Mark Jewell's Blog: Selling Energy, page 236
August 10, 2017
Taking Over Existing Projects
You’ll frequently have situations where accounts are transitioned to you because a company is rearranging the chairs. All of a sudden, you’ve got a project halfway toward completion and you have to finish it!
The first thing I would do is send a series of very deliberate questions to the rep who was previously handling it. Don’t write, “Tell me about this customer,” but ask the same kinds of questions you would ask of the customer if the two of you were face-to-face. For example:
How many projects have been suggested to this customer?
How many of those projects have been approved and why?
How many of those projects have not been approved and why?
The former rep for that customer may or may not have had the intelligence or opportunity to ask those questions already. Who knows? Maybe they were the customer rep for five years prior to this reshuffling of the deck. They may know a lot about how many projects have been proposed over there without actually asking the customer.
You have to interrogate them in a friendly way. “Okay, tell me everything you know about how this company does business.” You need to know where the landmines are. You need to know where the skeletons are. You need to know where the successes flourish. One of my favorite questions is, “What projects have you done that were the most gratifying? And why?”
Most decisions are made emotionally, so what you’re really asking is “What gets this management team excited?” Did they save some jobs by doing operating expense reductions? Did they earn an ENERGY STAR® label? Did they win a local BOMA contest because they cooperated with their utility on efficiency projects? You have to understand what has been happening in the company before you took over the account.
The second thing you have to figure out is what stage the project is in and who has been involved up to this point. Who thought it up? Was it the rep? Was it the property manager? Was it the asset manager? Is that person still on board?
Ideally you could talk to that person and say, “Okay, tell me about this project. How far did it get up the approval chain? What issues were encountered? What steps are remaining?” These are all things you definitely want to know, or otherwise you’re shadowboxing. You also need to know where your prospect stands with this project.
The third thing you need to consider is how the dynamics have changed since the project was proposed. For example, have the utility rates gone up and down? As a result, is the payback shorter or longer?
Now I don’t want to put too much emphasis on payback. I’m using that just as a proxy. Besides, if the simple payback period got shorter, chances are the modified internal rate of return, net present value and savings-to-investment ratio will have improved. But ask what you may. Ask what rebate or incentive programs may have done lately to influence the financial attractiveness of the project. Ask if the utility has opened any new programs. I know utilities frequently vacillate between supporting indoor lighting and outdoor lighting programs. It’s possible that the project was stalled because there was no outdoor rebate, and now that the local utility company has switched from an indoor rebate strategy to an outdoor rebate strategy, a stalled project can qualify, improving the financials.
I think understanding the project’s landscape is key. You need to know what kind of soil this seed was planted in. Was it stony and rocky to start with? Was it fertile soil, but the internal champion left the company and no one else realized they had to water the plants? Where exactly does the project stand in the rebate/incentives landscape, the regulatory landscape, the rates and tariffs landscape, the political landscape, and even the organization’s own management landscape?
The fourth thing to investigate is your circle of friends and previous customers in search of similar projects and any unexpected savings that may have resulted. For example, let’s say you’re going to do a lighting retrofit in a warehouse and the project has stalled. The former rep says, “I couldn’t get the guy off the dime. It was a payback of five years but they only approve projects with a three-year payback or less.” Then let’s say you happen upon a company in the same industry that did a similar lighting retrofit, and that they realized immediately thereafter that their pick-and-pack accuracy increased by 10%. You could certainly reenergize your stalled deal by bringing this new information to the table, particularly if you took the extra step of juxtaposing what that pick-and-pack accuracy advantage saved versus what the lighting retrofit was projected to save in terms of energy and maintenance savings alone.
Once again, it’s important to have segment-specific intelligence and use your Success Story Archive™ to help sell future projects. There are so many things that can happen while debriefing a former customer rep effectively and so much information worth investigating further. Overall the question is, “If I present this project, is there any reframing I can do to make sure something’s going to happen with it this time around?”
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August 9, 2017
Selling to a Property Manager, Part Two
What does it mean to get the job done?
First, you have to get that property manager fired up with the idea that you’re helping them achieve their goals. You also have to use the yardsticks that property manager uses to measure their own success. These are things like preventing complaints about thermal discomfort, addressing security concerns or increasing the occupancy of the building.
Second, you’ve got to give that property manager an elevator pitch that’s memorable and repeatable so when they ask for approval, they have a compelling case to get their boss’s attention.
Next, you want to give that property manager a one-page proposal focused on why the change is necessary as opposed to the what, how or when, which unfortunately is the subject of most people’s proposals. Really talk about the why. Make it accessible enough that the property manager can just cut and paste that proposal into their next weekly management memo and have a fighting chance of winning the capital to fund it.
After that you need that property manager well-tuned to answer any budget questions. How much is it going to cost? What’s the rebate going to be? When are the savings going to start? What are the 6 financial metrics? Their boss will make them focus on simple payback period, return on investment and internal rate of return. They need to migrate the conversation to modified internal rate of return, net present value, and savings-to-investment ratio. How much financial value will they produce for their company over the lifetime of the proposed improvement?
In conclusion, it’s more important to resonate with that property manager’s goals than to focus on what’s next. You need to not only convince them, but also give them the tools to make things happen.
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August 8, 2017
Selling to a Property Manager, Part One
You have to sell to more people than the property manager in front of you. You have to sell to everybody who might grant this property manager permission or consent.
Let’s talk about the ecosystem of a property manager. For example, in a typical US commercial office building investment setting, you’ll have a portfolio manager who allocates capital for an investment and an asset manager who is given that capital to purchase the actual buildings.
A property manager is either in-house or hired as an intelligent third party, presumably through a bidding situation. In many cases, they run the building’s day-to-day operations from a management standpoint. They oversee move-ins and move-outs. Sometimes they handle leasing.
Then you have another third party who’s hired to handle building engineering. It’s not unusual to have 4 or 5 different players working in concert to make sure that building is a safe and profitable asset.
You may enter the situation at the bottom of the food chain. You could be talking to the chief engineer or an assistant chief. Maybe your son-in-law is a porter in the building. Whatever it takes, get in, even if it’s through the boiler room. That’s obviously not the best place to start; however, that’s where a lot of people find themselves.
In other situations, you’ll enter at the property manager level. In that case you say, “Okay, well what do I talk about with that property manager?” When you’re talking to a property manager, it pays to understand what the property manager is up against.
What is a day in the life of a property manager? What is on their mind on the way to work? Is it how they are going to fill that last vacancy? Is it how they are going to deal with the complaints from a tenant with thermal discomfort on the 14th floor? Is it whether or not there are any new code compliance issues that they need to be aware of? Is it how they’re going to make the tenants feel safer after someone got their purse snatched in the parking lot? All of these things are going through a property manager’s head as he or she heads into the office.
Once they get there the last thing they want is a vendor throwing what I like to call “bits, bytes and blinking lights” at them: “I’ve got the sexier product, it has all these features and all these benefits and blah blah blah.” It misses the point. Shouldn’t that vendor be talking about how a proposed energy project would reduce operating expenses and increase net operating income and asset value, or perhaps foster better thermal comfort or indoor air quality, which would reduce (or ideally eliminate) tenant complaints?
It’s all a matter of what you’re selling and how your offering’s segment-specific value resonates with a property manager. These are the things that get the job done.
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August 7, 2017
Keep It Brief
Blah blah blah… This is a state of mind that everyone is guilty of succumbing to from time to time, whether we’re on the giving or receiving end of the communication. We’re overloaded with information every day – both visually in terms of graphics and ads, and verbally in all sorts of communications, from speeches to sound bites. It’s not surprising that many of us feel like our culture is developing a collective attention-deficit disorder. Our attention spans are growing smaller, as is our patience.
Admitting there’s a problem is the first step toward solving it. In the business world, your best bet is adjusting your behavior to counter it. Joseph McCormack’s Brief: Make A Bigger Impact by Saying Less is a remarkable guide that can show you the way. Whether you’re communicating via text, email, on the phone or in person, Brief provides step-by-step instructions to strip your message to its essence. It also details the pitfalls that many of us fall victim to when it comes to our own impatience or poor communication.
Here is a summary from Amazon:
“The only way to survive in business today is to be a lean communicator. Busy executives expect you to respect and manage their time more effectively than ever. You need to do the groundwork to make your message tight and to the point. The average professional receives 304 emails per week and checks their smartphones 36 times an hour and 38 hours a week. This inattention has spread to every part of life. The average attention span has shrunk from 12 seconds in 2000 to eight in 2012.
“So, throw them a lifeline and be brief.
“Author Joe McCormack tackles the challenges of inattention, interruptions, and impatience that every professional faces. His proven B.R.I.E.F. approach, which stands for Background, Relevance, Information, Ending, and Follow up, helps simplify and clarify complex communication. BRIEF will help you summarize lengthy information, tell a short story, harness the power of infographics and videos, and turn monologue presentations into controlled conversations.
Details the B.R.I.E.F. approach to distilling your message into a brief presentation.
Written by the founder and CEO of Sheffield Marketing Partners, which specializes in message and narrative development, who is also a recognized expert in Narrative Mapping, a technique that helps clients achieve a clearer and more concise message.
“Long story short: BRIEF will help you gain the muscle you need to eliminate wasteful words and stand out from the rest. Be better. Be brief.”
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August 6, 2017
Weekly Recap, August 6, 2017
Tuesday: Consider the value you create for your clients and use it to your advantage when setting and negotiating your pricing.
Wednesday: Explore how to sell efficiency effectively to cities, counties and schools.
Thursday: Check out some tips on how to create a winning marketing survey.
Friday: Examine the difference between “net margin” and “contribution margin” and use it when reframing the benefits of efficiency.
Saturday: Check out an article from the HubSpot Sales Blog on “How You can Avoid My Biggest Mistake as as Sales Manager.”
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August 5, 2017
Lead like a Coach
What’s the difference between a leader and a manager? A leader guides and steers the company, and a manager makes the necessary decisions to carry out the leader’s vision. While it may seem natural that a leader would be involved in day-to-day decision-making, the most successful leaders are the ones who give their managers and employees the power to make their own decisions.
According to an article published on the HubSpot Sales blog, a great leader is like a great coach. He or she gives them guidance and motivation, but does not make every decision for them. To be an effective leader, you need to let the managers make the decisions and field questions. Your time is better spent training others to carry out your vision for the organization. Be the visionary and the coach, not the decision-maker.
For more on this topic, read the full article.
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August 4, 2017
Layman’s View of Net Margin and Contribution Margin
The more you understand “net margin” and “contribution margin,” the more confident you will be discussing these topics with a prospect, whether it’s a CFO, a business manager, or a sole proprietor.
Most people are in business to make money. However, some people are in business because they want to change the world. In either case, it’s often helpful to express the savings you project in terms of the amount of work they have to perform to produce equivalent profit the old-fashioned way – doing what they do now.
If you have $1 million dollars in revenue and make $100,000 in profit after everything is paid (including taxes), your net margin is 10%. If you only make $10,000 dollars in profit (again, after taxes) on that same amount of revenue, your net margin is only 1%. And at that 1% net margin, if you see $10,000 in overhead reduction (energy savings or other) drop to your bottom line, it’s the equivalent of “earning that profit the old-fashioned way” by generating $1 million in revenue. That’s what net margin is all about.
By the way, you may be wondering why I use net margin, which is an after-tax construct, even though savings are often expressed as a before-tax figure. It’s because unless you’re accomplishing savings through behavioral changes alone (i.e., no investment), you’re likely to have depreciation and perhaps other tax benefits shielding much of the resulting savings from taxation. That said if you prefer to use before-tax net margin, feel free to do so.
Contribution margin, on the other hand, is what’s left over after paying the variable cost of incremental sales. Your contribution margin helps cover fixed costs, and the rest is profit. For example, if you sell an extra 1,000 units, the contribution margin is what’s left over after covering the variable cost of producing those extra units.
Using these definitions for contribution margin and net margin, it’s easy to see why a company’s contribution margin is larger than its net margin.
Returning to our initial example, if you generated an extra $1 million in revenues without having to add any new fixed costs, you would wind up seeing more than the “net margin” of those revenues hit the bottom line. That’s because you were already covering your fixed costs at your previous level of revenues.
An example will make this clearer. Let’s assume you’re running a coffee shop. Let’s assume you’re selling 1,000 cups of coffee a day and using one barista, one machine, one dishwasher, one shop space, etc. Those items are fixed overhead. If you sold an extra 10 cups of coffee, you would only have to pay for the incremental cost of the coffee, the steamed milk, the cup and the lid. Those are your variable costs. You wouldn’t need another barista, or another machine, or another dishwasher, or a bigger shop. In this case, you would make more than your typical net margin on those extra 10 cups of coffee because there would be little to no effect on your fixed overhead.
Now if you sold 1,000 more cups of coffee a day, chances are you would need a second machine. You would need a second barista on the payroll. You may even need to take over the store next door, which would mean more fixed overhead in the form of rent, etc.
You get to keep less than the entire contribution margin on those incremental cups of coffee. Why? Because you’ve had to use some of that incremental contribution margin to offset your increased fixed overhead.
If that example doesn’t make the difference between “net margin” and “contribution margin” crystal clear, here is a definition of each, courtesy of Wikipedia:
“Profit margin, net margin, net profit margin or net profit ratio is a measure of profitability. It is calculated by finding the net profit as a percentage of the revenue… Net profit is revenue minus cost.”
“Contribution margin, or dollar contribution per unit, is the selling price per unit minus the variable cost per unit. Contribution represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs. This concept is one of the key building blocks of break-even analysis.”
How does this distinction play out when reframing the benefits of efficiency in terms that will make it easy for your prospects to visualize? Assume your proposed energy upgrade is projected to produce $10,000 in annual bottom-line benefit through energy savings, maintenance savings, or even some non-utility-cost financial benefit like reduced scrap rate since occupants can now see better. Assume that your prospect is accustomed to earning a 10% net margin. You could say that your upgrade would give them the same net profit they earned by selling $100,000 of goods last year.
On the other hand, it would not be fair to say that it would be the equivalent of selling an extra $100,000 of goods. Why? Because they might be able to sell that extra $100,000 of goods without adding to their fixed costs, in which case they would enjoy a positive impact that would be more accurately calculated using their contribution margin, not their net margin. Since contribution margin is higher than net margin, the amount of equivalent incremental sales needed to match your projected savings would be lower.
That’s why I always phrase the comparison as follows: “Think of how hard you had to work last year to generate this same bottom-line benefit…” Phrasing it that way underscores that I’m talking about their existing revenue, and their existing fixed and variable cost structure, which allows me to use the net margin figure (which is lower than contribution margin) and generates a higher amount of equivalent revenue.
Fortunately there’s a plethora of information out there to help you understand financial statements. Use it and it will help make you both more intelligent and more confident as you reframe the benefits of efficiency using terms and revenue equivalents that resonate with business people.
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August 3, 2017
Kissmetrics
Getting feedback from customers can be tricky. Still, it’s important to engage them with thoughtful questions whether their responses are positive or negative.
Here are some tips on how to create a winning marketing survey, whether you’re planning on using it before or after a project.
The best surveys are qualitative. For example, surveying first-time customers with no previous experience with you might affect their responses. Likewise, a repeat customer with a long history would report something else to you. Know your audience and tailor your questions for them.
Sometimes writing good questions is all about stealing words from your customers’ mouths. That’s why putting them in survey questions is so important. In the end, it’s never about the product itself but what it will mean to someone. Incorporating their language is a surefire way to move them to respond in a meaningful and useful way.
One of my favorite questions is: “If we worked together, what would it allow you to do? How would you feel about it?” I love to ask this question because people open up and think carefully about their answers. And remember, most people make emotional decisions and then justify them financially, so asking folks how they would feel about working with you is a step in the right direction.
Ask questions like “How satisfied are you?” or “What is your primary motivation for using XYZ product?” or “What best describes why you came here today?” It’s really important to benchmark a prospect’s primary motivation.
And of course, make sure you have colleagues who are less familiar with your offering look over your survey before handing it to real prospects.
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August 2, 2017
Selling Efficiency to Cities, Counties and Schools
Cities, counties and school districts can be difficult when it comes to implementing energy efficiency projects. The only clear way to success is winning them over with concise, persuasive measures that appeal to their needs. So, how can you gain their attention?
First of all, you need to do your homework. No city, county or school district is the same. However, most of them are understaffed, over-taxed and looking for productivity enhancement and/or carbon footprint mitigation. They may also be looking for decreased absenteeism or something else. Talk to them. Fill in the blanks. Once you figure it out, focus your key messages on meeting those needs.
On a related note, I would recommend reading a free guidebook the Environmental Protection Agency published a few years ago: Energy Efficiency and Local Government Operations: A Guide to Developing & Implementing Greenhouse Gas Reduction Programs. It’s one part of the EPA’s Local Government Climate and Energy Strategy Series, with plenty of material on schools and local government. It’s a short read (about 60 pages) and includes a bounty of helpful case studies. If you need a leg up on selling more effectively to these segments, this resource is well worth reading. It’s essential that you speak to prospective clients and discuss their needs. Studying documents like this one and being prepared with real-world examples could give your pitch the extra polish it needs when you get in front of your prospects.
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August 1, 2017
Charging Based on Value
Most people plan their pricing from the perspective of cost when they should be pricing their offerings based on the value they create. Perhaps you’ve heard the story about a guy who takes his car into the shop, watches the mechanic as he fixes his engine in a jiffy, and says, “Wow, that was easy. How much do I owe you?” The mechanic says, “That will be $100, thank you.” Shocked, the customer says, “But you just tapped the engine once!” The mechanic confidently replies, “I charge a dollar for the tap and $99 for knowing where to tap. So would you prefer to pay in cash or with your credit card today?”
When setting your pricing, take the time to view the transaction through your prospect’s eyes. By doing so, you’ll be in a better position to help them realize that they are at great risk if they don’t buy from you. And once you do an honest assessment of the value you create, be sure to ask for what you’re worth. If you don’t, you may not have enough revenue to provide the level of service you pride yourself on providing this person after they become your client. Your pricing model needs to be a win-win for both parties.
When I started my formal selling career in Los Angeles many moons ago, I said to myself, “My goal is to make every one of my clients twenty times what I make.” It was just a rule of thumb; however, I always aimed to meet or exceed that lofty goal. Decades later, our sales professional workshops give people much more than twenty times the value of what they pay for our training. I was particularly gratified to hear one of our graduates last year say that the training we provide “has the potential to change family trees.” He continued by explaining that earning a better living opens the door to better schools to send your children, to enhanced cultural opportunities, and perhaps even to a larger number of children you feel comfortable raising!
Here’s a quantitative example of what I’m talking about… Last year I had coffee with a former graduate of our Boot Camp while we were both attending the LIGHTFAIR conference in San Diego. He had taken our Boot Camp in the same city in the prior year. Since he didn’t serve customers in SDG&E’s territory, he wasn’t able to take advantage of that utility’s tuition incentive, which would have substantially reduced the cost of attending the Boot Camp. And since he was from out-of-state, he had travel costs to pay as well. When everything was said and done, he had invested about $7,000 to get himself from the Midwest to California to take the class. And by the way, he didn’t ask his employer to reimburse him for any portion of that cost. He just considered it to be an investment in his future.
Less than a year later, he had increased his company’s lighting retrofit revenue from $730,000 a year to nearly $700,000 per month, and he was set to finish the year at about $4 million in sales. In the 7 months following his graduation from the Boot Camp, his company had hired six more sales people – all of whom were gradually learning to sell the way he had learned to sell – and the business was growing phenomenally. Seeing all of this success unfold before his eyes, the owner of the company came to the next Boot Camp himself and brought the rest of his salespeople with him. Why? At that point, everyone at the company had realized that the benefits of learning how to sell efficiency effectively would far outweigh the cost of the Boot Camp tuition and travel expense.
As an epilogue to the story, I subsequently learned that the company’s forward-thinking employee who had started this ball rolling saw his personal annual income rise to six times what he was earning prior to the training, an increase that was much, much more than 20 times the cost of attending.
Keep this example top of mind as you consider the value you create for your clients. What value can you bring to the table? Once you’ve done the math and can confidently defend it, use it to your advantage when setting and negotiating your pricing. Doing so makes all the difference in the world when it comes to making your pricing a true win-win for you and your clients.
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