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If the business is facing a cash flow problem, then the root of this problem is linked to sales. The biggest mistake entrepreneurs make is they have a tendency to overestimate their ability to sell their product or service. Once they open their doors, they believe the world will beat a path to their door. Take it from me, that just does not happen.
This outstanding excerpt is from ‘Built, Not Born’ by Tom Golisano. He is an American billionaire businessman and philanthropist. He is the founder of Paychex, which offers payroll and human resources services to businesses.
When entrepreneurs overestimate their company’s potential sales, they are doing the same thing with their gross revenue. This results in a cash flow problem. In simple terms, there is not enough cash coming into the business to pay the company’s overhead. So they go to the bank and report that they have a cash flow problem, but in reality, it’s a sales problem. Or, if we look at the bigger picture, a management problem.
In short, if your business is short of cash, the first place to look is at your sales productivity. Because administrative staff are not part of the selling process, the importance of the sales department is often underestimated. If you’re the CEO, however, you need to know at all times whether your sales revenues are on target. If they aren’t, your financial situation can deteriorate extremely rapidly.
Sales and Marketing
There is a fundamental truth: nothing happens in a company until someone sells something. The importance of the act of selling something frequently gets lost in the business school curriculum, where it is usually combined with marketing. But there’s a difference between sales and marketing; knowing that difference is an important first step in creating a sales strategy. Academic programs often fail to discuss the act of selling; that is, the personal interaction between a salesperson and a prospect. The act of selling and the art of negotiation are imperative to every business on the planet. It doesn’t matter what your business is; someone has to sell something.
Remember, you are the best person to sell your product (initially, at least). There is nothing better than experiencing first-hand the objections prospects have for not buying what you are selling and learning how to handle those objections. You’ll also gain an understanding of what motivates your buyers. Once you’ve experienced the sales process yourself, you can share the knowledge you have gained with your sales team and give them a clear idea of what they are going to hear when they’re face-to-face with prospects. There is no one better than you to train your sales management and salespeople. Let’s face it, entrepreneurs: it’s imperative you learn to sell your product or service and, more importantly, how to be productive at it.
Beware of Elephants
If you are out there prospecting and you come across a potentially huge customer, be cautious. You have to be careful when selling to what Tom Golisano calls elephants. The “elephant” in this case is any major customer that accounts for a sizeable percentage of your overall sales revenue. These clients appear very attractive, and they can be; however, they come with some baggage. Here are several challenges you will face if you focus on these “highly desirable” prospects and customers.
First, they can take a long time to close, and you will face stiff competition for their business. Second, they are not usually as profitable as you might expect. Large, important clients expect heavy discounts. Your competitors will also be trying to get their business, so beware of a race to the bottom when it comes to profit margins. You need to ask yourself whether high revenues and low profit are good strategies for your company.
One final danger is that you will likely have to increase your overhead to allow you to build capacity in order to service an elephant or elephants; then, sometime later, should they decide to change supplier, you will be left with an increased overhead with no corresponding revenue. Losing one or more major customers on which you rely heavily for a large percentage of your gross revenues can quickly, and sometimes unexpectedly, throw you into a cash flow problem.
Handle Objections
The only thing ever stopping you from getting a sale is an objection you have not overcome. Think about it: if you can overcome every objection, you must get the sale, as long as you ask for it, of course. The question is: How?
No matter what product or service you are selling, or to whom you are selling, prospects are always going to raise objections to buying whatever you are selling. The trap many salespeople fall into is that they become offended or upset by these objections rather than seeing them as another avenue to get back to the sales presentation. Look at objections as opportunities. To help you with this, train yourself to be ready for any and all objections by preparing clear, logical answers in advance. Spend the necessary time to think about all the possible objections you might face, write them down, and decide how you will answer each and every concern a potential buyer might raise.
Recognize Buying Signals
Tom Golisano shared a story about Chuck Wollmer, one of his first franchisees in Florida. Part of his role and responsibility as a franchisor was to help franchisees with sales training. Chuck called Golisano one day and said he had his first appointment with a twenty-five-employee restaurant, which was an ideal-size company for Paychex, so Golisano decided to make a trip to Florida. They went to the restaurant and sat in one of the booths. Chuck went through the presentation, and there was no question he knew and understood our product, its features, its advantages, and its benefits in finite detail.
When they left the restaurant and were walking back to his car, Chuck said, “That went well, didn’t it?” Golisano’s reply was that it was one of the worst sales presentations he’d ever witnessed. Chuck was shocked, so Golisano explained that he had failed to ask for the order, even though the owner had given him several strong buying signals. Chuck had been so wrapped up in his presentation that he hadn’t heard, or noticed, that the owner wanted to sign on the dotted line. The restaurant owner had said, “What do I do to get started?” and “When could we start?” Chuck, however, single-mindedly carried on with his presentation.
In any sales situation you need to listen to your prospect, really listen. There comes a point when prospects have enough information to make a decision and will ask you questions that indicate they are ready to commit to the purchase. These are the buying signals; learn to recognize them and when you do, move toward asking for the order. On some occasions a prospect may become silent; do not take this as a negative. They may be thinking of all the reasons they should buy. Let the silence go on for however long it takes, and you will be rewarded with an order.
Use of Trial Closes
Trial closes are almost the reverse of buying signals. Whereas buying signals are initiated by the prospect, you the salesperson can ask questions to “test the waters” to see if a buyer is close to making a decision. For example, you might say, “We could start this service next week if you like,” or “We could deliver your order the week after next. Will that work for you?”
If you use a trial close at a moment in the presentation when the buyer has all the information he or she needs, it can actually be a form of asking for the order or closing the sale. If the buyer is not ready, a trial close question will encourage the person to raise any remaining objections he or she might have about your product. At that point, you can answer the questions and use a trial close a second or third time.
Golisano shared his experience as “I remember once using a trial close and getting an extreme buying signal. I was selling to a printing firm, a father-and-son operation. I was making my sales presentation to the father, who was in his seventies. Their company had a twenty-person payroll, which was a great size for Paychex. The presentation went well, and I decided to employ a trial close: “Maybe we should start this next week. It’ll give us time to get your payroll information together.” I was surprised when he answered, “Can’t you do it sooner than that? I might not live that long.” Here was a case where the trial close led directly to the close as I replied, “Well, let’s do it right now.””
Key Point to Remember
“Entrepreneurs believe that profit is what matters most in a new enterprise. But profit is secondary. Cash flow matters most.” ~ Peter Drucker
Often salespeople make closing far harder than it needs to be; sometimes you simply have to ask for the order. Successful selling has three basic elements: identify a prospect that needs what you are selling; determine that the prospect has the power to make the buying decision; and ascertain that the prospect can afford or is willing to pay the price you need to charge to make a profit. With this, you can very manage your business cash flow problem.
The Wealth Code: Volume 1 is a personal development and financial education book written by Vinod Singh. It is designed to empower readers by teaching them principles of wealth creation, financial freedom, and personal growth. The book offers practical strategies to achieve financial success, with a vision to uplift and transform the lives of millions by promoting financial literacy and entrepreneurial thinking. Singh’s approach is rooted in inspiring individuals to take control of their financial destinies while cultivating a mindset focused on long-term success and abundance.
