I’ve developed this unusual habit of getting up early on weekend mornings to review financial statements (or as we refer to them in the US, 10-Ks and 10-Qs). I grab my backpack and sneak out of the bedroom, doing what I can to not wake up my wife who often has a cat on either side of her. One of both of the cats usually take notice and then do what cats are known to do…nothing. I walk past my freshman daughter’s room (she rarely awakens as she is typically doing her art until two or three in the morning) and then past my man-child’s room (he’s only 12 but nearly six feet tall). I make it to the coffee pot to turn it on, checking the time to estimate whether my wife will wake up before it shuts off in a couple of hours or if I should plan to bring her coffee in bed that morning.
I’m not a stock broker, though a number of my friends can never quite remember what I do for a living and assume it has something to do with investing. I am a consultant in the enterprise software industry and among the many roles I play, I am a business value analyst—pretty exciting, eh? In this role, my job is to connect technology solutions to business value. Ten to fifteen years ago, that mostly meant delivering a return on investment (ROI) analysis based on current state data for the prospect and forecasted future state based on the proposed solution—quantifying how it was going to reduce costs, increase labor productivity and/or drive revenue. (more…)
“I never lose—I either win or learn.” That’s one of my favorite mantras and something I remind myself of when things feel like they are about to crash and burn. There is a lesson in everything. When I don’t get the outcome I wanted either personally or professionally, I don’t dwell on not “winning” but take a step back, think through the situation and focus on what I could have done better. I make note of the lesson and carry it with me.
For example, when I started out on my career path in financial sales (gulp, many, many years ago), sales reps would typically engage my colleagues and me when a customer requested some type of financing option. These conversations typically took place near the end of the sale cycle after pricing had been formalized and the deal was close to or completely committed. Inevitably the customer would wait until the last minute to inform the rep of their lack of budget. Typically the customer required a zero percent payment plan because incurring interest costs was not likely to be approved. The end result was an additional discount offered (bad!) or no deal reached (even worse!).
I’ve been involved in many of these scenarios and although it sometimes works out in the end, there is another approach I’ve learned over time. This approach focuses on incorporating financial selling throughout the sales cycle. I promise you don’t need to be a wizard at Excel or in reading financial statements either (although it doesn’t hurt!). I’ll break this approach down into five key inflection points within the sales cycle. (more…)
Your technology sale to a Fortune 1000 customer has been on the forecast for several quarters. The solution is expected to be an on-premises perpetual license (capital budget), including maintenance and professional services (usually operating budget items).
The opportunity has been moving steadily through your sales forecast internally from lead to qualified lead toward close. It has also been making its way through the customer’s approval processes.
You’ve forecasted the deal to close, and the end user has budgeted a reasonable amount in the current year’s capital budget to make the acquisition. Enough budget to get you to Club. Hello Cancun!
What we haven’t discussed to date is the impact of subscription pricing on value selling. Should you be adjusting your value selling methodology and practices when you sell subscriptions? What changes and what stays the same? And what should I do differently if I want to be successful?
Are you ever in the middle of a sales opportunity with your client and frustration hits an all-time high? No matter which way you slice it or how much you thought you had prepared, you just can’t get the customer to see the value in the solution? We are on opposite sides of a large canyon – how do I get them over to the other side? My goal is always to resolve a customer’s problem. Now, how do I get there?
Recently a CEO I know, Jessica, spoke at an event I attended. She was telling the story about a girls trip she took for her friend’s birthday. This wasn’t a spa trip by any means. Most people would be happy heading to their favorite Mexican spot for tacos and fresh lime margaritas, but not Jessica’s friend. Nope! Her friend wanted to take a hike. But, it wasn’t just any hike–she wanted to hike rim to rim at the Grand Canyon – in one day. For those of you who don’t know about rim to rim, hikers have been known to die on this journey. There are warning signs prior to entering the Grand Canyon that you should not do the hike in one day.
The traditional Chief Information Officer role is under threat. You may think this statement is an exaggeration, but consider this: CIOs used to strategically manage and deploy the IT assets of the company, making data accessible only to specified employees and not to others, according to predetermined, and often inflexible, business rules.
Today, digital opportunities like building multi-channel customer experiences, harnessing social data, and enabling super-fast decisions powered by real-time data have become critical. CIOs are finding it harder to exert as much influence as they had in the past. Other line-of-business heads like sales management, marketing officers, and newly- created roles like digital business and data officers are all taking a hands-on attitude in purchasing tools relevant to them, often helped by developments like cloud, subscription, and bring-your-own-device. The CIO is increasingly finding that she is losing part of her relevance. (more…)
As software vendors continue their shift to the cloud, looking for higher stock valuations and lower costs, the shift can lead to delayed sales cycles and unintended outcomes.
Here are some of the reasons cited for sales delays:
Budgets: Most enterprise software sales have long sales cycles. Customers have planned for on-premises solutions which were budgeted for in the prior fiscal year. In the world of perpetual licenses, capital budgets may have been already allocated.
When selling hosted solutions in the cloud, operating budgets–generally larger and more flexible than capital budgets–are being tapped. What’s the issue then? Most customers’ operating budgets are being hit with unexpected costs during the transition. Without a strong business case the sale may be delayed until the next budget year. The cloud is putting pressure on operating budget availability. (more…)
As technology vendors move to software subscriptions as their primary pricing model, it presents new challenges as they attempt to meet customer demands while also managing company objectives. Historically customer finance programs have been used as strategic sales tools for many reasons, not the least of which was reducing the need for large, upfront payments. So is customer finance still relevant in today’s world of subscription-based, pay-as-you-go pricing models?
You’ve decided to offer annual subscriptions to your software solutions. Great! You’re on track to maximizing recurring revenue, not to mention increasing your liquidity multiplier if you’re planning for an IPO or acquisition.
But, of course, the next big question is, “Do you offer incented multi-year subscriptions?”
Possibly not for the rest of this year. You are already grieving over a large sum of deferred revenue that is going to disappear into retained earnings come January 1, 2018 (thank you ASC 606). Moreover, once 2018 hits, multi-year subscriptions won’t be fully ratable, so it’s probably best to only offer annuals, right?
Well, let’s first consider a few key factors:
If you were to offer multi-year subscriptions, how much would you need to incent your customers?
What is your expected annual subscription renewal rate?
How do you plan to compensate your sales team to keep your top performers?
What is the expected operational cost to obtain those renewals?
Your answers to these questions and associated analysis (as outlined below) should help you determine the profitability of offering multi-year subscriptions. (more…)
Pay as you go, utility, consumption, subscription, and the cloud have been the rage during the past several years. As a result, many vendors scrambled to adjust their offerings to meet the perceived needs.
The key drivers of this trend were:
1) OpEx budgets were plentiful in the good old days because most IT products were treated as capital assets. In some ways, operating budgets were easier to sell to than capital ones.
2) The perceived advantages of seemingly lower costs and not having to make a long-term commitment (true only if one compares a one- or two-year cost to owning an asset that can perform over a much longer period, and if there are no costs to switching platforms). Already, early adopters have come to realize that the yearly costs can stack up over time and can far exceed buying and owning your own licenses and IT assets.
3) Some customers have strategically chosen to divest themselves from owning and maintaining their own IT infrastructure. This last point can be a smart option for those customers for whom IT is not a differentiating core competency; however, this may not be the right solution for everyone. (more…)