Sales training is unfortunately still stuck in the 90’s. Sellers are trained on the techniques and “tricks” to drive a buyer through the seller process (rather than the buyer’s journey) and we are still expected to close, close, close. The world has changed. Your buyers have raced ahead in how they like to do business and you are trying to approach them as if you are some sort of dinosaur fossil: a relic who is outdated and irrelevant. If your buyers are business people, act like one. Learn about their business.
Warren Buffet once said, “Accounting is the language of business.” So, if sales is a business lever, you must be able to speak the language of business. You must be able to read and understand financial statements. So, here is the million-dollar question:
“How much training have you received on business acumen and how to read a financial statement?”
No doubt, having good product knowledge and sales skills are important, but in order for you to be a successful seller you must become a knowledgeable business person. We expect sellers to deliver powerful value propositions and clearly articulate the ROI of their solutions but, if you don’t understand business then you cannot truly appreciate those 2 things and you especially cannot appreciate them from the buyer’s perspective.
Financial Statements Reveal A Company’s Character
Your buyers are essentially business people. The more senior they are, the more they are focused on the business as opposed to the technical or subject matter elements. For example, the typical CTO will not be as technically brilliant as others in her team. That’s ok because her responsibility is to grow the value of the business. Being the best technical person won’t help her achieve those goals. Since she is a business person, her goals will be business driven. Her activities will be purely focused on how her technical team can enhance the business and grow its value.
Sellers often ask me, “How can I better understand my prospect’s/client’s strategy?” My answer is always, “Read their financial statement.” A company’s financial health doesn’t just determine the executive team’s decisions and strategic plan, it tells you the story of the business and even gives you an insight into the personality of the company.
Take Cazoo. In a recent videocast Ted Wainman and I talked about its finances and what they reveal. It turns out the CEO and his executive team are making a herculean push for this business to become successful within 5 years. They are investing a huge amount of money to market the business, buy cars, and buy fulfilment centres around the country. They are actually selling each car at a loss!
Ted likens this to a rocket ship taking off. At the take-off stage it takes a huge amount of fuel and energy to get the rocket off the ground. Once that rocket reaches a certain height, the ratio between fuel consumption and distance travelled lowers. You don’t need as much fuel per distance travelled. It is the same for Cazoo. They are spending a large amount of money to get this business off the ground. Their finances show that they haven’t even left the tower yet.
So, what does this tell you about the decisions that the executive team are making? Well, every decision they are making is to increase brand awareness, lower the cost of car deliveries, and increase market share. They are racing to capture as much market share before someone else tries to copy what they are doing.
Contrast this with Gymshark. In this videocast we learn that Gymshark is taking a completely different approach to Cazoo. Its personality is slow and steady. They are not making a huge amount of up front investments. They are expanding carefully, but not too slowly, and they are focused on creating a profitable business. Gymshark has a completely different personality to Cazoo.
How Financial Statements Improve Your Sales
If you use one standard approach for companies like Cazoo and Gymshark, you won’t get very far. At best your standard approach may align with a company who happens to share your approach. At worst, your approach doesn’t align with any company.
Understanding a company’s financial statement helps you understand the WHY for their decisions. It helps you understand where they are prioritising their money and what returns they seek. What you will also understand is how much money they need to make from each product and in what timeframe they need to do so. For example, Cazoo has to sell each car they own within 180 days otherwise they lose money. If you approach Cazoo with an angle like:
“I have read through your financial statement and it seems that you need to sell each car within 180 days otherwise you lose £$X amount per day, per car. We have a solution that will help you sell your cars within 60 days. Would you be interested to learn how we have done this for others like you?”
Now, compare that with your usual hook and approach.
There is so much advice out there about the importance of personalisation in your cold outreaches. We have even had some horrendously shallow and oversimplified guidance of using a prospect’s name and mentioning some small fact about your prospect in your scripts. But, those methods are not compelling enough to build trust with your buyer. The example I used above is leaps and bounds ahead of how your competitors are engaging with your buyers. You will stand out far better and you will gain both the respect and trust of your buyers because you are speaking their language and presenting evidence for your hook and theories.
Don’t Fear Financial Statements
So many sellers I speak with fear financial statements. They falsely believe that financial statements are too complex to read and understand. They also mistakenly believe that they need to become finance experts and accountants in order to draw meaningful conclusions about a company. Both are not true. Finance, just like any professional vocation, involves a series of steps, principles, and frameworks. You can quickly become very knowledgeable by understanding just 5 key elements of a company’s finance:
- Sales growth/decline
- Balance sheet & Net Asset Value
- Cash Flow and Cash Amount
- Can they service their debt?
Don’t worry, help is at hand. Ted and I created a video that will show you the basic principles for how to read a financial statement and understand a company’s decisions and priorities.
Financial statements are readily available for all pubic companies. All you need to do is Google the company name and then type “investor relations”. You will be taken to a section of that company’s website dedicated to providing various regulatory documents about their financial activities. You can access both their quarterly and annual statements.
The quarterly statements do provide you with the most up-to-date picture of their activities and results, but they are unaudited so it won’t have verified data from an objective 3rd party. To be honest this is not an issue for you as your hook does not need to be accurate. It needs to be thought-provoking and relevant. By delivering such a hook, you have established enough credibility that the buyer is likely to be happy with correcting any information that they will be privy to.
Annual statements are audited and more reliable. They also provide you with the basis for the budget allocated to your buyer. However, they are based on last year’s financial performance so they will be out of date. Again, this isn’t a problem for you as it still provides a complete picture of the company.
My advice is to use the annual reports to get a complete picture of a company and learn more about their goals and strategy, while using the quarterly reports to learn how they are pacing towards their goals and if there are any major updates.
What If I Am Selling To A Private Company?
There are still ways you can access their financials or at least get some picture of their financial health. The first and easiest way is that a small number of such businesses do provide high level data on their financial results such as revenue and profit. They will have created a page called “financials” or something similar. You can also find such information in their “About” section. They are of course not audited, so you do have to take them with a pinch of salt, but it’s better than no information at all.
In the UK, private companies are still required to submit their financials. These Annual Reports are published in Companies House and anyone can access them. It is important to note that there are circumstances where a company may not need to submit a full set of accounts e.g. if their revenue is under a certain amount, or if they are part of a larger group. But, it is a still a great source to check.
In the USA, private companies are not required to submit such annual reports so it won’t be possible to find this information. However, you can get a very good sense of a business through the financials of its competitors and industry peers. Have a look at what their public competitors are doing and their financial health. What does it tell you about the industry, their opportunities, and their challenges? You can share this information with your buyer and honestly explain that you can’t acquire their finances, but you have drawn inferences from what their competitors are doing. You are then in a stronger position to discuss their strategy and you will be in an even stronger position to understand the context of their answers. For example, if your buyer states that they are seeking to grow by10% this year, how does that compare with the growth of his/her competitors? How does that compare with their industry’s CAGR? Such context is valuable to understand their ambitions.
Who do you think a buyer will respect and share more with? The seller who comes in with the usual boring open questions like, “What are your biggest challenges and priorities?”, or someone who comes in having done such homework and is able to draw intelligent and thought-provoking ideas and suggestions?
Top sellers help their buyers make smart business decisions. They help them see around corners. They help them make sense of all the information out there. Don’t focus on selling your solution, instead focus on advising your buyers of the right decision to make. of course, the right decision will lead them down to your solution. But, the journey starts with helping them understand the future and make the right decisions; not, “Here is why it is a good decision to by my solution.”