Ever heard someone advising you to stay away from “financial mumbo jumbo” – financial terminology that could confuse or intimidate the prospect– when making a sales pitch?
This is flawed thinking. Frankly, it stems from a sales professional’s own unfamiliarity with financial terminology, not the prospect’s.
I once asked a Catholic priest if he thought someone could raise a child to be Catholic without first becoming a Catholic himself.
His answer was, “Son, you cannot give a gift you do not own.”
The same concept holds true with financial analysis. You cannot effectively use financial terms with a prospect if you do not understand them yourself. However, once you are comfortable enough with these terms that you can explain them to anyone, they will become invaluable arrows in your efficiency-focused professional selling quiver.
For instance, what if your goal were to open a prospect’s eyes to the reality that generating additional profit at the bottom line is a lot easier by shrinking expenses than by generating revenues? To make this comparison effectively, you need to understand the concept of net margin.
The net margin is the amount of revenue leftover after all expenses, including overhead, have been paid. If you have $1 million in revenue, and your net margin is 1%, you’ve made $10,000. In this example, if you save the company $10,000 in overhead with your energy-efficiency project, that would be the equivalent to the $10,000 in profit that the company earned “the old-fashioned way” by driving $1 million in revenue.
Now keep in mind that since net margin is influenced by fixed and variable costs, some prospects may prefer to use “contribution margin” or some other metric than “net margin” when performing this calculation.
Bottom line (pun intended), the more you open a prospect’s eyes to the relative difficulty of driving revenue versus seeing more margin on the profit and loss statement as a result of reducing unnecessary utility waste, the more interesting your solution will be for your prospect.
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