This example is a real-life one lifted from my own experience. We had an idea that recycling expensive metal used in the investment casting of aerospace parts would be a useful service to offer. Metal prices were at record high levels, and these guys used hideously expensive metals like rhenium and silver, to name two. Used parts were just stockpiling up everywhere because no one knew what to do with them. This type of project would have the potential to fill up the bottom of my sales funnel – the best part.
I called on the major aerospace players and asked them if this was a problem. YES. That was music to my ears. I decided to pick just one company to focus on initially to prove out the concept and the technology. We sketched out our solutions and got basic cost data put together for each process. The various solutions ended up being vastly different in cost structure.
One solution was very cheap and could be rapidly implemented – but the purity of the resulting metal was less than prime and it would have to be diluted with pure virgin metal to be used again. The alternate solution was very capital intensive and would take a year to implement, but the produced metal could be used as is – in fact it was purer than the incoming material.
I called on my contact at the company; his title was Technical Consultant, which at this company was the very top of the pecking order for the technical ladder, so he was the right person to be talking to. I asked him if it would be possible to put together a team from his side that could help evaluate our solution from both a technical and business point of view. He replied that he was the correct technical contact and he would put me in touch with the responsible buyer.
We had an initial teleconference where our team laid out the two solutions and talked about the pros and cons of both methods. At this point both paths made economic sense for them, but Option A was clearly less expensive if they could use the less pure metal. I suggested a trial run of Option A, since we already had that equipment on site.
A $50,000 purchase order was cut less than a week later.
Do you think the PO would have been so easy to get without the correct buyer in the loop? Note that I anticipated that this would be a possibility and had previously worked out the costs to arrive at the price.
As the work commenced, it was apparent that we needed to involve another of their vendors into the loop. They would be responsible for the initial melting of our recycled material into a usable alloy. Well, this group is now starting to get difficult to manage. Conference calls now had an average of seven outside people on the line in addition to our four or five. But this is the price to be paid for this type of collaboration. It got so involved that I ended up purchasing a Web hosting service to better facilitate the discussions via video – I even bought each of the major players a video camera and microphone to use. Talk about good will!
To cut down on the length of the story, the initial solution didn’t provide good enough quality for them to use, so we needed to further investigate the second option. Things get sticky here because your getting major quotes for capital equipment over $1 million and you really don’t want to tell your prospect what things cost or they will beat you down to unsurvivable margins. I was upfront and only told them what price we would need to charge to make it an attractive business to us.
They fought very hard to get more cost data, and sometimes you have no choice but to surrender. But in this instance, I had the upper hand. They had so much time invested with me that their switching costs to going with a competitor would be too expensive and time consuming. I ended up giving some detail about depreciation terms and usage estimates, but equipment pricing was never disclosed. See the article “Negotiating With the Bean Counters” for details about how to handle these situations.
The sale was actually pretty easy at this point. I went into a multimillion dollar and multi-year business opportunity with a one-page, zero-surprise quotation and won the business over others who submitted “proposals as thick as phone books”. If you’re curious about timing, from my initial contact to the $50,000 order was one month. It took another ten months to secure the multi year deal – no one ever said that complex sales happen quickly!
It should be noted here that since we initially thought of the idea, there was no competition up front. After getting into a bit and working with the team, I suggested to my customer that they begin to work up a competing quote.
Why would I invite competition?
Well, for starters, I knew that for orders of this magnitude, at least two competitive bids are almost always needed. If we waited until the end to realize this, it could delay the order process by months. Secondly, maybe the competition had a better plan that we did. I doubted it, but one never knows. And if they did have a better idea, perhaps we could share in it. Either way, I had the customer’s best interest at heart and it showed.
There are many more interesting intricate details that happened along the way with this project, but the soul of the relevant matters to this article have been laid out.