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Think Twice Before Selling ROI

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When we're selling to business people, our value proposition has to show a good return. Solid, credible Return On Investment (ROI) calculations are supposed to prove this for us. But if we don't think twice, calculating ROI can sabotage our sale.

Lots has been written about various ROI methods -- return on assets, net present value, months to break even -- and I'm not knocking any of them here. Use the one that serves your customer and your purposes best. Create the financial model that shows your offering is indeed a good investment, far exceeding your prospect's hurdle rate. But don't stop there.

If your prospect decides your figures are believable and accepts your argument as valid, that may or may not be good news for you. Here's the rub; the effort and energy you have expanded to extract relevant figures, analyze them, put them into a presentation, and then "sell" them to your prospect may have helped your competitor more than you!

Once your prospect accepts your ROI arguments, their conclusion is not what you might think. You may be assuming they will now feel justified in buying your offering. In reality, their conclusion is that several solutions like yours probably all make financial sense. They are now ready to buy - as soon as they know they are getting a fair price. Now that you've done all the hard work and convinced them to buy something, it's time for them to compare your offer to the competition's. You better think twice before you induce them to do that!

Here is how you can "think twice" and resolve the vulnerability you have created for yourself.

Think first about preparing an ROI presentation based on common, generic aspects associated with your category of solution. Get the prospect to understand the financial benefits of investing in a solution like yours. As before, use convincing, relevant, proven data so they can fully accept the financial benefits as real and attainable.

Now it's time to "think twice." Consider each of your competitive advantages and build separate ROI models to quantify the advantages of each. This is your chance to attach a figure to your differential advantage.

A software company used this approach to justify the perceived expense of their system to business executives. Their presentation on common benefits demonstrated a solid ROI that would get the executives' attention. Next, the salesperson would present additional ROI calculations that quantified the value of their seven unique system attributes. This second ROI layer improved financial returns by almost 30 percent. Their software package was far from the cheapest, but nowhere near 30% more than any of their competitors. As a result, buyers rarely found reason to shop around.

Thinking twice can earn you higher margins and a shorter sales cycle. You will avoid pushing prospects into the arms of your competitors. Plus, you will finally be able to quantify and capture the value in your differential advantage.

Give your ROI presentation a second effort, and you'll jump from sabotaging your sale to securing it.

© 2005 Paul Johnson. All rights reserved.

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