As we lean into 2023, let’s consider the possibility that what we need to focus on is what is most important… us!
Think about it. In the business community, we are always searching for slight edges. We always try to get more business–by earning it. We always want our clients to buy additional products and services from us, and we always want them to become advocates on our behalf over the long term. Those are all things we want. And there’s nothing wrong with being part of an organization that wants them.
At the same time, we all face some universal challenges as we enter 2023: a tough employment market, supply chain problems that affect us directly or indirectly, inflation, rising wage expectations, higher interest rates, technology overload, and (last but certainly not least) a softening market in which many buying decisions are being delayed or predicated on a request for a price discount. So: Could we handle those challenges better than we’re handling them right now? And by "better," I mean could we handle the challenges in a way that truly serves us – so we can do a better job of serving our clients, customers, and end users?
I believe we can. Here’s an example of what I mean. Many senior leaders are primarily looking to cut costs… and at the same time looking for ways to drive more revenue. What we need to ask ourselves is: Is what we’re doing in an effort to attain those objectives really serving us? Let’s think about a hypothetical $100 sale that carries a twenty percent profit margin. Here’s the P&L.
Cost of Goods: 10
Gross Profit: 90
Development (Fixed): 20
Sales Expense: 40
Pre-Tax Profit: 20
So – if we take Sales Expense down to $38, we increase Pre-tax Profit, which moves up to $22. That’s a 10% increase. BUT – what if that $100 could be $105, with everything else staying the same? Wouldn’t that be a better scenario?
In that case, pre-tax profit moves from $20 to $25 – a 25% increase! Way better than 10%, right? Now: Is that a pipe dream? No. It’s reality. When we practice not discounting off the list price automatically in an attempt to win the deal, we hold on to more revenue, more commissions, and more market share. And, truth be told, a lot of sales teams out there are needlessly giving away much more than five percent of the list price. As our partner Barry Trailer at Sales Mastery has pointed out, learning not to discount instinctively is essentially the same thing as raising your prices… without raising your prices.
There is an art to doing this, and it is an art we need to master. It may be tempting to discount on demand in an attempt to get last-minute sales. Such sales come, however, at the detriment of our business.
Here’s a simple Sandler tool you can use that makes discounting your list price a last resort, rather than a “closing technique” that saps margin, commissions, and competitive advantage. This is how we can learn to respond strategically when we are pressed to cut our list price.
The Sandler Negotiation Matrix
The value of this tool lies in how much easier it makes to follow the rule of never giving a concession without getting one in return. Most salespeople give and give… but get nothing in return except for (they hope) the word "Yes." This tool helps salespeople strategize the concession discussion up-front… and gives them the flexibility they need, in real time, as they talk to a buyer.
Believe me when I say that 2023 can be a great year. Our teams, our philosophy, and our attitude can be based on a shared belief in abundance, in possibility, and in a working culture of where growth, innovation, and a future-forward outlook are all interconnected. The way to make that happen is for leadership to set the example, through action, in ways that shape the belief system of the team in a constructive way… and for everyone to work together when it comes to protecting profits. For sales teams, the Negotiation Matrix is a great place to start. That’s what I mean by focusing on us!