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This is an email I received from Mike Southon who’s column you can read at the FT. I really liked it so decided to copy the entire email as Mike wrote it and added a few additions below. You can also see his blog here.
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Most entrepreneurs are very comfortable when offering products and services to friends and close associates. It becomes much more difficult when they find themselves in front of a seasoned professional: the purchasing director.
This is a natural consequence of entrepreneurial success for the size of sales orders to grow steadily to the point where the purchasing power of the person you are dealing with has been exceeded. Sooner or later they will have to refer you to purchasing.
This is a department used to dealing with salespeople. They have received formal training in how to ignore the clever persuasive and psychological tricks that are taught at sales workshops. They also have some advanced techniques specifically designed for turning complex commercial negotiations to their advantage.
Professional purchasers know exactly how to demand significant discounts, always backed up by indisputable logic as to why this is completely fair and reasonable. They also have convincing evidence of excellent relationships with suppliers of similar products and services, who they claim are ready and willing to offer higher quality at lower cost.
When I help early-stage entrepreneurs with their sales pipelines, it is common for them to talk about large potential orders that have been languishing in the system for a long time.
First, there was an initial meeting full of positive discussion and optimism; the prospective client was so impressed with the first sales pitch that the initial expectation of a modest order had been replaced by the promise of something much larger.
But since then there had been little or no progress. Calls and e-mails to the client have been ignored or referred directly to purchasing, who were intractable and unresponsive unless offered eye-watering discounts which would render the deal uneconomic.
Most early-stage entrepreneurs have limited sales experience, so I have to explain that this is the natural way of things, very familiar to salespeople experienced in the corporate environment. These hardened professionals have learned that it is much easier for a prospective customer to wax lyrical about how much they are impressed with your offering and make extravagant boasts about the size of their budget, rather than to explain the reality of the situation, which is usually much less favourable.
In the early stages of the sales process, the correct approach is to sidestep any grandiose promises of the potential buyer and instead to focus instead on the design and delivery of a small piece of work, such as a feasibility study involving a few days’ initial consultancy. The person across the table should be able to commit to this small order without referring the deal to purchasing. If they balk at this offer, then perhaps the promises of large revenues in the very near future was just talk.
Wise salespeople have a long-term strategy, which is to offer a number of small orders which increase in value over time. This develops both the technical and commercial relationship with the client until the inevitable day when the purchasing department need to become involved.
By then, you will have a number of people within the client organisation, who are very effective internal evangelists. They should be willing to explain to you the company’s purchasing processes and, if necessary, act as an advocate on your behalf with the purchasing department once the serious negotiation starts.
You will then find that purchasing professionals are human after all. They still demand discounts, but will be able to offer you terms of mutual benefit, such as much larger orders and better payment terms. This will be the reward for all your hard work in developing the client relationship.
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Mike makes some excellent points here about lowering the barrier to entry for your product or service. I experienced a similar thing in my earlier sales and marketing career and with the consulting work we do here, in that not everybody wants the full consulting programme, some people just wanted bite size affordable chunks of “know how” while others want to do it for themselves but learn from our skills.
Another interesting point that Mike makes is the groundswell that can be developed by doing small pieces of work and winning the hearts of minds of the staff involved at your customers site(s). We call them champions and they will help to fight your case inside the business.
Where possible though building a business case for what you are proposing can be a very useful tool and may involve you in dealing with business decision makers.
Having a check-list of the important factors that can affect a sale is really useful and one I’ve always found useful is MMEDDICC.
M = Metrics – basically a financial business case for your proposed product or service.
M = Money – is their budget allocated or will it require financing without budget (priority and authority).
E = Economic Buyer – having proximity or access to somebody with REAL buying power.
D = Decision Process – the steps your customer makes to finally generate an order.
D = Decision Criteria – the factors that need to be proven before a decision can be made.
I = Identifiable Problem – the need or issue you can help the business to resolve.
C = Compelling Event – change that will involve the company in having to buy.
C = Champion – the person that promotes you and your product and service internally.
All of this is made considerably easier though if your front end (marketing) is generating leads and qualifying prospects so that sales can focus on real business opportunities instead of tyre kickers. The business world is changing fast so don’t make it any harder than it already is.
Dependency on the factors above may change based on the type of sale your involved in, some don’t need a real face to face sales person like on-line sales while larger deals probably do and whether it’s a “need to have” like the parts that make up a product that your customer supplies or a more value driven sale which impacts the bottom line of the business requiring a financial justification you need to pick and choose that factors that will affect your sale and make sure you can clearly address them and differentiate yourself at the same time.
It really comes down to being realistic about actually getting an order. If there is no REAL reason to buy, then there is no REAL reason for an order.
From Business Growth Development, post Deal Slicing The Sale
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