Managing Risk – the main driver in sales

8
Sep

Revenue, Expenses and Risk

In all business purchases, there are 3 main business drivers that business owners and managers have as their core. The last 2 blogs I dealt with revenue and expenses. This one is on risk. There are two types of risk – general business risk and risk in the buying decision. General business decision risk is related to running the business. Buying decision risk is related to “Am I making the right decision and what will it cost me if I am wrong?” Both relate to business, but the buying decision risk has a lot more emotional factors involved, such as fear and ego.

Managing or reducing risk is huge factor in a buying decision. A business leader deals with risk in many areas. Risk to: data, people, buildings, general liability, financial, and business continuity to name a few. There are many ways managers try to reduce risk from insurance policies, data backups and cloud computing, physical security using ID badges, to having multiple people engage in the buying process. A buying committee is used to reduce risk, not necessarily get the best option with the most features.

I have a client who sells data services to banks. He reports that over the last seven years the focus has shifted from what revenue new software can deliver then to expenses reduction and now, the biggest concern is risk. The banks are evaluating contract terms, reputation of company, costs to get out of a contract and even data center uptime.  To reduce vendor risk, flexibility  in contracts is becoming a big issue.



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As you engage a business owner or manager, asking risk related questions can help you identify the key buying criteria. Ignoring that risk is a factor for the buyer in making a decision can cost you a deal. If there are multiple decision makers, my bet that one is highly focused on reducing risk, even if others are focused on the desired gain.

In buying decision risk, as a deal progresses through the buying stages. risk becomes more of an issue. Risk is related to the buyer being concerned over the reality of truly getting the outcomes that the purchase promises to deliver. Many closing techniques actually increase the risk factor through manipulation, thus causing the buyer to hesitate in buying from you.

In many cases, buyers try to use a price reduction to reduce their percieved risk. They will ask for a lower price. But, typically a lower price really doesn’t reduce the risk issue. Think about ow many deals have been lost when the seller had the lowest price? Risk or something else was the issue that a lower price could not overcome. So, be aware when a buyer asks you for a lower price, the buyer actually may be trying to reduce their risk.

Known risk issues should be dealt with upfront in the early stages of the buying process where there is less emotional issues regarding risk. The closer a person comes to making a buying decision, the more risk is tied to emotions and fear of loss and ego of wanting to look good.

Regarding the solution you may offer, revenue, expenses and risk may all be apart of the decision criteria for a prospect. The decision makers may be looking at how to best increase revenue without adding additional expenses and with the least risky means to do so. These three issues are very intertwined and one or two maybe hidden or not discussed during the sales process only later to raise their head and kill the deal. As a sales rep, you need to be aware and asking questions in terms of their expectations of what your product or service is expected to deliver. Listen closesly to what is being said and what is being left out in the conversation related to these topics. Also, if a risk issue is not brought up, you can bring it up to show how your offering provides a better outcome than another. For instance, you can show how your offering may be higher in price, but it lowers the business’s overall risk.

I like to address risk issues related to the business and risk issue in the decision criteria for buying early on in the buying process. By identifying them early on, there is less emotional fear and ego popping up to suprise me and I am able to tailor what I offer to reduce their perceived risk.

If you have a deal you are working on and would like to discuss how to engage the buyer in a risk discussion, give me a call. I will be glad to spend 30-45 minutes with you discussing how you might be able to reduce the buyer’s risk. 205-Eight six two- 0560 is my cell.

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