I Am Continually Surprised…

 

I am continually surprised

At how much I’ve learned

Since yesterday!

Value: A Bit LESS About Numbers?

 

How many digits of Pi do you remember?

How many digits of Pi do you use?!

 

The math constant π (Pi) has an approximate value of: 3.141592653589793238462643383279502884197… 

 

For many calculations we round this down to 3.14, but for a quick estimate of a circle’s circumference or area we simply use 3. Why? Because the single digit is much easier to remember and use!

 

In our doctor-patient interactions example (see previous posts below), the actual first-year net gain was $11,738,000. This is the correct number, but it is hard to remember (try saying it rapidly several times…!). 

 

$11.7 million is quite a bit easier and saying ~$12 million is even more so.

 

Along similar lines, if you found that your prospect could redeploy 5.27 FTE to other, more productive tasks, you have several choices of what to communicate:

 

·      5.27 is the exact number and is generally what you should use in detailed cost-benefit calculations.

·      5.25 (or 5¼) is easier to articulate and grasp.

·      Rounding down to 5 is the simplest form and represents a safe, conservative approach.

 

In most situations, simple numbers are the recommended approach. However, there may be situations where the impact of a very specific number is particularly memorable and effective. 

 

For example, in a study of demo effectiveness, the authors analyzed 67,149 demo recordings. When presenting the results of the study, saying the precise number of 67,149 appeared to have more impact than rounding it down to “about sixty-seven thousand.”

 

Bonus: For a terrific book on communicating numbers, read Making Numbers Count by Chip Heath and Karl Starr. Many of the ideas in this series of posts are drawn from their work. 

 

Double Bonus: Chip and his brother Dan also wrote that seminal book on storytelling, Made to Stick, which should be required reading for all customer-facing folks! 

And here are the other posts in this series so far – enjoy!

 

https://greatdemo.com/calculating-value-numbers-you-should-know/

 

https://greatdemo.com/which-vendor-statement-has-more-impact/

 

https://greatdemo.com/arithmancy-the-magic-of-numbers/

 

https://greatdemo.com/making-monetary-numbers-tangible/

 

https://greatdemo.com/value-statements-need-to-align-with-job-title/

 

https://greatdemo.com/annualize-your-value-statements/

 

Perception

 

We note the presence of something new much more acutely 

than the absence of something old.

Calculating Value: Numbers You Should Know

 

Value calculations rely on a number (pun intended!) of constants that every customer-facing vendor player should learn and memorize! Here are a few:

 

·      Working Days per Year: About 238 for the average U.S. company (that’s 365 days minus weekends, holidays, two weeks of vacation, additional personal time off, sick leave, etc.). The specific numbers will vary depending on industry and region. For example, in France the number is about 216 and in Germany it is about 230. Of course, people at start-ups work about 400 days per year!

 

·      Working Hours per Year: This is dependent on the number of working days per year, and the number of hours worked each day. Someone who works 238 x 8-hour days per year spends about 1900 hours laboring annually; those who have a bit more time off and work 220 x 8-hour days invest about 1760 hours in their firms each year. 1800 hours is a reasonable average, but again you should investigate the specific numbers for your prospects’ situations.

 

·      FTE Rates: FTE is “Full Time Equivalent”, which translates to the full cost of an employee. This includes salary and other compensation, benefits, and the portion of the business’ overhead that is attributed to that employee. This last component might include office space, office equipment, and associated services. 

 

In simple terms this can be broken into two components: compensation and burden (or “overhead”). Knowing typical rates for both enables the kinds of calculations we’ve enjoyed (ahem) earlier in this series of posts. Burden rates generally range from about ¼ to ½ of the employee’s salary for office-based businesses but can go up much higher for industries that have more equipment or supplies required, such as in manufacturing and healthcare.

 

So, once you know the average compensation for your prospects’ employees and their typical burden, you can quickly calculate their FTE rates. For example, someone who makes $100,000 annually and has a 1.5x burden has an FTE rate of $150,000. Simple arithmancy!

 

Are there other numbers or “constants” you should know? Yes, most likely, and these will depend on the nature of your offerings and your prospects’ industries and locations. In the world of chemistry (my background), one can expect that a typical traditional bench chemist can complete about one experiment per working day (depending on the type of chemistry, of course!). You can probably find these constants for your situation in a few web searches. 

 

For more, see "Let's Talk About Value" starting on page 156 in Doing Discovery:

https://www.amazon.com/Doing-Discovery-Important-Enablement-Processes/dp/B0B8RJK4C2/

 

Annualize Your Value Statements!

How is 1 day per week worth 2 FTEs?

 

When communicating value, we need to present the largest reasonable figures. One simple way to accomplish this is to annualize our calculations.

 

Let’s say that during a discovery conversation, we learn that our prospect can save one day each week by implementing our software. We could leave it at that, but it isn’t very compelling!

 

On the other hand, if we annualize our finding, it amounts to about fifty days per year. That’s much more interesting: That’s nearly a quarter of an FTE (Full Time Equivalent)!

 

But wait: The prospect was simply describing one individual on a team, and it turns out that there are ten people all suffering the same issue. On a weekly basis this amounts to saving ten days for the team. Annualizing the calculation, we find that our prospect can recover 500 days annually. That’s a lot more! (Flick your wand and say, “Engorgio!”)

 

We glance at our prospect, a middle manager, and realize that they can’t really visualize what 500 days saved can mean. We say, “500 days – that’s a bit over two FTEs, so that’s like freeing up two members of your team to focus on other, more valuable activities.” Our prospect immediately “gets it” and starts thinking about other neglected tasks that could be addressed.

 

Annualize your value statements!

For more, see "Let's Talk About Value" starting on page 156 in Doing Discovery:

https://www.amazon.com/Doing-Discovery-Important-Enablement-Processes/dp/B0B8RJK4C2/

What is the Calculus of Sales?

 

Critical Moments!

 

What is the Calculus of Sales (or more accurately, what is the Calculus of Buying)? It is understanding what happens moment by moment in a buyer’s process or journey. How does this understanding help?

 

Exploring and analyzing buyers’ sentiment on a moment-by-moment basis should enable us to determine exactly when they were convinced to buy. 

 

What was the triggering event? Was it a compelling story? Was it seeing a key dashboard or report? A review from a third party? A call to a colleague?

 

Prior to Newton and Leibniz, people focused on specific events but were unable to connect them. The Calculus enabled us to examine motion – what happens between events – what are the minute transitions? 

 

I wonder if these same ideas can be applied to sales and buying!

 

Can recordings and transcriptions be analyzed (by AI or whatever) to uncover the very moment a buyer makes the decision?

 

They say that people make rational decisions for emotional reasons. We accept this. But what are the specific emotional decisions, when exactly do they take place, and what are the triggers? What are the tells?

 

What are these Critical Moments?

 

Are there phrases, gestures, questions, statements, facial expressions or other entities that are indicators that a decision has been made? At that point do we need to move from “selling” to “supporting”?

 

Perhaps it is a sudden nearly imperceptible expression of excitement, or anticipation, or relief. I believe we can tease these out to understand and characterize Critical Moments!

 

In “The Credit Card Story” (a true story related in “Suspending Disbelief”), the prospect CEO gives a clear buying signal when he takes out his credit card and slides it across the table to the salesperson. But what happened just before that took place? That’s the Critical Moment when he made the decision to buy!

 

Thoughts?

Value Statements Need to Align with Job Title

The sales call wasn’t going well!

 

I was watching the prospect’s reaction to the salesperson’s statements…

 

He said, “It looks like you’ll gain $24 million annually by implementing our software.”

 

The prospect players’ response was silence. No excitement, no discernable interest. What was going on?

 

The prospect participants consisted of mid-level managers and their staff members. I heard one staffer mutter to a colleague, “$24 million? We won’t see any of that!”

 

Even though sufficient discovery had been completed, and the numbers were from the prospect, this group remained unconvinced.

 

Why? Because value statements need to align with job title!

 

There are three interchangeable measures of value: time, people, and money. Each needs to align with the corresponding job title level.

 

What are executives interested in saving or gaining? Money! When speaking to high-ranking prospect representatives like C-suite, senior VPs, and VPs, their metric of interest is money. For these folks, gaining $24 million each year resonates strongly. 

 

What about middle managers? (Your turn…!) If you said “people,” you are correct! Yes, money is of some interest, and time savings as well, but what do middle managers always request when planning next year’s budget? People! “We need more resources…!”

 

So, our salesperson translates $24 million into people resources, and we have that number from our example: 12 additional doctors (https://greatdemo.com/arithmancy-the-magic-of-numbers/). Our salesperson rephrases, accordingly, when addressing the mid-level managers, “It looks like you’ll gain the equivalent of 12 more doctors by implementing our software…”

 

This time, we see engaged responses from the managers. They can visualize 12 additional headcount contributing to their team.

 

OK, the executives are now looking forward to an incremental $24 million in revenues and the managers are updating their doctors’ schedules to accommodate the additional doctor-patient interactions represented by 12 additional doctors.

 

What about the staff, the doctors themselves? What motivates them?

 

One motivation is improved patient care. By seeing more patients each day, they can visualize improved patient care and (hopefully) improved outcomes. And by saving 3 minutes recording their notes with each interaction, they recover 45 minutes each day that were previously consumed by laborious manual documentation (to say nothing about readability, transcription errors, etc.!). 45 minutes is a quantity that is easy to picture, and it resonates with the doctors.

 

Summarizing, when communicating value, we need to align to prospect job title and level:

 

·      Executives are interested in gaining or saving money.

·      Middle managers want more people resources.

·      Staffers want to save time (and to go home on time!).

 

See much more starting on page 85 of Doing Discovery

https://www.amazon.com/Doing-Discovery-Important-Enablement-Processes/dp/B0B8RJK4C2/

A New Strangely Accurate Forecast and Pipeline Term

LITLOH! What is LITLOH?

 

Living In The Land Of Hope.

 

And if the opportunity rolls over into the next quarter it is 

Lounging In The Land Of Hope.

 

Two more quarters?

Languishing In The Land Of Hope!

 

 

Avoid LITLOH by doing better discovery:

https://www.amazon.com/Doing-Discovery-Important-Enablement-Processes/dp/B0B8RJK4C2/

Making Monetary Numbers Tangible

What can $100 buy? $1,000? $25,000? $1,000,000?

 

It is often hard to associate an amount with a tangible deliverable, and it gets more difficult as the numbers grow larger:

 

·      In the U.S., $1 buys a pound of fresh vegetables, on average (454 grams).

·      A typical book costs about $16.

·      The average cost of dinner in a restaurant for two in the U.S. today ranges from $50 (two seniors, sharing a burger with fries and two beers, including tax and tip) to $150 or more (highly dependent, of course, on location, appetite, and selection!).

·      $2,000 buys you the average combination of washer and dryer in the U.S. (installation not included).

·      The typical lower-end compact car costs $23,000 (registration, insurance, taxes, fuel, and maintenance are not included!).

·      $419,000 is the price for the average house in the U.S. (I won’t even begin to list what is not included in this amount, so be prepared!). For most people, this is the most expensive item they buy in their lives.

 

Above this amount, it gets harder and harder to comprehend:

 

·      What can you buy for $1 million? A really nice house? (Or a garage in the heart of Silicon Valley?)

·      What can you do with $10 million? A penthouse in New York? A small private jet?

·      $100 million? That’s a typical cost for a new freeway interchange in California (of course, the original estimate was that the job could be done for $35 million…!).

·      A billion? I have no idea…!

·      A trillion? I’m not even sure how many zeros to use!

 

So, when communicating value, especially with large numbers, we need to tie them to things that are concrete. In our healthcare example (from Monday January 5: https://greatdemo.com/arithmancy-the-magic-of-numbers/), the three minutes saved with each interaction translated into the equivalent of gaining twelve additional doctors: That’s something that most of us can visualize.

 

To give you example that might be close to home, a successful SaaS company generating $24 million annually could be your company, if you have about 120 employees (based on a good ratio of $200,000 of revenue per employee). You can use this ratio to scale up or down: A smaller successful company of 60 employees would generate $12 million, etc.

 

Here’s another: I am sad to report that I have flown over 3 million miles on United Airlines. How far is that? It’s like circling the earth 120 times at the equator or traveling to the moon and back six times! (“Aaaaaagh!” was my quiet scream when I realized this!)

 

The challenge when communicating value is to find tangible examples that your prospect players can comprehend. Be prepared with a few concrete examples!

 

And here are ideas to help with those examples – enjoy!

https://greatdemo.com/analogies-and-metaphors-in-demos-and-discovery/