot (played by John Cleese), has just been shot in the chest with an arrow bearing a message that seems to have been written by a damsel in need of rescue. Vowing to respond to this cry of distress, Lancelot declares, “Brave, brave Concorde! You shall not have died in vain!” To which Concorde raises his head and replies, “Uh, I’m-I’m not quite dead, sir.”

I’m in the ROI calculator business, so I obviously disagree with the premise that the ROI calculator is dead as a sales tool. On the other hand, Zarges makes some valid and valuable points. Most ROI tools suffer from a few fundamental flaws and therefore undermine the credibility of the tool (and the provider company), as well as any sales rep that uses it.

I do believe, however, that a properly built and deployed ROI tool can increase not only the sales rep’s credibility, but also improve close ratios and result in bigger deals. Here are my responses to three of Zarges’ observations about ROI tools.

Point 1: “Your reps never learn how to calculate the value themselves.”

First, sales reps need many skills, but I’m not convinced that strong financial-analysis skill is paramount to sales success. The sales process is complicated enough understanding all of the roles and influencers and managing the relationships, without also needing to be a financial expert as well.  Second, when properly built, an ROI tool shows the underlying calculations for each business value benefit articulated in the business case. This allows both the sales rep and the prospect to understand how the value is calculated without necessarily being able to build the calculations on their own.

I wrote a blog post about why spreadsheets fall short as selling tools, and I believe Zarges is referring to those kinds of homegrown spreadsheets. Black-box tools where reps or prospects enter a few numbers and a financial justification magically appears damage the credibility of the tool as well as the providing company.

Point 2: “The calculator only solves for the ideal problem.”

Again, this may be true of many calculators and most homegrown calculators, but a properly developed calculator uses a set of default assumptions only as a starting point. The tool should then allow the rep and/or the customer to modify all of the numbers. Any hidden calculations or hidden assumptions undermine the credibility of the analysis. Ultimately, you want the customer not just to buy into the numbers — you want the customer to own the numbers. They must believe the full results of the analysis and all of the underlying inputs and assumptions, and they must be ready to defend the results if challenged by anyone internally. Any hidden or fixed number undermines their ability to defend the analysis results. Most tools today are filled with hidden and fixed assumptions and don’t allow for modifications based on unique user situations.

Point 3: “The calculator is solution agnostic.”

This can sometimes be true of an ROI tool, but not of a Total Cost of Ownership (TCO) tool. And this is true of an ROI tool only if your offering has no differentiated value for your customer. If your offering has no differentiated value, then you have a bigger set of issues to deal with than the sales tool you’re using. In a competitive situation when trying to show why your offering delivers more value over the competitor’s offering, a TCO tool is sometimes a better choice.

In the end, however, the customer will likely have to build an ROI-based business case to get the funding approval for the project. The funding-approval business case (sometimes called capital authorization or project authorization) is never based on a comparison against a competitive offering — it is always based on how the project will impact the financials currently projected. Thus, even if you need a TCO tool during the sales process to show more value than a competitor, you’ll probably also need an ROI tool to show the customer how deploying your solution will have a beneficial impact for them financially.

Credibility in sales is everything. Customers want to purchase from people they trust and who can deliver solutions to unique problems. If the sales tools you provide your sales reps undermine their credibility, then you’re better off not using the tools. But I’ve seen many cases where a well-designed ROI calculator absolutely helped sales reps move the deal forward and win the sale.

Back to The Holy Grail, in the end, Concorde, who is “just fine,” is being left behind by Lancelot as he goes off to save the supposed damsel in distress, and replies as Lancelot ‘rides’ off, “I’ll-um, I’ll just stay here, shall I, sir?”  In the end, value calculators and ROI tools will still be here to back up the sales team when they need them.

To see an example of an ROI Calculator that can help you build credibility, visit http://www.stratavant.com/roi_calculator.html.