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SALES IS BUSINESS

10 ELEMENTS OF
BUSINESS KILLER SALES
PEOPLE UNDERSTAND
CONTENTS
1 About
2 Intro
3 Chapter 1 Profit & Loss Statement
8 Chapter 2 Balance Sheet
14 Chapter 3 Cash Flow Statement

18 Chapter 4 Capital Expense


21 Chapter 5 Culture
25 Chapter 6 Consumer Confidence
30 Chapter 7 Consumer Price Index
34 Chapter 8 Inventory Velocity
38 Chapter 9 Mandates
42 Chapter 10 Gross Margin
ABOUT THE AUTHOR:
JIM KEENAN

Follow me on
twitter:
@keenan

Jim Keenan is founder and CEO of A Sales Guy, Inc. In his 15+
years in the trenches, he’s learned what it takes to build killer,
highly productive sales teams and how to create sales strategies
that increase the probability of success. He’s been cited in The
Harvard Business Review, Forbes, HuffPost, SoldLab Magazine and
his blog was named as one of the top 50 blogs by Top Sales World,
and Sales Crunch as well as being listed in Guy Kawasaki’s AllTop
Blogs. Named Top 50 Sales & Marketing Influencers 3 years in a
row (2012, 2013, 2014) by Top Sales World.

A Sales Guy, Inc., via it’s consulting and recruiting divisions, offers
a comprehensive resource for building a world class sales
organization. It is one of the most respected and engaged sales
brands today. A Sales Guy Consulting helps build, manage and
lead sales teams that outperform their peers. A Sales Guy
Recruiting was built specifically for sales people and sales
organizations to find the best sales talent possible. For more
information, visit asalesguy.com.
INTRO
In the world of quota, pipeline, closing deals and high pressure sales it's too easy to
forget that sales is about business. The adage is true, "nothing happens until something
is sold," but too often we forget that nothing is sold, unless there is a business reason.
In the world of B2B sales, sales are made because there is a business
problem. Businesses are trying to gain a competitive advantage, streamline operations,
increase revenue, reduce expenses, improve margins, grow customer bases etc. At the
core of selling is business and crushing it in this world of business challenges
requires significant business acumen.

Yes sales skills matter, but without solid business acumen, your skills will die on the
vine. Those lacking solid business acumen will forever be product pitchmen, purveyors
of product, order takers, and product slingers. They won't be trusted advisors,
consultants, and councilors.

Business acumen is robust and complex. It's tangible and intangible. Those with the
most amazing business acumen not only understand complex and simple business
concepts, they also have a 6th sense on how business will play out, where the
opportunities lie, and where the pitfalls lurk. The intangible business acumen cannot be
taught, but the tangible can be and those who commit to strengthening their business
acumen will always win.

Consider this ebook, business acumen for sales 101. It's designed to school you on the
key business concepts that affect business and the business world. It's designed to
not only educate you on the concepts but tie them to selling. The 10 Elements of
Business Killer Sales People Understand highlights how certain business issues or
concepts can effect the sale and your buyers' decision making. It provides you with
questions to evaluate how the product or service you're selling can affect your
prospects' business and what you should be looking for.

Improving your business acumen is key to being a killer sales person. Remember,
nothing happens until something gets sold, but nothing gets sold until there is a
business reason.
CHAPTER 1
................................................................

PROFIT & LOSS


STATEMENT
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PROFIT & LOSS STATEMENT

Profit & Loss Statement, n.


A P&L highlights the changes in expenses and income over a specified time period.
That could be months, quarters or years.
This is what a P&L Statement looks like:

This is Salesf orce.com’s Prof it and Loss Statement. To get a better look you can
click on the image.
The first thing to note about a P&L statement are the top few lines. These are the revenue lines.
Thus the term “top line.” The top line is where revenue is found. This is not to be confused with
cash. Cash can come from a number of areas besides revenue, such as
financing, sale of assets prepaid services etc. Revenue should not be confused with cash.
Revenue recognition and cash flow are topics we will tackle later in the series.

Understanding where your customers get their revenue can be VERY important to you.
Salesforce.com drives over 95% of their revenue from subscriptions and support. Although
services generates over 180 million in revenue, it’s a drop in the hat compared to their
subscription revenue. Depending on what it is you are selling, knowing this could play a
substantial role in your deal strategy.

Just below the revenue line is what’s called cost of goods or total cost of revenue. Total cost of
goods or revenue is the total amount of money the company spends to create the product(s)/
services or create the revenue. Total cost of goods or revenue are the expenses that directly
relate to the revenue being created. In Salesforce.com’s case, expenses associated with creating
the platform, hosting the software, development, support resources, services salaries, etc. are
all accounted for in total cost of revenue.

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PROFIT & LOSS STATEMENT

Separating expenses related to what they need to deliver Salesf orce.com to create 3
creating or delivering the or margin tells you how much billion dollars in revenue. Gross
product or service f rom other money a company has lef t over margin is also commonly
expenses such as marketing is af ter they’ve spent ross margin, displayed as a percentage.
important because it lets you due to the f act its a tight SF.com’s gross margin
know how expensive it is to margin business) percentage in 2013 was 78.6%
create the revenue. To reate the product. In 2013 That is VERY high margin
determine how expensive a Salesf orce.com’s gross margin business. High margin
product or service is, is a simple was 2.36 billion (Revenue of businesses have lots of money
equation. Simply subtract total 3.0b minus total cost of lef t over to invest, operate the
cost of revenue f rom the revenue of 683m). This is a very company, store cash, leverage
revenue. This calculation is healthy gross margin. It means M&A and more — all good
called gross margin. Gross that it’s not very expensive f or things. For contrast Amazon’s

The next line af ter total cost of revenue is operating expenses. Operating expenses are all
the other costs associated with running the business. Normally divided into 3 categories:

RESEARCH &
GENERAL
DEVELOPMENT SALES &
ADMINISTRATION
MARKETING

research and development, understanding where your minus expenses. It’s that
sales and marketing and prospects or clients are simple. If the number is positive,
general administration, these spending their money and the company is prof itable. If the
expenses include things like whether or not they are number is negative, the
sales people’s commissions, making money could be very company is losing money. The
marketing expenses, janitorial valuable in your sales income f rom operations number
services, electricity, security process. is critical. If it’s positive, the
etc. Operating expenses are company is creating a prof it and
exactly that, expenses The next line in a P&L assuming their are no cashf low
required to operate the statement is the juicy one. problems the opportunities f or
business. It’s the income f rom selling something to them are
Unf ortunately it’s rare to see operations. The income f rom high. If the number is negative,
a expenses broken down operations tells you if the your ability to sell
beyond a f ew rolled up company is making money or something could be hampered.
categories, however not. Income f rom operations That being said,
is revenue

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PROFIT & LOSS STATEMENT

if what you’re selling can turn Although not key to the core
that number from a negative business knowing if your
to a positive, you will get the product or service affects these
attention of a lot of people. expenses and how is just as
important.
Knowing whether or not your
customers or prospects are The final line after income
profitable can be an from operations is net income.
extremely valuable piece of Net income is exactly that, net
information. That being said, income. It’s what’s left for the
10k’s rarely show detailed business after everyone and
P&L’s by individual business everything has taken their
or subsidiaries. Therefore, a piece of the pie.
group within a larger Salesforce.com is running their
company that is losing money business at a loss. I’d have to
can have a P&L with positive read more of the 10k and do
income from operations. Just more research to understand
because the company as why, especially because their
whole is losing money doesn’t gross margins are so high. That
mean every aspect of the being said, 1.6 billion of their
business is. operating expenses are in sales
in marketing, so one
The line below income from
explanation is they are
operations includes
investing heavily in growth. If
expenses and income not
I’m right and your product or
associated with running the
service can help them grow,
core business. To be sure,
you are in a good position.
they are real expenses, and
Now you have a baseline
income, they just aren’t part
understanding of what a Profit
of the core business. They
& Loss Statement is and how
include interest income,
to read one. Although not
(income from bank balances,
perfect and they don’t tell you
money markets, etc.) interest
everything, they do give you a
expense (interest paid on
lot of information.
company debt) and taxes.

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7....................................................................................................................................................................................
PROFIT & LOSS STATEMENT

How does your product or service affect the


customer's P&L experience? It’s a good thing to know.

WITCE (What is The Customer's


WITCE
Experience) Questions:

1. Does your product or service af f ect their P&L? How?


2. Does your product af f ect the expense side or the revenue side?
3. Does your product directly af f ect your prospects P&L, like an
instant reduction on a particular expense line. Or does it
indirectly af f ect it, such as creating an ef f iciency that “could”
reduce expense or increase revenue? (a product that cuts
energy consumption in half directly af f ects the P&L. A job
sourcing service that f inds better candidates f aster, indirectly
impacts the P&L)
4. What type of company does your product or service best serve,
those losing money or those making money?
5. What does the P&L of your prospects and customers look like?
6. How much impact does your product or service have on the P&L?
6. Does your product or service initially negatively af f ect a P&L
and then gradually positively affect it overtime?
7. Can you articulate the impact of your product or service in terms
of impact to the P&L?
8. How does your customer view their P&L?
9. How does your customers or prospects P&L af f ect your deal
strategy?

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CHAPTER 2
................................................................

BALANCE SHEET
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BALANCE SHEET
Balance Sheet, n.
A financial statement that shows a summary of the financial balances of a sole
proprietorship, a business partnership, a corporation or other business organization.

Salesforce.com's balance sheet


The balance sheet and the Period Ending Jan 30, 2013
profit and loss statement go
hand and hand and should
be evaluated together.

The profit and loss


statement shows the inflows
(revenue) and the outflows
(expenses) of a company
over a fixed period of time,
by month, by quarter, by
year.

A balance sheet on the


other hand, shows the
health of a business and it’s
a fixed period of time. In
other words a balance sheet
shows you a companies
financial situation at that
particular moment in time.

A balance sheet consists of


two main items, assets and
liabilities. Assets are things
that have value, like cash,
inventory, property,
equipment, money owed to
the company etc. Liabilities
are financial obligations of
the company like
loans/debt, or bills that are
due.

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10...............................................................................................................................................................................
BALANCE SHEET
Balance sheet analysis
The first thing you’ll see on a balance sheet is the assets and the most
important asset is cash. Regardless of how much revenue a company makes,
regardless of how popular their product, regardless of how fast they are
growing if you run out of cash, you’re screwed. When you look at a balance
sheet, the first thing you want to look at is cash. Do they have enough to
operate the business?

The second line under assets is short term investments. Short term investments
are investments that can be liquidated in less than a year. They can be stocks,
bonds, etc. The key point here is that it’s easy to turn these investments into
cash if necessary. It appears Salesforce.com doesn’t invest a lot in short-term
instruments, about 20% of cash. This could be because they don’t have faith in
the current markets or some other reason.

Next on line is net receivables. Net receivables is the amount of money owed
to the company for it’s products and services by it’s customers. The thing to
think about when looking at this number is how big it is in relationship to
revenue (think P&L Statement here). If net receivables gets too high there is a
problem. For example if the net receivables exceeds 3 months revenue, there is
a collection problem. Another term for this collection problem is called DSO
(Days Sales Outstanding). Companies DON’T want DSO to be too high.

After net receivables is inventory. Inventory speaks for itself. The inventory line item is the
value of all the inventory the company is carrying at the time the balance sheet is done. Being a
software company, Salesforce.com doesn’t carry inventory. If what you sell affects your
customers inventory, it’s important to understand this number and it’s relationship to total
assets as well as inventory turn or inventory velocity. We’ll talk about those two terms in a later
post.

The next set of assets are long-term assets. Long-term assets are assets that are difficult to
liquidate or turn into cash. The general rule of thumb is they take more than a year to turn into
cash. Salesforce.com has almost 900 million dollars tied in long-term investments. I’m not sure
what they are, but they can be things like investment in other companies or start-ups. It can be
difficult to determine what represents a companies long-term investments but might be found
in the 10K.

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11................................................................................................................................................................................
BALANCE SHEET
Balance sheet analysis
Now that we’ve totalled up all the good stuff, the stuff “owned” or owed to the company has
value. We have to look everything we owe. These are called liabilities. After cash, liabilities or
debt is the most important part of the balance sheet. Debt can bury a business. Not just the
amount of debt but also the terms of the debt, which aren’t represented in the balance sheet.
Debt eats at cash and that leaves less for operations.

The first line in this is Current Liabilities. Like current assets, current liabilities are things due
immediately. The fist type of current liabilities are accounts payable. In Salesforce.com’s balance
sheet it appears they are including accrued expenses with accounts payable. Accrued expenses
are the anticipation of things like employee benefits coming up, interest on loans, services yet to
be invoiced etc. While accounts payable are for services where expenses are due, and that have
been invoiced by vendors.

The last liability I’m going to address here is other current liabilities. Salesforce.com has almost
1.8 billion in other current liabilities. I have to confess, I’m not sure what that is and why it’s so
big. Other current liabilities can include tax liabilities (sales and payroll), current maturity of debt,
in other words, some or all of a long-term debt due within the year or it also can be unearned
revenue. Unearned revenue is when cash is received before the service is delivered. Being a
subscription business some of this liability could be unearned revenue.

After current liabilities is long-term debt. Long-term debt could be for a money borrowed for a
plant, real estate etc. In Salesforce.com’s case they have no long-term debt.

Once all these numbers have been compiled, we simple have to subtract total liabilities from
total assets and you’ll know how well the company is operating. Remember however, cash is
king. If the assets far outweigh the liabilities yet their is little cash on hand, the company is a
short road away from trouble. Salesforce.com has $5.5 billion in assets and $3.2 in liabilities.
They are doing well. I wouldn’t say they are crushing it, but a 2.3 billion dollar separation isn’t
something to lose sleep over. Remember the closer these two numbers are the more precarious
the companies situation is.

Salesforce.com has 700m in cash on hand. However, their annual expenses (see P&L) total 2.4B.
This means Salesforce has less than one years operating capital on hand. Salesforce is a
subscription based company, so their revenue is more protected than most companies, but
comparing cash on hand to operating expenses is always a good thing.

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12...............................................................................................................................................................................
BALANCE SHEET
Balance sheet analysis
The last part of the balance sheet is the Stockholder Equity. Stockholder Equity is made up of
primarily two things, the amount private equity and public investors have in the company and the
retained earnings. In this case Salesforce.com’s total Stockholder Equity is 3.1B. In essence this
number represents “book value” Saleforce.com’s “book value” is 3.1B dollars, which is just 8% of
it’s market cap. We’ll address market capitalization in another post.

There you have it. A balance sheet highlights the capital in a business at a point in time. The
more capital the better the business. Pretty simple really. To get a good feel of a business read
the P&L and the balance sheet at the same time. It will give you a much better picture of what is
actually going on.

WITCE
WITCE (What is The Customer's
Experience) Questions:

1. How does your product or service affect 8. Are there anomalies associated with
the balance sheet? that industry only? If so, how do the
affect what you sell?
2. Does buying your product require debt, if
9. Are the companies you’re chasing
so can the company you are selling to
healthy companies or struggling
afford the debt? ones?
3. Does your product or service improve the 10. Does the balance sheet of your
balance sheet? target companies affect what you
4. Is your product or service too small to sell and how you sell it? No? Why
make a dent in the balance sheet? not? Yes? How?
5. How does your customers current 11. How can the balance sheet affect
your deal strategy?
financial situation affect their ability to
purchase what you are selling?
6. What do the balance sheets of
companies in your industry typically
look like? Are their common threads?

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13...............................................................................................................................................................................
BALANCE SHEET

How does your product


or service affect the
balance sheet
experience of your
customers and prospects?

The balance sheet is a cool instrument to gauge the


health and stability of a company. When it’s
available, take the time to check them out, ya never
know what you might learn.

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CHAPTER 3
................................................................

CASH FLOW
STATEMENT
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CASH FLOW STATEMENT

Cashflow statement, n.
A financial statement that shows how changes in balance sheet accounts and income
affect cash and cash equivalents, and breaks the analysis down to operating, investing,
and financing activities.

I find cashflow statements to be the most confusing and


complicated of the three key financial statements. Therefore
I’m going to do my best to keep it simple.
In the end, cashflow statements are to designed to provide
insight into the “cash” moving in and out of the business. At first
glance it’s easy to think we already know this. We’ve seen the P&L
statement. We know how much the company made. The problem with that is, the P&L
statement only addresses what is “owed” or “earned” not necessarily the cash
transaction. It’s possible for a highly profitable company to be tight on cash. An
example of this is a mobile phone provider. Mobile carriers have very high capital
costs to build out there networks. Capital costs don’t show up on the P&L Statements.
They are depreciated as an expense overtime. Therefore a billion dollar cash out lay
won’t be seen as a billion dollar expense item on the P&L. The carrier could be
showing a profit, but be cashflow negative. The other side of that coin could be
service company that charges for a year of it’s services up front. The service company
would get a lump sum of cash in let’s say January, but can only recognized the
revenue monthly. Therefore they could be cashflow positive in the month they
received the cash, but could be losing money.

Accounting for cashflow isn’t simple. Calculating cashflow is easier so we’ll


start their. To calculate cashflow, simply compare cash at the beginning of the
year (or time period you want to measure) from the end of the year and you
have cash flow. For example, if you begin the year with 10 million dollars in
cash and ended the year with 6 million dollars in cash, you are cash flow
negative by 4 million dollars. If your cash balance at the end of the year is 12
million dollars, your cash flow is positive by 2 million dollars.

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16................................................................................................................................................................................
CASH FLOW STATEMENT

Salesforce.com’s cash flow statement


Notice the operating category, Salesforce is generating a nice chunk of cash from operations, over 700
million dollars. That’s 30% of total revenue and operating profit.

Now lets look at the investing category. Salesforce has used almost a billion dollars of cash in
investing. In this category they are cashflow negative. A 179 million of the cash was in capital
expenses. I’m going to assume this is primarily for hardware, servers, network infrastructure etc.
Capital expenses are considered investments in the company and that’s why they show up in the
investments category of the cash flow statement. Beyond capital expenditures, Salesforce used cash
in outside investments to the tune of more than 750 million. I don’t know how Salesforce is dividing
“investments” from “other cash flows from investment activities” but we do know that Salesforce has
been on an acquisition spree over the past few years and it could have something to do with M&A
and debt.

Finally, we can look at the financing activities part of the cash flow statement. Here we see Salesforce
has generated over 335 million in cash from financing activities, mostly from it’s stock.

At the end of 2013, Salesforce is cash flow positive to the tune of just under 140 million dollars.

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17...............................................................................................................................................................................
CASH FLOW STATEMENT

Why does cash flow matter?


If you remember in the Balance Sheet post, I say cash is king. Cash is what keeps a business going.
If you run out of cash, game over, unless you can get someone to finance you. But, that’s never a
good sign. Therefore, knowing if a company is generating cash, and where it is coming from OR
where it is going OUT is key.

We’ve now covered the three most critical financial statements. The key is to look at them in
tandem. By looking at them all at the same time can give you some real insight into who you are
selling to, their financial health and most importantly potential data to improve your deal
strategy or create new opportunities.

WITCE
WITCE (What is the Customer
Experience) Questions:

1. Is the customer cashflow positive or negative?


2. How does what you sell affect cashflow?
3. Does what you sell potentially improve cash flow;
accounts receivables, inventories etc?
4. How does the customer's cash flow impact your
deal strategy?
5. Does it matter if your prospects or customers
are cashflow positive or negative?
6. Do you account for a companies cashflow health
in your prospecting and sales process?
7. Can you find opportunities to sell your product or
service by reviewing a prospects or customers
cashflow statement?

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CHAPTER 4
................................................................

CAPITAL
EXPENSE
19..............................................................................................................................................................................
CAPITAL EXPENSE

Capital Expense, n.
A capital expense is an expense that adds value to the current business. An expense is a
capital expense when it’s used to purchase an asset that has a useful life for substantially
more than one year, can improve the life of the property, increases the value of property or
creates a new use for the property. Simply put, think of a capital expense as investment in
the business that creates a cost basis or equity.
The purpose of a capital expense is to spread the use of an asset evenly across the years it
provides value.
Example, let’s say an Ice Cream Shop, buys a new store on Main St for 200,00 dollars. In it’s fist
year of business it sold 50,000 dollars of ice cream from that shop. It also spent 25,000 dollars for
the ice cream, and another 15,000 in operating expenses (electricity, payroll, napkins, cups, plastic
spoons etc.). When it comes time to do the taxes, the operating expenses, those things whose
useful life will be consumed in a year (the ice cream and the napkins, cups, plastic spoons etc.),
can be deducted against revenue. The new store however is treated like a capital expense,
because although it contributed to sales during the year, it will ALSO contribute to sales next year
and the years following. Therefore it is treated differently to spread out its value to the business
over the years.
Spreading the value of an asset over a longer upgrading it’s network. It spends 1 Billion
time, prevents the company from looking too dollars on towers and the network and it’s
heavily burden in year one, showing a HUGE spending 300 million to operate the
loss and then unrealistically profitable in the business. Let’s say their revenue is 500
subsequent years. million dollars. In this case the mobile
carrier laid out 1.3 billion dollars in year one
Unlike an operating expense which is recorded to generate 500 million dollars revenue.
to the P&L as an expense immediately, a capital That’s a negative 800 million in cash.
expense is added as an asset to the balance However, their P&L will show the carrier as
sheet and expensed to the P&L as depreciation profitable as they will only be able to write
overtime. off a portion of the 1 billion dollars in
network costs.
In simple terms, capital expenses hit the P&L It’s important to know if what you sell is a
slowly in the form of depreciation. While capital expense or an operating expense
operating expenses hit the P&L immediately. and what impact it has on your prospects
and customers. It’s not uncommon for
There can be substantial tax implications and companies to have a capital budget separate
cashflow implications when it comes to capital from a general expense budget.
expenditures. Imagine a mobile carrier who is

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20................................................................................................................................................................................
CAPITAL EXPENSE

For most sales people, this won’t be


an issue. However, if you sell

WITCE extremely high-end software,


hardware, equipment and other
assets understanding the difference
WITCE (What is the Customer between a capital and an operating
Experience) Questions: expense is key and may be the
difference between making the sale
or not.
1. Is what your selling a capital expense
or a operating expense?
2. How does this affect the sale? CAPITAL EXPENSE
3. Is your target market sensitive to
capital expenses?
4. What impact does buying your product
or service have on your customer/
prospects balance sheet or P&L?
5. Do you have the ability to offer your v.
product or service as a capital expense
OR an operating expense (cloud
service vs. own and operate) in order
to meet your customers needs?
6. Are there better times to be selling an
operating expense vs a capital OPERATING EXPENSE
expense or vice versa?
7. Can you have a conversation with your
prospects about the accounting
ramifications of buying your product?

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CHAPTER 5
................................................................

CULTURE
22.................................................................................................................................................................................
CULTURE
Culture, n.
A culture is the environment, the norms and the behaviors in which an organization
operates. It’s the core ideology of the company.

" No companies, vendors, suppliers or anyone wishing to do


business with [company] can contact directly or speak to anyone about
their products or services, nor can they register their company,
products or services on the website as previously done before. "
Every company has a culture. Cultures are an interesting thing, they exist whether or not they
were designed. Every company has a culture whether they built it or not.

I learned of this edict in a LinkedIn group. It is the policy of a Fortune 100 company,
straight from the CEO. No one in that company is allowed to engage with a sales person unless they
initiate the engagement — interesting.

Can you imagine the culture of this company?

THERE ARE COMPANIES whose culture is defined, stated, managed to and lived by the
employees. It's deliberate.

THERE ARE COMPANIES who don’t have a stated culture and the organizations culture is
haphazard and victim to the whims, challenges and issues of the organization. It’s difficult to
know the direction of the organization. Things change often and cultures like this are normally
negative and reactive. There is little collaboration and lots of competing agendas.

THERE ARE COMPANIES whose culture is defined and stated but not managed to. These
organizations are the most maddening as the contradiction creates confusion. Some of the
employees adhere to the culture and demonstrate the desired behaviors, while others don’t. In
spite of the stated culture, when faced with difficult decisions, or major challenges, the culture
is rarely maintained in exchange for the short term or easy gain. Environments like this are
tricky to navigate. Behaviors don’t match the stated expectations. The culture expectations are
used situationally to further competing agendas. It’s not a guiding light. It’s difficult to gain a
solid footing in organizations like this. The rules seem to always change.

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23................................................................................................................................................................................
CULTURE

The most successful companies have well defined cultures and manage to them. They
are the guiding principles of the organization. They are used at times of conflict to aid
in decision making. When faced with a difficult decision, “do we go left or do we go
right,” the culture acts as the framework for which direction to go.

Disneyland created an entire language to highlight its core value of making guests
happy. Employees are “cast members.” Customers are “guests.” Jobs are “parts” in a
“performance.” All Disney new “parts” in a “performance” (employees) are required to go
through a “Disney Traditions” training in order to learn how to make guests happy.

Google has “20% time” where employees get 1 day a week to work on anything they
want that could further the business of Google. 3M does this too, but it’s only 15%.

Zappos offers $3,000 dollars to every employee after they’ve completed training to
leave. They want anyone who doesn’t feel they are a good fit to leave as soon as
possible.

These are all examples of a companies culture in action.

Culture’s are the personality of a company. A company is the sum of its employees behaviors,
decisions, and policies. A companies culture drives everything. It’s the foundation for getting things
done, therefore it is critical for sales people to understand the culture of the company they are
selling to.

Smart sales people understand the culture they are selling to. Would you sell to Zappos, the same
way you would sell to Google? Would you sell to Disney the same way you would sell to GE? Culture
matters when it comes to building successful companies that last. It also matters when it comes to
selling.

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24................................................................................................................................................................................
CULTURE

The most successf ul companies have well def ined cultures and manage to them. They
are the guiding principles of the organization. They are used at times of conf lict to
aid
WITCE
WITCE (What is the Customer Culture always plays a role in
Experience) Questions the buying process, sometimes
less than others. Sometimes the
sales person doesn’t even know.
1. What is the customers culture?
The key, don’t leave it to
2. Is it a stated culture or a def ault culture?
chance. Know the personality of
Is the culture managed to?
3. Does your product or service af f ect the the company your selling too.
culture? How/why? Culture matters, whether u
4. Does your product enhance the culture? realize it or not.
5. Are you selling your product or service
with their culture in mind? Now go back and read the edict
6. How does their culture af f ect the buying at the beginning of this chapter.
process?
What is the culture of this
7. Does their company culture blend with
company? How would you sell to
yours? If not, is it a good f it? Should you
consider not selling to them?
this company?
8. Are you f actoring culture into your deal
strategy?

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CHAPTER 6
................................................................

CONSUMER
CONFIDENCE
26...............................................................................................................................................................................
CONSUMER CONFIDENCE

Consumer Confidence, n.
An economic indicator measuring how the general populace feels about the economy
and their own personal financial situation.

The concept goes like this, if people are optimistic or feel good about the
economy and their personal situation, they will spend more and therefore
keep the economy moving. If they are pessimistic, well the belief is, people
will tighten their belts and economic growth will slow.
There are several consumer confidence tracking indicators, however the two
most widley followed and used are the CCI or Consumer Confidence Index
and the MCSI or The University of Michigan Consumer Sentiment Index.

CCI MCSI
Consumer Confidence Index University of Michigan Consumer
Sentiment Index
The CCI surveys 5000 people each The MCSI is based on a month
month and asks them 5 questions telephone survey of U.S. households.
from these areas: It also asks 5 questions:

Current business conditions Personal financial situation now


Current business conditions for and a year ago
the next 6 months Personal financial situation one
Current employment conditions year from now
Current employment conditions Overall financial condition of the
for the next 6 months business for the next twelve
Total family income for the months
next 6 months Overall financial condition of the
business for the next five
The Conference Board has been years
doing this on behalf of the United Current attitude toward buying
States since 1967. major household items

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27.................................................................................................................................................................................
CONSUMER CONFIDENCE

Above: graph of consumer confidence rarely leads a retail, manufacturers,


confidence over the past return to growth, but government agencies,
several years. rather responds to it. In and investors use it for
Notice how confidence 1980, 1981, 1990, planning purposes and
drops just before a consumer confidence to forecast downturns
recession. Also notice how started falling after we or increases in
low it was during 2008 entered a recession and consumer spending.
and 2009. Tough years. didn’t start moving back up Like all things
Although many call it a until after the recession connected, when
leading indicator, if you was over. Not much of a companies see
notice on this chart leading indicator. consumer confidence
consumer That being said, banks, fall they then pull back

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28................................................................................................................................................................................
CONSUMER CONFIDENCE

themselves, retail reduces


inventory, banks tighten
lending, manufacturers
slow production, home
WITCE
builders reduce WITCE (What Is The Customer
construction starts. All this Experience) Questions:
pull back reduces the
spend of these companies
and it’s almost always
1. Does consumer confidence affect your
sales people at the end of
customers buying habits?
the rope. If you sell to
2. Do you know how consumer confidence
builders, they are buying
affects your ability to make quota?
less from you. If you sell
3. Do your customers follow the consumer
to retailers, they are
confidence indicies and if so, how do they
tightening their belts.
incorporate the indicators into their
Quota just became a little
decision making?
more difficult. If you sell
4. What happens to your customers business if
to banks, you better start
their is a decline in consumer confidence?
getting creative.
5. Are there trends within your customers or
Companies buy from sales
prospects business that are tied to
people, when they stop
consumer confidence?
spending it’s harder for you
6. What would you do if your customer started
to make quota.
to reduce their purchases and slow their
Consumer confidence isn’t
buying because of the economy? Would you
going to make or break
know what to do?
your business, but
following it can lead to
opportunities others aren’t
looking for.

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29................................................................................................................................................................................
CONSUMER CONFIDENCE

Consumer confidence
provides good insight into how
people feel about their
financial well being and their
ability to pay their bills, go on
vacation, keep their job and
stay afloat.

How good it is at “indicating” where the economy is


heading I couldn’t tell you. But knowing what your
customers think and how they view consumer
confidence, that’s probably a pretty good idea.

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CHAPTER 7
...............................................................

CONSUMER
PRICE INDEX
31................................................................................................................................................................................
CONSUMER PRICE INDEX

Consumer Price Index, n.


The (CPI) consumer price index measures the change in price of consumer goods or a
“market basket” of goods over time.

The market basket represents a list of commonly purchased household stuff like
household items, personal goods and services, tobacco, leisure goods, households
services, housing, alcoholic drinks and other categories.

The CPI is a statistical estimate designed to determine price trends; are prices going
up, down or staying flat. Below is a graph of the CPI from 1913 to 2006. What I find
most interesting is the reduction in massive swings overtime. Since 1980,
inflationary swings have been modest and have leveled out at consistent increases.

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32.................................................................................................................................................................................
CONSUMER PRICE INDEX

How the CPI is calculated is a hot inflation. Inflation matters


mess that’s beyond my to everyone in sales, because if it
understanding. I’m not a stats guy. If goes up too high, too fast, people
you’re interested in going deeper you stop buying things and when people
can find out more here. That being stop buying things it’s not good for
said, simply put the CPI consists of sales.
price data and weighting data of Even though inflation or the CPI
household goods. In other words, it matters to everyone in sales
takes into consideration the price of indirectly, it doesn’t affect everyone
a good and the prevalence of that directly, and certainly not everyone
good being purchased. at the same time. Some industries

"So why do we care?"


We care, because the CPI provides are more prone to the swings of the
important insight into inflation which CPI than others; particularly retail. If
in turn affects purchase power, the you sell in an industry or sell to an
real value of wages, salaries and industry that is quickly affected by
pensions. When inflation increases the CPI, then you know it and if you
consumer purchasing power don’t you should. If not, knowing how
decreases and the real value of it can affect your sales overtime is a
wages decreases. Inflation can good idea.
constrict the economy because the
ability of consumers to “buy” is
hampered. The dollar looses it’s
value and folks have to work more to
buy the same amount. Inflation can
also have devastating impact on
savings and investment accounts, if
their return is unable to outpace

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33................................................................................................................................................................................
CONSUMER PRICE INDEX

The CPI is a broad


economic indicator WITCE
that is heavily WITCE (What is the Customer’s
Experience) Questions:
watched. Even if it
doesn’t directly 1. How does the CPI affect your
customer's business?
affect your selling 2. What happens to your target
customers business if the CPI
environment, it’s good goes up?
to know what it is and 3. What happens to your target
customers business if the CPI
why it’s important. goes down?
4. How does the CPI affect your
customers, customers?
How does CPI affect 5. Do changes in the CPI affect
your selling environment?
your sales world?

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CHAPTER 8
...............................................................

INVENTORY
VELOCITY
35...................................................................................................................................................................................
INVENTORY VELOCITY

Inventory Velocity, n.
The speed or rate at which inventory is cycled within a given period, for each item.

INVENTORY velocity vs. INVENTORY turns


Inventory turns is the rate at which inventory turns in total. Inventory velocity
measures the rate at a product level, where inventory turn measures at a divisional
or corporate level.

To measure inventory:
Cost of goods / average inventory
Inventory turn and velocity is an of your speakers, 8 inch round speakers,
extremely important measure. Simply put, twitter speakers, ear bud speakers etc.
the higher the number or the more “turns” It’s important that your customer has all
the more profitable (assuming the the speakers they need to meet
product is profitable) the company will demand, but what happens if they run
be. The longer a product sits on the shelf, out of ear bud speakers? How does that
it is taking up valuable cash nor is it affect their relationship with their retail
generating cash. It’s dead, it’s not partners? How does that affect sales?
working. The combination of profit and The natural solution then might be to
higher turns drives return on sales. increase inventory, but by how much?
Therefore, improving this combination is What happens if they order too much
key to companies. As a sales person who and it ends up sitting on the production
sells product, your ability to understand floor for two months instead of two
this and address inventory turn is critical. days? What is the cost to the company
to have inventory sitting around that
Imagine you’re a supplier of speakers for long? How does it affect their cash-
headphone and car speaker manufactures. flow? Most importantly, how does it
Each of your clients order several types affect your ability to sell to them?

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36....................................................................................................................................................................................
INVENTORY VELOCITY

4 Key Metrics
That Drive Inventory Velocity

Planning Cycle Time - this is basically the order time, the time between when it
is recognized a product is in demand and the time it takes to actually get an order
to a supplier. If you’re customer needs 8 inch round speakers and it takes 2 days to
get the order to you. That’s a problem. The goal is to get order lead time to zero.

Supplier Lead Time - This is all you sales folks. It’s the ability of your company to
get what your customers need out the door as fast as possible. In other words, how
long from the time you receive an order to get it on the truck and on it’s way to your
customer.

Transit Time - Simply put, this is the time it’s enroute. How long does it take to
go from their dock to your dock.

Variability of Demand - this is the big wild card. Variability in demand is the end
customers. End customers can be fickle. It’s the market. Trying to time the market
or guess the market is tough. Depending on the customer or demand, it can be
consistent, inconsistent, or “lumpy” big orders then nothing all drive the ordering
processes.

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37...........................................................................................................................................................................................
INVENTORY VELOCITY

For those sales people who sell product,


there may be as much selling opportunity
WITCE in the ordering process as there is in the
questions
WITCE (What is the Customer product itself. Step back for a second and
Experience) Questions:
see if you're aligned with your customer's
business. If not, you could be staring at a
1. How often do each of your
great opportunity.
customers turn inventory?
2. Are their ways you can improve
inventory turn with your products?
3. Does your customer struggle with
meeting customer demand?
4. Does your customer “send back”
product that doesn’t sell and are you
stuck with waste?
5. What is your customers supply chain
strategy and how well do you
integrate into it?
6. Do you consider your customers
inventory/supply chain when trying
to sell them your products
7. How does your inventory
turn/velocity compare to your
competitors, does their stuff move
faster, slower or the same?
8. Is inventory velocity and turn part
of your account management
strategy?
9. Are their ways your can improve
your customers business by
improving the ordering process?

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CHAPTER 9
...............................................................

MANDATES
38.....................................................................................................................................................................................
MANDATES

Mandates, n.
An official or authoritative command; an order or injunction; a commission; a
judicial precept.

Mandates are everywhere, effecting every company in


the U.S., big and small.

Mandates are a BIG deal and affect every business in the country. Knowing the
mandates that govern your customers can make you a fantastic partner and trusted
advisor.
What are mandates? You political wonks know what I’m talking about. Mandates are
a hot topic in the world of business and politics and generate a lot of discussion.
Why? Because mandates put rules on how businesses can be run and depending on
those rules, companies have to do a lot of work to comply or be shut down.

GOVERMENT regulated mandates

OSHA (Occupational Hazard and Safety Administration) which mandates laws


around safety and health in the work place.
EEOC (Equal Employment Opportunity Commission) which mandates laws
around equal opportunity.

The EEOC and OSHA are two government agencies which regulate every business in
the U.S. via mandates and regulation. No business escapes them.

FSLA (Fair Standards Labor Act) mandates the minimum amount of money a
company must pay its employees. Minimum wage is a perfect example of a
mandate, a mandate that effects how a business is run. It mandates how much
a company HAS to pay an employee.

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39.....................................................................................................................................................................................
MANDATES

GOVERMENT regulated mandates

HIPAA regulates health plans, patient privacy, preexisting conditions and more.
HIPAA plays a HUGE role in the healthcare and insurance industry.

Beyond broad mandates like minimum wage and equal opportunity, there are
industry specific mandates like HIPAA (Health Insurance Portability and
Accountability Act).

If you are selling in these industries, knowing HIPAA inside and out could be a
HUGE competitive advantage to you. Imagine an IT consulting sales person within
the healthcare industry who is familiar with HIPAA enough they are able to help a
company avoid potential exposure in the design of their new customer portal. That
sales person and their company will be heavily valued.

Dodd-Frank (Dodd Frank Wall Street Reform and Consumer Protection Act)
Another substantial set of mandates comes from Dodd-Frank. It was the
government’s response to the 2007 financial crisis and was designed to minimize
the risk of something like that happening again. Dodd Frank is massive, mandating
and regulating a vast segment of the financial world, from how mortgage
companies can be run to how banks manage their reserves. It’s a sweeping piece of
legislation that affects every aspect of the financial world. If you sell to the financial
industry in any capacity the more you know about Dodd Frank, the more you will
sell.

Mandates affect how a business is run. It sets the rules


and guidelines affecting the decisions and options a
company has.
In many cases, the regulations and mandates are complex and wide-ranging.
This leaves many companies exposed or potentially out of compliance.

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41.....................................................................................................................................................................................
MANDATES

4. Are there potential compliance


issues within your customer's or
prospect's business your product
or service can address?

WITCE 5. Does your product or service


potentially create unintentional
questions compliance risk? (I knew of a great
company that had a great product
WITCE (What is the Customer and in spite of heavy demand, it
Experience) Questions: failed because it created compliance
issues with FSLA)
6. Are you capable of having solid
1. What mandates or regulations affect conversations with your
your customers? customer or prospects around
the regulations and mandates that
2. Do the products and services you sell
affect them?
affect your customers ability to
comply? 7. Do you have a process like Google
3. Is there legislation currently under Alert to keep you apprised of
regulation changes in your
review that could affect your
industry?
customers or prospects in the future?
8. Do you even consider mandates
and regulation in your selling
process?

The impact of mandates and government regulation on the sales process is going to
range widely, depending on the product(s) you sell and the industry you sell to.
However, those most knowledgeable about mandates and the regulations affecting
their customers and prospects will be far more prepared to find the deal and win
the deal than those who aren’t.

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CHAPTER 10
...............................................................

GROSS MARGIN
43.....................................................................................................................................................................................
GROSS MARGIN

Gross Margin, n.
The difference between the revenue a product or service creates and the cost of creating
that product or service.

margin is 5 dollars or a 33% gross


margin percentage. The higher the
gross margin the better the business.
Higher gross margin means there is
more money left for operating the
business and for doing other things.
When gross margin is tight, it’s difficult
to run the businesses as there is very
little money left over for operations.
When margins are low, heavy sales
volume is required to maintain the
The key here is to keep business.
A lot of things can go into the expense
cost of goods expenses side of gross margin. Some companies
as low as possible. like to load this part of the P&L up.
Others try to keep it low only
Gross margin is part of the P&L statement including the direct costs of the
and if you’re in sales it’s important to product and omitting labor. The
understand for both YOU and YOUR expenses that go into gross margin are
customers and prospects. In other words, if called cost of goods and include the
it costs a 10 dollars to create a widget and parts that go into the product, the
the widget is sold for 15 dollars, the gross direct labor costs, materials, etc.

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44.................................................................................................................................................................................
GROSS MARGIN

Remember: gross margin is the difference between the revenue


generated by a product and what it costs to make the product.

FORMULA:
REVENUE - COST OF GOODS =
GROSS PROFIT

Then divide GROSS PROFIT by


TOTAL REVENUE, and you get
WITCE
GROSS MARGIN.
WITCE (What Is The Customer
Experience) Questions:

1. What is your customers gross


The other way to improve margin?
or affect gross margin is 2. How does your product or
to increase revenue. If the service affect gross margin?
cost of goods are high, 3. Is there a way you can position
then increasing your your product or service to
prices can help strengthen improve revenue or cost of goods?
gross margin. You can
4. Is your customer below or above
choose to focus on value the industry average for gross
so you can increase your margin?
prices or focus on
5. What happens if gross margin
productivity to improve
starts to shrink, is your product or
costs. Either way it’s service first to go or are you in
critical to have as much a the critical path?
spread (gross margin) as
possible.

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45.................................................................................................................................................................................
GROSS MARGIN

" Gross margin is


critical to the health of business,

so why not know


how it works? "

Understand gross margin, where you can. Try to know what your customers
gross margin is. It can be helpful tool in the sales process.

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