There is no doubt Buyers have made significant changes in how they make strategic buying decisions. They have not only changed their process, they have changed the players and the rules. The current Buyer has many more steps in their process than in the past and expects today’s sales professional to be more informed, better prepared and be able to articulate their value. When the Buyer changes a process or step in their process it kicks off a chain of changes the Seller must adhere and adapt too. Below and in the coming weeks I will explore the problems caused by the changes the future the Buyer is making.
Today’s sales professional’s have NOT made the necessary adjustments within their process, and the way they approach a Buyer and ultimately try to sell to them. The process for the Seller is essentially the same from the past and the present. This misalignment is the source of much frustration for sales professionals, sales management and the owners of businesses all around the world who have not adjusted their approach. Don’t get me wrong, today’s sales professional has made some changes. Technology has forced this. The internet, Facebook, Twitter and the rest of the social media outlets has caused (or forced) today’s sales professional kicking and screaming into the present. The problem however is the future.
Here are the first two problems sales professionals are going to face in the future of selling.
When Seller’s made strategic buying decisions in the past, the decisions were typically made with a single purpose in mind by a department head or mid level manager. In the past it was less complicated to identify the decision maker, and easier to get to them to make your sales pitch. Today, the same decisions that were made in the past are now made with a broader view of the organizations needs. For example, if a Buyer entered the market looking for a fork lift to improve productivity in his warehouse, he would evaluate his options based on his immediate needs. (Improving efficiency in the warehouse) The fork lift can move goods easier and faster through the warehouse. Remember in the past Buyers were looking more at features, functions, and benefits than they were at solving a larger problem. Case in point, all forklifts can move goods around a warehouse. But the added benefits of hydraulics, comfort, tire size and lift capacity were some of the features the Buyer wanted to evaluate.
Today, Buyer’s looking to purchase a forklift would evaluate the many options the forklift can offer them like reducing the amount of floor space needed to store goods by building racks and going up, as opposed to adding additional storage space. The decision to add rack space as opposed to building another storage facility is a major decision many companies may face. The purchase of a fork lift can weigh into that decision. Mid level managers typically are not involved in a decision like this. They are focused on their immediate needs, not necessarily the needs of the organization.
The problem is this. Decisions have moved up into the C-Suite and often times by committee. Identifying the decision maker will become more difficult because of this point. Getting to the C-Suite will prove to be more difficult as well, and gaining an understanding of corporate needs will be a challenge going into the future. Future Buyer’s will make it much more difficult for Seller’s to participate in the early stages of the buying process. They will isolate themselves on the financial analysis, create internal teams to participate in needs development, and buying strategies will be exclusively made at only the C-level.
Since the future buyer will be difficult to engage early in the sales process, you, the sales professional will need to have a compelling reason for the Buyer to talk to you. Be aware, the future Buyer may start their buying process as much as a year ahead of time. They will research, kick a lot of tires and develop a strategy over an extended period of time.
CFO’s Are Going To Be In On All Strategic Decisions
The next problem the Seller will face is there will be a finance person involved in most strategic buying decisions. The inclusion of finance in the process of making a strategic buying decision will cause a chain reaction of additional issues for sales professionals that must be considered.
However, first let me prove the point by citing a research report contracted by CFO Magazine. Martin Akel & Associates conducted a study in 2011 for CFO Magazine on the trends in procurement by US corporations. The study, “The Senior Finance Team and Corporate Purchasing Decisions…” looked at the role of finance teams in corporate purchasing decisions. This study stated the following:
“Nine of ten executives report that members of their company’s finance team are now collaborating with business management on key issues affecting the selection of vendors.”
o 98% collaborate on developing / reviewing business and functional requirements
o 95% collaborate on preparing / reviewing financial justification and ROI analysis
o 85% collaborate on speaking with and evaluating prospective vendors
This single change of using the finance department in the Buyers process will cause many additional issues for today’s sales professional to consider. The first issue is the language of the C-Suite is different than mid level management. When you communicate at the C-Suite level they are more concerned about your value as it impacts their business metrics like, cash flow, debt to equity, profitability, DSO’s, etc. These metrics are the foundation for the language of the C-Suite. Today’s sales professional will need to learn what metrics are used, what the metrics mean and finally, the Seller’s value as it relates to the Buyer’s C-Suite metrics.
Caution, this is not a trivial task. Learning the metrics will take time and effort. Learning how to identify your value and its impact on the most important metrics will become a must have to compete in the future. There are as many as thirty metrics Buyers will use in consideration of a major purchase. At the top of the list is, cash flow, operating costs, DSO’s, Profitability, and earnings. This is a good place to start.
We came across a great web site on financial metrics (C-Suite metrics) norms by industry from Inc. magazine. The web site is http://www.inc.com/profitability-report/index.html. Please note that the data is supplied by Sageworks, Inc., www.sageworksbenchmarking.com <http://go.madmimi.com/redirects/3a96e404b8bcf8ae75139bdf545bfa0c?pa=7369847664>. The web site displays financial metric norms for 19 different industries, including mining, construction, retail, and management services, among others. It gives you the normal range for metrics like earnings before interest, taxes, depreciation, and amortization (EBITDA), net and gross margin, debt-to-equity ratio, return on assets, return on equity, and accounts receivable days’ sales outstanding (DSOs). There are about 20 different metrics divided by industry that you can examine for free.
The next change for sales professionals caused by the finance department involved in the strategic buying decisions is the need to be able to communicate with the C-Suite. It is one thing to understand your value, it is another to be able to articulate it. In our example of the fork lift, a mid level manager and a CFO would have very different views as to why a new fork lift is needed. The mid level manager would discuss the issue as improving efficiency in their warehouse. i.e. moving goods quicker and more efficiently around the warehouse. The CFO on the other hand would consider the efficiency improvements, but would want to understand the impact on cash flow, profitability, operating costs, and perhaps corporate growth strategies. The ability to communicate effectively with both positions is a major key to selling in the future. Sales professionals will need to learn to be a chameleon as they communicate at different levels within a Buyers organization.
In the study conducted by Martin Akel & Associates one of the questions that caused me to realize an additional issue for sales professionals was this. Check the situations that cause your firms finance team to become involved in the vendor selection process.
“Purchases that affect multiple functional areas or departments” is a result of involving the C-Suite and specifically the finance department. Having finance involved for this reason will cause a sales professional to perform a different deeper research effort. The future Buyer will expect the sales professional to have a global understanding of their needs. If they are expanding or contracting the business for example. Information you can only get from news articles, investor calls or an annual report. The future sales professional will need to understand and learn to use research tools like Hoovers (www.hoovers.com) <http://go.madmimi.com/redirects/34596b51211c828fc71d05cf0c2de5c6?pa=7369847664>, InsideView (www.insideview.com) <http://go.madmimi.com/redirects/1a6cbb12861d020372db1d038cad7549?pa=7369847664> or ZoomInfo (www.zoominfo.com) <http://go.madmimi.com/redirects/61884ff5c4d28c828738406519722eae?pa=7369847664>.
The future Buyer is going to rely on the finance department to provide strategic buying input including Return on Investment (ROI), Total Cost of Ownership (TCO) and other economic impact indicators. The future sales professional will need to learn and understand their value and its impact on these analysis reports provided by the finance professional on the Buyer’s team.