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sales tools

Discounted Cash Flow

The most effective sales tool I use when selling big solutions is a spreadsheet. The spreadsheet gets me into the CxO level immediately and often gets me an immediate yes or no. It frees up discretionary CxO-level budgets. It tells me if I should even be selling the products I am asked to sell.

Complex solutions are difficult sales. They often affect more than one division of the business, which leads to a longer sales cycle. Selling to the people in the business that understand the solution itself means that we are relying on these people to represent us to the people that will free up the budget – and are they better salespeople than us? We might as well make the call to the CxO ourselves, control the whole sale and perhaps, free up budgets that would not be accessible any other way. The spreadsheet is essential here – it reduces the benefits to the customer to a common language to all businesses, that of finance. A CEO or CFO can quickly decide whether the project is worth looking into further,without having to know anything about the technology itself.

As an example, I have recently been selling new waste recycling technologies as an agent.  In the case of the waste technologies, the technologies I have selected create new products for markets that the waste operators have no understanding of, which makes my selling job doubly difficult. The operator doesn’t know how to develop products,  doesn’t have the customers for the products and doesn’t know how to value the market for the products.

Why did I select these products? I selected them because, when I investigated the market for the products, the waste supply and then built this into a conservative operating financial model of the plant in a spreadsheet, it showed a very attractive Internal Rate of Return (IRR). The IRR is a measure used by businesses to compare the profitability of investments. A project with an IRR higher than the business’s cost of capital (how much it costs to borrow the money to finance the project, or, if it doesn’t have to borrow, the rate at which investors would be better off having the money returned to them for investment elsewhere) is a potentially attractive investment. A typical large business will have multiple projects that it is considering, with different durations, capital requirements and risks. IRR is one tool used to select which of these projects will get the firms limited capital. If the product saves costs, then a payback model is appropriate – how many months before the project pays for itself in savings.

With every technology, the first waste operator that I discussed the project with, largely in financial terms, wanted the project. The rate of return, even on a conservative basis, is better than investing in other projects they were considering. I have reduced the uncertainty by thoroughly researching the markets for the end-products and opening discussions with interested customers.  There is still a long way to go on these projects, the operators must go through their due diligence, choose a site with planning permission and customer contracts must be agreed – but the operators have invested the resources to complete this as quickly as possible, and all because the respective CEOs liked the numbers.

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