In my last article (Changing of the Sales and Marketing Funnel in the New Age of Business Buyers), I talked about the importance of building a financial business case as part of the new sales and marketing funnel. Today, I want to shed some light on exactly how to build one.
Again, to review, the way organizations purchase technology has dramatically changed over the years. Ten years ago, decisions were made via the IT department, based on their views of what was best for the organization and without financial oversight. Today, this is no longer the case, most IT teams report up through the office of the CFO, where the final buying decision tends to sit. This changes the sale, as financial decision makers want to see more than features and functions. In fact, they could care less (most wouldn’t even know what they are looking at). Their main focus concerns questions such as: how is this purchase going to improve the organization, what are the fiscal benefits, and what’s it going to cost?
When building a financial business case around a solution, you must first recognize that feature and function comparisons do not matter without an underlying justification in business value. For this reason, a financial decision-maker may select an technologically inferior product over a feature-rich solution if doing so makes better fiscal sense for the organization.
With that said, when building a financial business case, you need to showcase both Hard Benefits (that impact the top or bottom line) and Soft Benefits (that provide value that is less directly quantifiable on a P&L sheet). Here are a few examples:
- Reduced hardware and software cost
- Reduced infrastructure cost
- Reduced inventory
- Reduced head count
- Increased revenue
- Increased executive leadership, IT, manager, and employee productivity
- Increased employee satisfaction
- Reduced or mitigated enterprise risk
- Reduced customer churn
- Decrease in time to market
- Increased competitive advantage
When reviewing Hard Benefits, you want to be able to tie your solution directly back to either decreased cost or increased revenue (preferably both) with a clear outline of the financial trade-offs they will be making.
Example: purchasing this $200,000 a year Cloud-based solution will reduce overall hardware, infrastructure, and support cost by $350,000 a year. . . leading to $1,750,000 in direct cost saving over five years.
Soft Benefits, are a little more difficult as they are not always cut in dry. One organization could see 25% increase in overall employee productivity, while another only 10% with the same solution. What either improvement means on a balance sheet is not always clear.
This is where upfront discovery and understanding the business use case come into place. Again, instead of trying to sell a buyer on features and functions, you must ask questions:
- How does this affect you today?
- How much more efficient do you think this will make your team,
- What’s average pay of these employees, etc.
Asking these questions upfront in the discovery cycles allows you to use this information when presenting back the financial business case.
Example: When we first spoke, you mentioned that you thought this solution could increase employee productivity by 20%. Your average employee makes $20hrs an hour. This means that a 20% increase in employee productivity would net you $32 in additional employee productivity a day. Spread that cost across all 1,000 employees throughout 262 average working days, would net you $8,384,000 a year in employee productivity.
Now again, these are Soft Benefit numbers. They are not exact, but they are a grounded starting point based in what the customer gave to you directly (so you didn’t just make them up). Most importantly, they are provide a fabric that a financial decision-maker can wrap his or her head around and help make the overall decision.
Again, financial decision makers make the final decisions on most technology solutions these days. If you want to win the deal, you need to present your solution in a way that makes sense to them…. and it’s not feature and functionality.
Hope this was helpful and I look forward to hearing your own stories or thoughts below in the comments section.