Entries Tagged 'Examples' ↓

The long, long sales cycle

Long sales cycleOne of my favorite sales podcasts is the SalesRoundup Podcast, the hosts, Mike and Joe, are funny and are actually selling – i.e. not trainers, and it shows in what they say.

That being said, I have had a slight bone to pick with them for quite some time. I LinkedUp with Joe over a year ago and we exchanged a few emails talking about sales cycles. I explained that a sales cycle in my industry (advanced materials) can be as long as five years. Well the next Podcast I hear them taking a few shots at an unnamed person (me!!) and making fun of me a bit. I was jogging when I was listening to it and it really fired me up for about a day – I even shot them an email about it. So this post is to clear the air and explain my very complex sales cycle.

Among other things, I help develop and sell advanced metals to the aerospace industry. From the time of a first call with, say an engine OEM, to a production sale it can indeed take over five years. Would you feel comfortable flying across the country on an unproven material? There is so much testing and evaluation that you can switch jobs before you make the big sale.

So what is my solution? I obviously can’t wait for five years to make a sale. The solution is twofold. First, you better have more than one material at various levels in your sales funnel, or you better make the majority of your pay via a salary for the first few years as opposed to commission.

The second solution, and what I choose to do is to find more forgiving and risk taking markets to sell to before your main aerospace customer blesses it. Let me show a quick example to keep this post from getting too long.

Let’s say that your company has a new material called Xmetal. It is strong, lightweight and will never corrode. GE and Rolls-Royce are both very interested and in the initial stages of testing. Revenue from them buying your test material is maybe $150,000 per year, and your company is probably losing money at it.

Who else can use this awesome material? How about the motor sports industry? They will die for a lighter metal that can shave a few pounds out of their chassis – there’s another $200,000 per year. The medical industry has a need for a super-corrosive resistant metal for certain surgical tools. That equates to $500,000 per year at a healthy margin.

You see where this is going? You might have to support your big breakthrough with supplemental sales in the early years so that you don’t starve while waiting for the big payday.

Oh, so it’s five years later and your material is finally approved and you got your first repeatable production order – for $7MM.

I trust that my honor has been restored, in my own mind at least.

To show that there are no hard feelings and that I still love these guys, I asked Joe to comment on this strategy and here’s what he had to say.

Heck you should be put on a pedestal for taking on a product line with an average sales cycle of five years. – And I thought nine to twelve months was long. First let me comment on your strategy. Whenever you have a cycle that transcends fiscal years (and could up to five) you really should develop a laddered approach to the business timing. In your example, you close the $7M deal in year five. Hopefully you started a second and perhaps third cycle four and three years ago respectably. This way you will have built a nice pipeline of “large” deals and a predictable success rate.

I particularly like the creativity of approaching adjacent markets to supplement your revenue in the short-term. As you so nicely pointed out you do need to generate a steady stream of revenue! Although not your prime source, adjacent markets could be what your company needs to sustain operations during the “startup” period.

One final point I would like to underscore. In your post you alluded to the fact that many sales professionals will not make it the five years needed to realize success. Having said that, I would pursuit large deals with a team of sales people to mitigate the risk of turnover systemically affecting the outcome.

As far as the honor goes, anyone who successfully takes on a product line with a multiple year sales cycle is tops in my book. Five years! Man I still think you are crazy! LOL

Make sure to check these guys out – it’s about 40 minutes a week of free sales training.

Customer service before the sale

Customer service in salesWhen I was pondering starting this blog I talked to as many people as I could. One gentleman that kept coming up as a recommendation was James Durbin of Durbin Media. I emailed him for a quote on designing and setting up the blog site for me.

We talked on the phone for about an hour and by the end of the conversation James recommended that I take a stab at designing the blog by myself to not only learn the process, but to reduce costs until I was sure that I had a sustainable Web presence – which can take a year to determine. He further offered to have me email him when I had it set up so that he could take a quick peek and offer any suggestions.

Why am I telling you this? Because it is a prime example of having your customer’s best interest at heart regardless of any sale that might be on the line. Here were James’s options as I see them (and my personal analysis of each).

Option 1: Close on a sale with me by frightening me into needing his service. This might have worked, I was pretty green at this in the beginning. I’ve only done Blogger blogging previously and the thought of actually coding up my own site was daunting. The end result of this option would be a one-time sale of $x. Kind of sounds like a used car salesman.

Option 2: See me as a waste of time because I’m just starting out and won’t likely be spending a large amount of money. This can be a tempting option for busy people whose time is literally money. I find myself struggling with this option from time to time when dealing with graduate students that want to buy small amounts of material from me.

Option 3: Lend a helping hand and put me on a successful path without closing a sale. This is the option that James chose and it is in keeping with everything we talk about here. If this site grows and becomes more than I can handle, you can bet that I’ll look James up. Or if anyone comes looking for a reference I’d be happy to pass his name along – just look at this post.

So the bottom line is to think long-term and always, always have your customer’s best interest at heart. This is the only way to ensure a full sales funnel.

I recently asked James to comment on his sales philosophy and here’s what he had to say:

Social Media consulting isn’t about just billing hours, it’s about discovering what clients need and determining if your services make sense for them. Most of what I teach can be done without a trainer, but it’s a question of time versus money. Companies can’t get the results without putting one of the two in, and my job is to figure out which makes the best sense. Eric has a great idea for sales engineers, but he needed to build an audience before he put money into the site. Sometimes the best policy is just paying it forward.

P.S. I talked to a lot of other folks that would probably be considered James’s competition – and you won’t see me writing any glowing reviews of their service here!

Managing your customer’s business

Customer sales managementDon’t ever forget that your customers are juggling many business issues that you aren’t privy to. It can be tempting to scream at them because they aren’t doing the logical thing – from your point of view anyway.

For this example imagine that you sell raw material, say plastic pellets, to a company that makes plastic injection molding machines. They buy relatively small quantities, because they don’t manufacture parts in production. Their business plan is to sell machines to industry and allow them to make the parts. So your target here is their customer base, but they are difficult to account for and reach.

On the surface, this might not sound like a set up for a recycling sales example. What you need to realize here, however, is that getting recycled sales with your machine maker friend is orders of magnitude easier than tracking down all their customers and selling to and servicing them on a continuous basis.

So how would you handle this situation?

The Idea

Your idea is to sell large quantities of plastic pellets to the machine maker and have them turn around and directly supply the material to all their customers. Both you and your customer get a cut and you’ve helped your customer create a predictable and repeatable revenue stream. They no longer have to wait for a huge cash windfall from selling a million dollar machine a few times per quarter. They can now count on all their customers ordering raw materials direct with a steady cash flow.

You would not know that your customer has issues with holding out for a big sale and then stocking that money away in case the next machine has a delivery problem, if you weren’t so engrained in their organization. They trust you and value your input to solve their most pressing problems. And that’s what you’re going to do.

The Idea in Action

Assuming that you’ve built a strong level of trust with your machine maker customer, call them on the phone and ask for a visit to discuss “uncovering new growth and business opportunities.”

They will ask exactly what you have in mind and you can reply, “Well, we’ve been trying to think of ways to try to create more repeatable and predictable revenue streams for our company and one idea is to distribute our pellets through you directly to your customers. Of course, you’d get a markup on every pound sold – it would probably make a nice complimentary line to your machine sales. Your customers get the satisfaction of knowing that they have a reliable source of quality raw material at their fingertips.”

Hmm, that actually does sound like a good idea – I think we’ve talked about this before.

“That’s great to hear. Do you think we should tie in anyone else at this time? Since I’ll be flying out there and spending a few days, I think maybe we could nail an agreement down on the spot if your upper management could be involved.”

OK, let me set something up.

Do you see what just happened here? You went inside your customer’s business and saw an opportunity for a better business model and acted on that idea. You had your customer’s best interest at heart and found a way to increase their bottom line – and yours in the process.

If you do get invited, be ready to close and sign an agreement because they are obviously interested. So you’d have to do your homework and get the correct level of authority to give you a range of circumstances in which you have the freedom to sign the company up for a binding agreement. You don’t want to get into a situation where at the end of the day, they sign up and you have to say that you’ll take it back to your boss for review.

Example purchase order

In our last post we provided an example of a simple email sales quotation that you might send a prospect. In this post we’re going to review the hypothetical purchase order (PO) that came in response to that quote. Click on the below thumbnail to open up the PO.

Sample purchase order

Now what’s wrong with this PO? A quick look reveals two discrepancies with your quotation.

  1. The delivery date is two weeks after receipt of order instead of your stated four week delivery. Typically this can be explained by the fact that the engineer gave the correct delivery data to the purchasing agent and it just took two weeks to actually get through purchasing. If you can’t physically handle this delivery, you need to call purchasing and your engineering contact and get this fixed.
  2. You quoted your per unit price of $100 based on an order of 25 widgets. Your customer only ordered 10, but kept the same per unit price. If they are well qualified and you think that there may be future fruitful business, I would recommend ignoring this issue and simply fulfilling the order.

Example sales quotation

For all the sales talk that we’ve been doing, I realized that we’ve never shown an example of a simple sales quote. So here is an opportunity to purchase an example of a short quote that you might email someone. I’m a big fan of emailing quotes out to prospects rather than faxing – it’s the fastest way to fill up the sales funnel.

Please CLICK HERE to download a sample sales quotation for you to use as a template in your sales efforts.

Pretty straightforward. Our next post, however, will analyze the resulting purchase order (PO) and give tips on what to look for when you get it.

UPDATE: This example sales quote post is by far our most popular, if you want to learn more, visit our products page and purchase the 74 page eBook.

Example sales call

Sales callFor this example, let’s use an engineer salesman pitching a new stronger and lighter material than steel and he is focusing on landing a major aerospace account to kick the business off. The sections follow the list of questions from the post “Ask the right sales questions“.

Sales questions to ask yourself

  • Why would they ever accept a call from me?
    They are interested in using lighter materials to save weight in the airframes. Less weight means less fuel costs and more payload capacity.
  • Is my solution the best choice for them?
    Don’t know for sure at this point, but it certainly seems so.
  • Do I have high intent here?
    Absolutely, we could both benefit if this works out.

Sales questions to ask your prospect after cold call but before sit down meeting

Me: Hi Sally, I was hoping that you’d have a few minutes to talk about our upcoming meeting. I just want to make sure that I cover some of the high-level topics that you’re expecting me to cover. So what would be say the three key topics that you want to make sure I cover?

Prospect: Well, we really want to see property data showing how your material stacks up against what we’re currently using. Another important point would be price, we have to justify any cost increases with corporate, so we need to give them a heads up early in the process. Thirdly would be your ability to keep up with our production needs.

Me: Fantastic, you mention mechanical data, what properties most interest you and do you have any minimum values.

Prospect: Our main concern is tensile strength and low cycle fatigue properties and the minimum values are X and X.

Me: OK, sounds good so far, you also mentioned a cost justification – I’d like to start providing you with that information right from the start. Can you tell me a little about how you measure costs and what they typically are?

Prospect: We say that we only care about life cycle costs, but the initial purchase price is what really drives our purchasing decision.

Me: Hmm, I doubt that we’ll be competitive when the initial purchase price is the main purchase discriminator. Is there someone in your organization that we could invite to this meeting that could help explain how we could better position our life cycle cost advantages.

Prospect: I’ll ask our CFO to sit in.

Me: Alright, you also mentioned a concern about our production capacity. Valid concern. Do you have a feel for what your annual demand would be?

Prospect: We use about 10-tons of material and that should stay steady for at least the next five years.

Me: Well, as you know we’re a small company, but I think I’ll be able to adequately convince you that we won’t let you down when delivery time comes. Perhaps later in this process you and your team could stop in for a tour of our facility.

Me: I don’t want to take up much more of your time. Is there anything you think I should have asked you or anything else that you’d like me to prepare before our meeting?

Prospect: No, I think we’ve pretty much covered everything.

Again, I could go on and on with this example, but I think the main point should get across. You are feeding off of your prospect’s previous answers to fuel your follow up questions. Your goal is to understand their technical and business issues at least as well as they do.

Example sales scenario

Knowledge is powerThere are so many purchasing scenarios that it might seem difficult to choose a representative example. If you really look at this layer, however, the steps don’t really change much regardless of if you’re selling chewing gum to Wal-Mart or heating shields to NASA.

Setting the stage for this example requires you to picture yourself as a raw material provider to a medium size business that is making a lot of money by turning your material into finished goods. You have competition, but your two advantages are that you are the only domestic source and your quality is second to none. Your weaknesses on the other hand are price, and lead-time.

Based on all your work up to this point, you know that they really want a domestic source for this product and it might even become mandatory in the future. They like your quality, but others are also acceptable. You need to work on lead-time, and then there’s the price issue to deal with.

You go in with your zero-surprise proposal and go over it in detail with your contact Sally. No surprises are found and she assures you that it will fly through procurement and you should see an order in about a week.

A week passes by.

Another week, still nothing, but you don’t want seem desperate, so you don’t call.

Finally on the third week you call Sally and she doesn’t even know where it’s at in the process. Perhaps you should have scheduled a call two weeks ago. At any rate, she checks into it and Jack the CFO has it. You’ve never met or even heard of Jack, but he now controls your destiny. You ask Sally for permission to call on Jack and she gives you his number.

“Jack, this is Eric on the line. I’m calling to check and see if you have any questions on our proposal.” To be honest Eric, it isn’t that big of a priority to us right now and I haven’t even looked at it. “Oh, I see. I must have misunderstood Sally; I thought you needed this material delivered by the end of next month in order for you to win the GE account?”

Complete silence…how could you possibly know that!!!

As the oft quoted saying goes – knowledge is power.

Jack thought he had the upper hand because you’ve never met him and he has a big scary title. But if you did your homework, you have the leverage because he doesn’t know exactly how much you know.

“Jack, are you still there?” Uh, yes. Well would you be willing to come in next week to present your best and final offer.

Oh how the winds of desperation have shifted.

You now have the leverage, don’t give it up. You are providing a valuable service and helping your prospect get a large amount of business and deserve to be properly remunerated for it.

Example Whiteboard Sales Negotiation

Whiteboard sales strategyAs mentioned in the general post on sales negotiation, keeping your sales funnel full depends on a continuous flow of successful negotiations with engineers and their buyers.

A quick example of the whiteboard strategy follows. The scene is that your buyer just said they want to negotiate your proposal and you walked up to the whiteboard to list out the issues and had them rank them in order of importance – you secretly know your own rankings.

whiteboard5.png

Looking at the relative ratings reveals instant compromises that can be made to move the sale along quickly. For instance, it appears that you might be able to offer holding a certain level of their inventory on consignment if the price could be increased by just 0.2%. Also, you might be able to work in a second shift to expedite lead times if their minimum order levels are raised 10%.

See how it works? You simply exchange what’s important to you for what’s important to them. It’s all done in good faith, but I like to keep my ratings secret to have a little extra leverage.

Cold calling script example

Cold calling scriptI’ve gotten several requests to provide a sample cold calling script that I use. We’ve given some sales tips in “Getting the initial sales appointment” that should alleviate much of your need to conduct cold calls – but it’s still an important part of your overall sales arsenal.

Some folks call this a script – I tend to call it a cheat sheet. The idea isn’t to memorize the text, but only to force yourself to think through a few scenarios and be able to talk confidently to get that first meeting.

For this example I’m going to stick with our now familiar package tracking technology example. The sales script is numbered to help put some structure to this. Here you go…

  1. Hello, this is [NAME] from [COMPANY], I’m hoping to talk to the head of the logistics department. (response) Great! Oh, before you transfer me, could you please give me the name and extension in case we get disconnected. Thank you so much for your help.1a. (If you get resistance here) Let me tell you just a bit about our technology and perhaps you could recommend what department I should be talking to. We have a product tracking technology so much more efficient than the RFID technology that you use now, it would save each of your stores over $1.25 million. I was assuming that this would be the logistics department, but perhaps you could steer me elsewhere?
  2. (Now transferred to the correct person) Hi Mr. Prospect my name is [NAME] from [COMPANY], I was hoping to set up a time to talk with you about our new product tracking technology that can be used to dry and wet goods from underwear to crinkled up bags of frozen chicken nuggets. Initial tests show it as 28% more efficient and by our calculations, it should save each of your stores about $1.25 million per year. (pause as long as needed here until Mr. Prospect talks)2a. (If you get resistance here) Look, I understand that you are extremely busy. I also understand the awesome responsibility that you have in tracking each and every product in each and every store on the globe and on every truck and in every warehouse. If you give me a ten-minute meeting and we can’t convince each other that there’s a possible match here, I’ll do the honor of throwing myself out the door. (again, long pause here)
    Fantastic, I’m going to be somewhat in your area in two weeks, would you have 10-minutes the morning of the 22nd?

When he finally agrees to meet – anyone and everyone has 10-minutes to spare – it’s going to be tempting to keep him on the horn and ask more questions. Don’t. Just go prepare for your actual meeting. Love to hear your thoughts on this.

What’s a product worth example

What to charge?In “Determining what a product or service is worth“, we eluded to an Excel tool that would automatically calculate what you should charge for your product or service. Of course we also gave the caveat to not blindly use the numbers provided – they are for reference only and the tool’s main goal is to make you think through each layer in your prospect’s company to figure out where you stand.

Well, here’s an example analysis – please leave a comment if you want the actual Excel file behind this post, I’ll shoot it right over your way.

Let’s suppose that you’ve spent several months selling an engineer on your gizmo, and you put together a $25,000 proposal and send it off in the mail to her. Then you sit back and cross your fingers. Your spirits are high because through hard work you know that the engineer values your product at $25,000 and that’s exactly what you charged – so it’s a no-brainer.

But what’s actually happening on the other end with your proposal?

The following table shows how your gizmo is valued by the various stakeholders and their respective pulling weight.

Stakeholder

Perceived value

Relative pull

Engineer

$25,000

15%

Engineering Manager

$20,000

10%

Purchasing Agent

$12,500

20%

CFO

$17,500

40%

CEO

$18,000

15%

Plugging these values into the Perceived Value Equation yields a PV of $17,950. You’re $25,000 proposal suddenly looks 39% overpriced! Chances are that your proposed solution may solve the engineer’s problem, but the rest of the team has a smaller need and your gizmo is overkill. Your sale is in major trouble.

The following screenshot shows what this analysis might look like in the accompanying Excel file (again, leave a comment asking for the file if you want it).

Excel - What’s a product worth