How to Prove That Your Solution Directly Increases Revenue – Demonstrating ROI on a Sales Demo And How It Greatly Increases Your Close Ratio
In one of my previous articles titled, "How to Present A Killer Sales Demo" I discussed at length the sales presentation and one of the major components of a fool proof sales demo is proving a return on investment by using your products/services. After all, we want the deck stacked in our favor.
Remember our prospects have pain. They came to us for a reason. Our odds of getting more clients are greatly increased if we show our prospect that it makes sense from a financial standpoint to sign up with us.
We want to instill confidence that not only will our solution make their pain go away, but they will realize profit too.
I have included a very simple ROI calculator you can use and walk your prospect through.
In this article, I will break down each step of the ROI calculator, and explain in detail how you can use it as part of a successful sales presentation.
Will Your Solution Make Me Money?
On a practical level, this is at the back of your prospects mind. Will this solve my problem, not cost me money in the long run, but make me money. Remember that their lizard brain is in control, and the lizard brain is doing everything it can to make sure your prospect stays in their comfort zone. Your job as their potential service provider is to show them that working with you will solve their pain. For most businesses who suffer from the feast famine syndrome, the problem boils down to not enough consistency in their business.
The best way I know how to answer that universal dilemma (remember, that your prospect more than likely will not verbalize these sentiments but are more than likely thinking them) is to walk them through in black and white what ROI looks like.
It's always a good idea to have full transparency, full and open dialogue with your prospect so they know that you are an honest broker, and that you have their best interests at heart. We all know what happens when we are so anxious to make a sale, we hard sell even when it might not be the best fit for our prospect. I used to do that and have found that it causes so much hassle. The customer was not happy, they bugged me all the time, I was miserable, and it would have been much better to part ways.
Trust me when I tell you that it's best to be honest and open about what your offering is. At any point if it doesn't look like it's a good fit, end the process and find another prospect that is a good fit for your services. Please don't try to fit that square peg into a round hole.
When you have determined that this person is a viable prospect and it would benefit both of you to work together, then as part of the sales process (typically during the demo/sales presentation) you would want to make sure your prospect understands that working with you not only will NOT cost them money, but in the end, they will MAKE money.
Justifying Your Fees By Demonstrating ROI
The ROI calculator is designed to do just that. It is nothing extremely clever, just practical. Let us take a look at each step of the process and I will walk through how to work through it with your prospect.
Customer Value: For this field you want to ask your prospect what they normally charge when they sign up a new customer. They should have this information readily available. If your prospect seems dodgy or evasive, it is more than likely because either they don't have set fees and they wing it, they don't trust you enough yet, or you haven't instilled enough confidence for them to share this information with you. If it's a trust issue, you will need to establish that trust.
If you can see that it is a trust issue, you can work on establishing trust and calling it out by saying something like this, " I notice that you're either unable or don't feel comfortable enough with me to share this information. I do understand that your fees are somewhat personal. The only way we can really determine if this is cost justified for you (if not, we can part ways as friends), is if we can get a realistic picture of what you normally charge for your services... What would you say your normal fee range is?"
Then just be quiet and let your prospect answer.
Put that number down in row 3 (it will show row 3 in the spreadsheet you can download below) of the ROI calculator.
Number of times billed per year: This should be easy to determine based on if they bill monthly or annually, etc. Whatever their rebill rate is per year, put that number down in row 4. (It will show row 4 in the spreadsheet you can download below).
Number of new customers per month: You may have to work through this with them by asking probing questions. If they are not sure, talk to them about the previous month or current month. You can say something like this, "Did you sign up any new customers recently?" "How much did you charge for them?" "Is that your normal rate?" The goal is for your prospect to tell you what they charge for their services as well as how many new signups they average per month currently.
Now that you have a baseline, you can walk them through how many new customers they can expect as a result of your services. You would get to this estimate base on your experience coupled with theirs.
For example, you can say something like, "have you ever had a time where you had gotten more than your average number of new customers per month?" If they say yes, you can probe a bit more to see what it was a result of. You can do that by asking something like this, "what would you attribute that too do you think?"Typically it's a result of more exposure of their business. (A.K.A more marketing).
If they don't have an answer for you then you can work through it with them based on your personal experience or industry standards/case studies. You can start that conversation like this, "well prospect, based on what I have seen as typical based on similar strategies with similar businesses, we can expect _____number of new clients/customers per month". "Does that sound reasonable to you?"
Get their buy in and plug that number in row 5 of the ROI calculator (it will show row 5 in the spreadsheet you can download below).
Increase in revenue as a result of implementing the right marketing: This number is auto calculated based on your prospects input of the previous cells.
Owner's time per hour: I think this is often overlooked by the business owner. Oftentimes, if they were to calculate how many hours they worked by how much they net after expenses, it would come out to a mere pittance. The idea here is to get your prospect to place a value on their time, not what they are earning after expenses.
For some service based industries this would be easy. Take an attorney or consultant who charges billable hours. You can use that as a starting point by saying something like, "the average _______typically bills at ________ per hour. Does that sound reasonable?"
You want to have a concrete and realistic number of what their time is worth, not what they are currently earning.
Number of hours spent on customer acquisition: This is proposals, follow up, presentations, pitches, lead generation that your prospect spends on their sales and marketing efforts. This is a total per month, not per new customer. You may have to help them by getting them to explain their sales and follow up process, and how much it takes per new customer. You can take that and multiply it by number of average new customers they get each month to come up with a true and accurate number of hours they spend per month on acquiring new customers.
Number of months spent on new customer acquisition: This is typically 12 months if they try to bring in new customers throughout the year. If you had an owner that took the summer off to vacation in the south of France, then this number for example, would be 9. The idea is to have your prospect put a monetary value on their time because as business owners we often overlook the value of our time.
Total owner costs in actual dollars: This is a calculated field and takes what your prospect reported in rows 7, 8, and 9 of the ROI calculator. (It will show up as rows 7-9 on the actual spreadsheet you can download below).
Cost of proposed solution: This row is all about what you quoted as your costs. Typically this is a monthly fee for services. If you charge a set up fee plus monthly, then you would add your set up fee. The easiest way to do this is to divide your set up fee by 12. For example, let's say your set up fee was $1200 and your monthly fee was $500. You would divide $1200 by 12 which would give you $100 then add it to your monthly fee which in this example is $500. Your total cost of proposed solution would be $600.
Number of months billed for solution: Typically if you bill monthly this number would be 12.
Cost of acquisition per year: This is a calculation of how much it costs your prospect to acquire those new customers per month that you worked out with your prospect in row 5. This is an annual number based on your fees and the time they spend on new customer acquisition per year.
It is important to get the prospect's buy in and work through this calculator with them so they have input and agree to the calculations. The worse thing that could happen is for your prospect to disagree with you or think that you pulled numbers out of the air that are not realistic on their business. This is all about their needs, pain, and solution.
Net increase in revenue and ROI percentage: These final two rows tell the story of how much in additional revenue they gain in dollars and percentage. If they had buy in along the way, you should still have them up to this point. It is hard to say no to a solution which will earn you and additional ___ dollars per year.
When you get the prospect to this point, just be quiet and listen to what their objections are. Typically any objection to this is something the prospect has not revealed to you yet. More than likely it has to do with belief that this is what they can earn or that you can deliver what you said you could. It could also be a pricing objection. If it is a pricing objection, then you would have to work through that with them because there is something of a disconnect.
If you think about it, if your prospect is objecting to making and additional $________ in additional revenue, it's more than likely something else. This requires you to dig a little bit to find out what the issue(s) is/are and see if you can find a solution to them that your prospect can agree to.
While this ROI calculator is not the answer to every sales presentation, buy working through the numbers with your prospect, you can help them see in black and white what an expected ROI should be in working with you, as well as getting them to put a number on their time.
Of course, there are nuances to how to present this ROI calculator and it does rely on trust. If you would like your own copy of this ROI calculator, you can download it here: