Archives For roi

Walking along the Arabian Sea

Yesterday we completed day 2 of the Making Money with Security workshop – working on messaging.  Wherever I go, there seems to be a disconnect between marketing and sales…at some point in the value proposition development portion of my workshop, I ask someone to show me what they would deliver if given a high level appointment today to talk about security, and what their company can offer.  There is always a hesitation – no one wants to stand up and show me.  Why?  Usually it is because after a day and a half of discussion on messaging, they realize their presentation does not contain the elements of a great security approach.  Marketing has delivered a set of slides with talking points that are all about them and their product.  There is nothing new, nothing educational,…nothing amazing.  No call to action other than – let us know if we can help.  Nothing to cause the meeting attendees concern within their own business and approach.  Yet every day companies like RSA, Microsoft, the Income Tax division of India, etc. are defeated by cyber criminals.  There is an urgency; why can’t we demonstrate this in our messaging?

© 2011, David Stelzl

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I was recently talking with an account manager responsible for breaking into a large fast food chain.  He could have brought in his PowerPoint slide deck riddled with company statistics, product offerings, roadmaps, and perhaps a list of customers currently using his product.  If he had, he would have looked just like everyone else calling on that account.  Instead, he did the unthinkable…

Reaching out to the local fast food franchise, he explained his role as an account manager to the local store manager and offered to come down to their location and work for free.  His assigned task the first morning of work was to help unload the eighteen-wheeler that shows up around 6:00 AM every morning.  It took about an hour to unload that truck, along with half of the people working at the restaurant.  But look what happened.

After working there for a couple of weeks, this rep was able to compile a compelling list of operational inefficiencies, from which he laid out a roadmap for improvement.  Calling the headquarters was now an easy task, armed with all kinds of data and recommendations that could turn around any fast food restaurant.  He had best seller material in hand.  He requested a short 20 minute meeting, citing his observations of cars leaving the restaurant simply because the truck was in the way.  He offered software and hardware solutions that would turn this truck around in about 15 minutes, freeing up parking space, making it easier to get in and out of the lot, and freeing up an army of people to go serve customers!  This is what executives want to hear, and this led to a multi-million dollar sale that put him ahead of quota after one short 20 minute meeting.  What are you doing for your customers?

True operational efficiency  can be easily shown if certain criteria exist.  First, you absolutely need to be in touch with you customer’s business, and second, your offering has to affect the business process in an undeniable way.  Business opportunities can be created when both of these are true, as long as you can get an audience with someone who cares.  Armed with the right message, this is not difficult.

© 2011, David Stelzl

Uniquely Yours…

March 29, 2011 — Leave a comment

Photo taken by David Stelzl

As I mentioned yesterday, when someone requires you to deliver ROI or TCO numbers as part of the red-tape process, the sale really isn’t based on ROI or TCO, but rather this is just a protocol the company has for vetting possible providers.  In most cases they will have a format or model for doing this, and your best bet is to work with them, using their models to make your case.  However, don’t fall into the trap of believing numbers are the deciding factor.  They rarely are.   The lowest price only wins when offerings are equal.  So what are you doing to set yourself apart?  Anything that can be documented can be commoditized.  And anything that can be commoditized can be computerized.  And anything that can be computerized can eventually be done on an appliance or smart phone.  Creativity and perspective are yours uniquely.   But make sure they are uniquely great.

© 2011, David Stelzl

I was recently proposing a training class for a large manufacturer.  My main point of contact wanted the training and had money approved for it. However, they required a certain multiplier as a return on investment(ROI).  Is this an ROI sale?  No, it’s a competitive advantage sale – training is almost always a competitive advantage sale.  The request for numbers is purely red-tape in this case and is submitted using the client’s ROI model.  The same could be said for TCO (Total Cost of Ownership) requests.  If the client already wants what you provide, and has access to money, but requires internal financial analysis, don’t think of this as a financial sale.   As you might predict, using the client’s model, we made my numbers work.  Can I prove there will be a certain return on training?  No, I have no control over what sales people will do with the material I give them.  However, bureaucrats upstairs require the paper, so we worked out the math and submitted it.  My value proposition remains, competitive advantage.  The question will always be, “Will the sale people be able to sell more after going through my training?”  If they apply it, they will – and the price of training is easily recovered when that happens.

© 2011, David Stelzl

ROI vs. TCO

March 24, 2011 — Leave a comment

A question came in today asking, “What is the difference between ROI and TCO?  Our company uses the terms interchangeably.”

This is common…but they really are different.  Here is some explanation:

I use the term TCO specifically to mean that it will cost you less to produce the same or better results.  By focusing more on business results and less on cost, the seller has a chance to avoid a true ROI study; which may be analogous to asking the CFO to audit your proposal.  The last person I want to sell this to is a CFO (or anyone in the purchasing department).  Once the focus on business moves to finances, value is compared only to the cost of other options, and not on the value you bring to the business.

You might think of ROI as purely mathematical.  One way to describe it is:

ROI = (Financial Gain – Cost of the Investment)/ Cost of the Investment.

True ROI calculations involve a deal’s net present value ( taking into consideration  a proposal’s future estimated cash flow the cost of capital), payback period or hurdle rate, and an internal rate of return.  In other words, ROI at its core is a math problem dealing with investments, returns, and the cost of capital.  The average sales person’s ability to compute these numbers, or even review them with a financial officer is limited in most cases.

TCO might be defined as the cost of acquisition, installation, and operation.  In this case, we can take into consideration only the current solution and whatever solutions might be under consideration or in use at the present time.  Gartner Group often reports TCO numbers for various technologies,  taking into consideration the above as well as long term operations and future replacement or decommissioning of a technology solution.  When TCO is fairly evident, meaning one solution might involve many smaller servers or appliances that require data center real estate, cooling, and possibly additional staff, it makes sense to use this as justification to buy your solution.

I put this under operational efficiency because the cost savings generally are tied to an efficiency gained by the solution, and that is where the seller’s focus needs to stay.  To focus on the math is to kill the deal, unless the customer is already determined to buy, and is just price shopping at this point.

© 2011, David Stelzl

Thinking about TCO

March 23, 2011 — Leave a comment

Continuing on with operational  efficiency sales tactics from yesterday’s post, the problem comes in when the product or service does not directly relate to a business issue.  This is common with efficiency gains when considering products that relate more to infrastructure. However TCO numbers can play a strong supporting role here; where product doesn’t necessarily require a tight connection to a business function.  Virtualization and data center consolidation are good examples, where a true ROI might be hard to prove, but TCO may be apparent.  If you’re going down this road, make sure your numbers make sense.  Always best to get numbers from the client – at a level above those charged with system administration.

© 2011, David Stelzl

Where’s the ROI?

March 17, 2011 — Leave a comment

ROI is likely the oldest approach as far as sales books go in providing justification.  People are always talking about ROI on the selling side, trying to talk customers into seeing that their product will deliver ROI and therefore should not be constrained by budget.  In theory, this is correct thinking.  The problem here is, ROI is demonstrated with math, not emotion, and when it comes to really proving there is an ROI, a certain depth in financial experience is needed.  Most sales people I know have never analyzed profit & loss, balance sheet, and income statement reports.  They understand the real meanings and effects of capital expense vs. operational expense or how full-time W-2 employees differ from contractors when valuations and stock prices and other financial metrics are reported.  How can they?  If you’ve not worked as a CFO at some point in your life, what is the likelihood you can really show the CFO true bottom line returns on their financials?  It would be nearly impossible.  So while I hear sales methodologies calling for ROI, I strongly disagree and recommend sales people pick a different tact for demonstrating value.

To be clear, I am not saying it can’t be done.  I am simply saying, “It requires some very special training”, not something you’ll learn in a one day class.  Car leasing sales people are trained to talk about ROI and do a good job of it, but in most cases they are talking to people who don’t know better.  They might get away with it, you won’t.  Plus, it’s always a bad idea to base your value on a pitch rather than your ability to actually meet a real need.  The first is deceptive and manipulative, the second is honest value.

© 2011, David Stelzl