Five Steps to Make Labor Savings Real in Your Business Case

If you want to influence your prospects and customers, your best bet is to create a business case to show how they can reap value from your offering. However, if the business case includes labor savings as one of the value drivers, you will often get push back from your prospect. It’s sometimes difficult to get buy-in for a number of reasons:

  1. Labor savings are often spread out among many employees and, therefore, receive the label of “soft benefits” that delivers no real economic value.
  2. Companies can only realize labor savings by taking some action (e.g., reducing headcount, not hiring more employees, or reassigning employees to other duties) that requires them to overcome the status quo.
  3. Sometimes the labor savings you’re proposing might create special hurdles internally for the prospective buyer (e.g., selling a solution that reduces IT headcount to an IT department can be tough).
  4. Companies have been promised productivity gains before, but rarely have seen the results (usually due to not taking the required action described above or lack of measurement).

These factors don’t have to stand in your way, however. The approach I advocate enables you to have a productive discussion with buyers around labor savings and build a defensible business case. Here’s how I suggest you proceed:

  1. Don’t use a broad brush and say something like, “We can cut ten percent of your workforce.” Rather, be specific and appropriately categorize the labor savings by role or work process. It’s better to say, “Our solution can save you three full time equivalents (FTEs) in your billing department.”
  2. Make sure that the buyer understands the size of his or her problem (i.e., how much is the issue costing the company) before you show the anticipated savings.
  3. Don’t force projected savings on your prospect. If possible, use an industry benchmark or case study as a starting point. More important, spend time communicating with your prospect until the two of you agree on an achievable savings. Taking the time to commit to this deeper level of engagement can help you establish credibility.
  4. Use what we at Stratavant call a “productivity capture factor.” This factor is a percentage with a value between 0 and 100 percent. It is used to provide a conservative estimate of the projected labor savings. Here’s an example. If the total projected labor savings are $500,000 and the productivity capture factor is 80 percent, the “new” labor savings becomes $400,000. This adjustment acknowledges that even if one hour of time is saved, it doesn’t mean that the one hour will be used to reduce payroll costs, avoid hiring another person for an hour, or be spent on some other value-added activity. In actuality, some of that one hour saved may be used by the employee to surf the Web or engage in water cooler talk. The productivity capture factor helps you proactively address that reality. When having this discussion with your prospect, keep these quick tips in mind:
     

    1. A lower factor should be used when the labor savings are made up of a little bit of time saved per worker spread across a large number of workers. Though saving five minutes a day per employee across 1,000 employees may add up to a large savings, it’s hard for an organization to realize that entire savings.
    2. A higher factor can be used if the labor savings come from hourly or contract workers as it’s easier for an organization to achieve those savings.
    3. A higher factor can also be used when the labor savings are concentrated in one role or job class.
    4.  

  5. Implement a ramp rate factor if your business case contains more than one year’s worth of savings. The ramp rate lets you tell your buyer that labor savings don’t happen overnight. Companies need time to orchestrate employee separations or retrain employees, so it’s better for you to tell your prospect that labor savings take time to come to fruition than make a promise that’s unrealistic.

Below is an example of these five steps at work. The labor savings benefit is quite focused (i.e., sales/marketing labor spent preparing business cases). The size of the problem is shown in row [i]. Row [j] illustrates how much the solution in question can reduce the size of the problem. Row [l] is the productivity capture and row [n] is the ramp rate. (For a larger view, click on the image).

Labor Savings

By adopting these five steps, you will have a credible way to include labor savings in a business case. And with labor savings in your business case, your offering delivers a more compelling value proposition to buyers.

Have you ever tried any or all of these steps? Share your comments below.

B2B Sales Always Comes Back to Selling Value

I recently came across this insightful blog post, How to Sell Value to Your Customer, that outlines a four-step process on how to sell on value. I want to take the last two steps and point you to some real life examples that might help you better relate to the points and achieve sales success.B2B Sales Always Comes Back to Selling Value

Step 3 – Identify Specific Values

This step really comes down to finding, for whatever problem your solution solves, where and how that problem manifests in your prospect’s organization. Read The Hidden Cost of Office Printing and Scanning: The Nuance Story to learn how one of my clients successfully addressed that challenge.

Step 4 – Quantify the Value

I would like to take point this a bit further. I believe that you not only need to provide an estimate of your offering’s value that is conservative to maintain credibility but also that the estimated value has to be something your customer believes. Your conservatism does no good if your prospect is even more conservative. It’s always a good idea to start with an industry benchmark or proof point if possible, but don’t let the conversation end there. Spend time with your customer until he or she is on board with the projected value. Read Success Story: How One ERP Vendor Proved Value to Prospects to discover how one of my clients used an ROI calculator to do just that.

How do you sell on value? 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?

Overcoming Objections in a Complex Sales Cycle

Learning how to overcome objections is an essential selling skill. It also takes time and experience. This is particularly true for sales teams with a long and complex sales cycle.

With that in mind, here are links to four of our most popular blog posts related to overcoming different kinds of customer objections during a complex sales cycle.

Make labor savings believable with customers

Prevent objections in the first place

Persuading the CFO

What to do customer asks for a revised report/business case

What’s the biggest objection you hear from customers, and what is your response? 

Three Qualities That Will Win a Buyer’s Business

Why does one sales team win a customer’s business, while another sales team finishes in second place? According to research announced in this blog post, New Sales Research: What Sales Winners Do Differently, three simple selling behaviors separate winning sales teams from their competition.

The findings of the study, published by RAIN Group, are based on an analysis of more than 700 B2B purchases from buyers representing $3.1 billion in annual purchases. Let’s look at the top three factors that buyers attributed to sales teams that won the buyer’s business:

  1. Educated me with new ideas or perspectives,
  2. Collaborated with me,
  3. Persuaded me we would achieve results.

Now let’s look at these same factors and see how buyers ranked second-place finishers in their ability to demonstrate these attributes:

  1. Educated me with new ideas or perspectives – 42nd place (dead last),
  2. Collaborated with me – 26th place,
  3. Persuaded me we would achieve results – 41st place.

Obviously the second-place sales teams were not trying to lose the deals on purpose. I think the likely problem is their failure to adapt to changing buyer behavior. For the second-place teams, unless they recognize what has changed (see the top three factors above), their only chance for success is if the winner is not in the deal and they are only competing against the third-and fourth-place vendors.

What I found encouraging was the behavior of sales winners. The three main verbs from their success factors (educate, collaborate, and persuade) are the building blocks of the approach that I advocate (aka, ROI-based selling). The keys are for salespeople to help prospects:

  1. Better see the magnitude of their problems,
  2. More clearly imagine how things could be better,
  3. Work with them to project measurable results, and
  4. Deliver a business case to overcome internal objections.

There are different types of tools that can help salespeople accomplish each of these four points and communicate value at different stages of the sales cycle. Regardless which tool you use, the fundamental approach remains the same: educate, collaborate, persuade. By shifting their focus to what buyers really want, I believe that second-place finishers can become sales winners.

Do you use tools that help you educate, collaborate, and persuade buyers? Do you agree these are key selling behaviors to win with buyers today? Share your thoughts in the comments section.

Don’t Overcome Prospect Objections, Prevent Them

Every sales rep dreads hearing prospect objections. From “Your price is too high,” to “Call me again in three months when I get my budget back,” it can sometimes seem like all prospects and prospects want to do is find reasons not to buy from you.

This is a frustrating situation for reps, especially when they feel — as the best do — that their product or solution could actually help the prospect and improve his or her business. So what’s the disconnect? If your offering can actually make life easier for this prospect, why is she spending so much time finding reasons to reject it?

I believe this dynamic happens when salespeople jump to a demo of their solution at the wrong time in the sales cycle. Most sales reps want to start the sales process by showing a demo and talking about product features. From there, they try to convince the prospect that their solution is the best.

In my view, salespeople need to start instead by identifying a problem the prospect has, and then defining how that problem is impacting their business including how much it is costing their company. Conceptually, this is a very simple thing to do. First, define what the problem is. Then, quantify how much the problem is costing the prospect. For example, the problem could be lost cross-sell opportunities, which could  represent $100,000 a month in lost opportunity. In other words, you’re making a business case to justify the prospect’s investment in your solution (which, obviously, will help the prospect solve the problem and increase their sales by $100,000 a month).

Why is it important to center the sales conversation on the business case instead of your solution’s features? Because a focus on features distracts prospects from their problems and pain points. When you start with the demo and features, you’ll get responses like, “Can we make this button blue instead of red?” This isn’t the kind of question that’s going to advance the sale, because there’s no focus on value. The value is not whether the button should be blue or red; the value is how your product can solve a real business problem for your prospect and result in real economic impact.

When prospects watch a demo, they’re on the lookout for why your product or solution won’t work. Even if your product could actually help them, they’re not ready to hear that yet. That’s because you haven’t walked them through the problem or pain point, which means they have no emotional nor financial attachment to solving that problem. However, if you start by identifying the problem and quantifying it, you’ve set yourself up to say, “What if we could solve that and save you half a million dollars? Is this worth spending more time to discuss?” If you’ve taken the time to lay this groundwork before showing the demo, they’ll have a different reaction when they see the demo. They’ll be thinking, “How can this solution help alleviate my pain?” rather than, “Why should I not purchase this solution?” It is a transformation in the mindset of the prospect.

Once the prospect is invested emotionally and economically, then you’re essentially preempting objections. When we work with clients to create ROI calculators, we frequently talk about the importance of getting the prospect to “own the numbers.” Put another way, the prospect has to understand how much the problem is costing his or her business. This is why an ROI calculator is an invaluable tool when it comes to building a strong business case. By the time you’re discussing how much your solution will cost, you’re in no danger of getting stuck in a debate about whether your particular features or benefits are “worth” a certain amount. Instead, the conversation is about how much the investment in your solution will offset the prospect’s problem.

In short, the best way to overcome prospect objections is to prevent them in the first place.

Have you ever used a business case to prevent prospect objections? How well did it work? Share your thoughts in the comments section.