Mark Jewell's Blog: Selling Energy, page 276

Understanding Tax Deductions and Credits, Part 2

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Yesterday, we talked about tax deductions, tax credits, marginal tax rates, and effective tax rates. Today, we’re going to continue the discussion with a look at before- and after-tax returns.

You have to be very careful about combining before-tax and after-tax returns in your financial summary. People combine these two concepts all the time – probably unwittingly. Unfortunately, doing so can tarnish an otherwise accurate financial summary. I touched on this topic briefly in the “Costs to Include in Your Financial Summary” blog last week, and it warrants some further explanation.

Let’s assume you have a situation where a project is going to save your prospect $1,000 a year in utility bills and provide a depreciation deduction of $250. It’s not fair to say, “You’re going to get $1,000 PLUS a tax savings equal to your marginal tax rate times $250.” Why not? Because, assuming your prospect’s business deducts utilities on their tax return, they’re not saving $1,000 on an after-tax basis. They’re actually saving the after-tax value of $1,000. In other words, in the absence of your project, your prospect would be deducting that $1,000, and assuming a 35% marginal tax bracket, they would be saving $350 in federal income tax as a result.

If you were to take the before-tax savings of $1,000 and add the value of the depreciation tax shield (i.e., the $250 depreciation deduction times the marginal tax rate), you would be mixing before-tax and after-tax effects.

While we’re on the topic, whenever you’re deciding how to work this information into your financial summary, make sure that you don’t assume your prospect has a “tax appetite,” even if the organization is a taxable entity. What if they had a lackluster year and no taxable income? What if they had a bad year last year and have a net operating loss to carry forward? What if they purchased a lot of equipment this year and have a bundle of investment tax credits to use? In any of these scenarios (and many others), there may be little or no taxes owed, in which case there may be little or no incentive to secure additional tax deductions or credits. 

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Understanding Tax Deductions and Credits, Part 1

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Over the course of the next two days, we’ll discuss taxes and tax incentives in the context of efficiency projects. I’ll concede that, of the topics we discuss on this blog, the “tax discussion” is not the most thrilling one; however, it’s important that you have a good understanding of the financial implications of taxes as they can have a significant impact on your ability to demonstrate value for your prospects. Please note that the purpose of this blog is not to give you tax advice; it’s to provide topics to be thinking about so when the time comes, you’ll be prepared to have a productive discussion with your prospects and customers.

First, let’s talk about the difference between a tax deduction and a tax credit. A tax deduction is a reduction of the income subject to tax. A tax credit is a sum deducted from the total amount a taxpayer owes to the government. A deduction and a credit are two very different things.

If you qualify for a $10,000 tax deduction as a result of something you did to your property, that’s worth $10,000 times your marginal tax rate. If you qualify for a $10,000 tax credit, it would be the equivalent of a gift certificate for $10,000 of taxes paid.

This brings us to the topic of marginal vs. effective tax rates. If your prospect is a taxable entity, you’ll want to have a clear understanding of the difference between marginal and effective tax rates so that you can properly estimate what the tax benefits of your proposed project might be.

The marginal tax rate is the rate that applies to the last (or next) unit of taxable income or spending. The effective tax rate is the rate that you pay on all of your income after all of your various tax brackets are taken into consideration.

So, if you receive a $10,000 tax deduction and your highest tax bracket is 35% (and you have at least $10,000 in taxable income in that bracket), the deduction would be worth $3,500. You would not multiply the deduction by your effective tax rate – you would multiply it by your marginal tax rate, because that’s the amount of tax the deduction is going to offset at that tax bracket.

Stay tuned for more on this topic tomorrow…

 

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Focus on the Why

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If you’ve attended one of my sales trainings or are a regular reader of my blogs, you’ve likely heard me talk about focusing on the “why” and watched Simon Sinek’s TED talk on “How Great Leaders Inspire Action”. If you can’t determine why someone would feel compelled to purchase from you, how can you expect to present him or her with a compelling value proposition?

A recent HubSpot Sales blog titled, “In Sales, Start With Now” resonates with my point. If you can get to the root of the “why” and focus your energy on persuading your prospect why they need your product or service (and leave the “what” and “how” for later), you’ll have a leg up on your competition.

Read the full blog here:

http://blog.hubspot.com/sales/in-sales-start-with-why

For the full TED talk on “How Great Leaders Inspire Action”, I highly recommend watching this and exploring how to connect the dots for your decision-maker:

https://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action?language=en

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How to be a Good Conversationalist

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Efficiency sales professionals know how to create personal connections with their prospects and customers. They know to establish good rapport and to use that rapport as a vehicle for delivering their message.

So how do you create strong personal connections and build good rapport with your prospects and customers? It all comes down to the conversations you have. A great conversation breaks down social barriers, builds rapport, and allows you to better understand your prospect. Being a good conversationalist will improve your sales performance and help you generate new business.

If you’re interested in learning more about conversation techniques, I highly recommend reading Rainmaking Conversations: Influence, Persuade, and Sell in Any Situation by Mike Schultz and John E. Doerr. This book covers the principles of successful conversation-making and how those principles can guide your sales strategy.

Here’s a summary from Amazon Books:

"Conversations make or break everything in sales. Every conversation you have is an opportunity to find new prospects, win new customers, and increase sales. Rainmaking Conversations provides a proven system for leading masterful conversations that fill the pipeline, secure new deals, and maximize the potential of your account.

“Rainmaking Conversations offers a research-based, field-tested, and practical selling approach that will help you master the art of the sales conversation. This proven system revolves around the acronym RAIN, which stands for Rapport, Aspirations and Afflictions, Impact, and New Reality. You'll learn how to ask your prospects and clients the right questions, and help them set the agenda for success.”

Love one of our blogs? Feel free to use an excerpt on your own site, newsletter, blog, etc. Just be sure to send us a copy or link, and include the following at the end of the excerpt: “By Mark Jewell, Wall Street Journal best-selling author of Selling Energy: Inspiring Ideas That Get More Projects Approved! This content is excerpted from the Sales Ninja blog, Mark Jewell's daily blog on ideas and inspiration for advancing efficiency. Sign up at SellingEnergy.com.”

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Weekly Recap, April 24, 2016

 


 



 
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Monday: Read Jack Mitchell's best-selling book, Hug Your Customers on how to build customer loyalty. 


Tuesday: Costs to include in the financial summary of any efficiency project. 


Wednesday: Savings to include in the financial summary of any efficiency project. 


Thursday: Business acumen is a very important concept, whether you aim to increase the profitability of your prospect's business or your own.


Friday: Reflections on an Earth day back in 1990 that may just change your life.   


Saturday: Take a look at this article on the LifeHacker blog on "Time Assets and Debts: A Different Way of Thinking about Productivity".

 

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Time Assets and Debts

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When we talk about productivity strategies, we generally talk about actionable tips and tricks that allow us to complete tasks more quickly in the short-term. I read an article on the LifeHacker blog that shed light on a whole new way of thinking about productivity. The article proposed that we think about productivity in terms of “time debts” and “time assets.” In other words, is what I’m about to do going to require extra work down the line, or is it an investment that will actually save me time?

 

An example of a “time debt” would be sending an email that you know would require follow-up. Once you click “send,” you’re committed to reading a response, and, in many cases, responding to that response. If you don’t really need to send the email, don’t send it.

 

An example of a “time asset” would be setting up an FAQ on your website so that you don’t have to field so many questions from people who visit your site. This takes extra effort upfront; however, it becomes an “asset” that saves you time in perpetuity.

 

So how do you put this concept into practice? Think about how your actions affect the use of your time. Invest in things that will save you time in the future and avoid things that will cost you time unnecessarily. For more on this topic, I highly recommend reading the full article:

 

http://lifehacker.com/time-assets-and-debts-a-different-way-of-thinking-abou-1658835903

Love one of our blogs? Feel free to use an excerpt on your own site, newsletter, blog, etc. Just be sure to send us a copy or link, and include the following at the end of the excerpt: “By Mark Jewell, Wall Street Journal best-selling author of Selling Energy: Inspiring Ideas That Get More Projects Approved! This content is excerpted from the Sales Ninja blog, Mark Jewell's daily blog on ideas and inspiration for advancing efficiency. Sign up at SellingEnergy.com.”

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From Flush To Fish

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Given that today is Earth Day, I’d like to share the story of how I migrated my career from commercial real estate to a path that took me to where I am today.

The year was 1990, the 20th Anniversary of what is now known the world over as Earth Day. That year, Urban Ecology, an environmental group founded by Richard Register hosted an event called, The First International Eco-City Conference in Berkeley, California.

At the time, I was part of an executive team with a portfolio of nearly $200 million in shopping centers in Southern California. Over the preceding two or three years, I had become interested in the environmental movement, so when I learned that 3,000 people from all over the world would be convening in Berkeley to compare best practices on how to make our cities more sustainable, I told my partners that I would be spending a four-day weekend there to see what I could learn.

I heard many interesting and inspiring stories that weekend. The most inspiring by far was told by an East German delegation. Apparently, they had been able to take their entire apartment block “off the grid,” which I initially assumed meant “off the power grid.” As they continued speaking, they shared that they had also taken themselves off the water/sewer grid with the help of a patented technology that they had licensed from John Todd of the New Alchemy Institute in Cape Cod.

Over the next half-hour or so they described how they were able to take their entire complex’s black water (if you don’t know what that is, look it up!), pump it into the basement (presumably with Pump #2!), and gradually pass it through a series of nine large tanks of water. Each tank contained successively larger species of aquatic flora and fauna.   At the end of the nine-tank run, out emerged fresh drinking water and fully grown tilapia fish, which they then sold at the local farmer’s market to raise a little extra money for the apartment block.    

The moment I heard this story, my whole world went wiggly. At the time, my partners and I were basically living a Joni Mitchell song (“Pave Paradise, Put Up a Parking Lot!”) in Los Angeles. These East Germans were living in an urban setting just as I was, but their spin on living in harmony with their community was totally different than anything I had personally experienced in Southern California.

Long story short, after that weekend I returned to Los Angeles a changed man. I told my partners that I would do one more shopping center with them, after which I’d retire and reboot my career to pursue objectives that were a bit more sustainable than “malling” America.

Over the last two and a half decades of successfully pursuing that new career, I’ve had the privilege of interacting with the energy decision-making of more than three billion square feet of North American real estate.   The insights gleaned during that time form the backbone of many of the workshops we teach today on selling energy solutions more effectively.

Last week I received an email from one of our graduates asking what advice I’d have for young people who are still trying to figure out what they want to do when they grow up…or grown-ups who are now realizing that what they thought they wanted to do when they grew up has turned out to be a lot less fulfilling than expected.

Reflecting on the story of that Earth Day way back in 1990, I have half a dozen tips for those folks:

Get passionate about something. When I heard about what those East Germans were able to do, despite their very limited financial resources, it became clearer than ever that ingenuity and passion often trump financial resources in accomplishing a goal.
Take the time to understand your audience’s values. If you know the yardsticks with which they measure their own success, you’ll find it easier to craft a message that captures their attention.
Take the time to reframe the benefits of what you are advocating so that they can be measured by those same yardsticks – and hence, truly appreciated by your audience. For example, it’s a lot easier to “sell” sustainability if you understand (and communicate effectively) how sustainability helps your audience get what it already knows it wants.
Learn to communicate effectively. Professionals who know how to speak and write effectively will be better equipped to communicate their dreams. And remember, listening is one of the most important parts of communication.
Commit to taking massive action, measuring your results, changing your approach, and taking massive action again. We begin all of our workshops with a simple quote: “Successful people do what unsuccessful people are unwilling to do.” Research proves that one can accomplish mastery of virtually any skill by doing it for 10,000 hours. Some might say, “But that will take five years!” Others will realize that 10,000 hours could also be done in two years if you were to invest 5,000 hours a year doing it!
Embrace your inner sales professional. Sales is now the second-hardest role to fill in this country, right behind skilled trades. I’m unaware of any college or university that teaches students how to sell. There are sales management courses, but that’s not selling.   Meanwhile, U.S. colleges and universities graduate 89,000 psychology majors each year when there are less than 2,000 job openings each year for psychologists. One might say that a psychology degree is great preparation for selling; however, that’s not the point. One of the reasons my team and I dedicate our lives to teaching professionals how to sell is that we’ve seen this critical void in the workplace. Lack of sales professionals is hindering the economy. And it’s a block on getting worthwhile sustainability initiatives approved!

In closing, let me suggest to any young adult who is passionate about making the world a better place that pursuing a career in professional sales, and then focusing that career on a solutions provider that advances sustainability, could very well be the best thing you could do to achieve your social, environmental and economic goals.

And for all of those professionals seeking to transition to a more interesting and promising career path, realize that the energy industry is a growth industry, and that personally putting your shoulder to the wheel effectively selling the bounty of commercially available solutions that are out there is one of the best ways to participate in advancing industry (and your personal net worth).

We feel so strongly about the power of efficiency-focused professional selling that we’re happy to give a free electronic version of our Wall Street Journal bestseller, Selling Energy: Inspiring Ideas That Get More Projects Approved! to anyone who asks.   Just visit www.SellingEnergy.com/ebook to claim your copy in whatever ebook format works best for you. And by the way, if you have a son or daughter (or a friend or colleague) in need of a bit of career direction, please feel free to forward this blog so that they too can benefit from this free ebook offer.

In the words of Anthony Robbins, the famous motivational coach and speaker, most people spend more time planning a two-week summer vacation than planning their lives. If you’re serious about leveraging your interests and skills to create true value in the energy field – a field where the workforce is typically long on passion and short on communication skills – then take the time to download a copy of this book and read it. As was the case with me, a decision you make today on Earth Day might just change your life.

Love one of our blogs? Feel free to use an excerpt on your own site, newsletter, blog, etc. Just be sure to send us a copy or link, and include the following at the end of the excerpt: “By Mark Jewell, Wall Street Journal best-selling author of Selling Energy: Inspiring Ideas That Get More Projects Approved! This content is excerpted from the Sales Ninja blog, Mark Jewell's daily blog on ideas and inspiration for advancing efficiency. Sign up at SellingEnergy.com.”

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Turning Black Water into Tilapia Fish

 [image error]

Given that today is Earth Day, I’d like to share the story of how I migrated my career from commercial real estate to a path that took me to where I am today.

The year was 1990, the 20th Anniversary of what is now known the world over as Earth Day. That year, Urban Ecology, an environmental group founded by Richard Register hosted an event called, The First International Eco-City Conference in Berkeley, California.

At the time, I was part of an executive team with a portfolio of nearly $200 million in shopping centers in Southern California. Over the preceding two or three years, I had become interested in the environmental movement, so when I learned that 3,000 people from all over the world would be convening in Berkeley to compare best practices on how to make our cities more sustainable, I told my partners that I would be spending a four-day weekend there to see what I could learn.

I heard many interesting and inspiring stories that weekend. The most inspiring by far was told by an East German delegation. Apparently, they had been able to take their entire apartment block “off the grid,” which I initially assumed meant “off the power grid.” As they continued speaking, they shared that they had also taken themselves off the water/sewer grid with the help of a patented technology that they had licensed from John Todd of the New Alchemy Institute in Cape Cod.

Over the next half-hour or so they described how they were able to take their entire complex’s black water (if you don’t know what that is, look it up!), pump it into the basement (presumably with Pump #2!), and gradually pass it through a series of nine large tanks of water. Each tank contained successively larger species of aquatic flora and fauna.   At the end of the nine-tank run, out emerged fresh drinking water and fully grown tilapia fish, which they then sold at the local farmer’s market to raise a little extra money for the apartment block.    

The moment I heard this story, my whole world went wiggly. At the time, my partners and I were basically living a Joni Mitchell song (“Pave Paradise, Put Up a Parking Lot!”) in Los Angeles. These East Germans were living in an urban setting just as I was, but their spin on living in harmony with their community was totally different than anything I had personally experienced in Southern California.

Long story short, after that weekend I returned to Los Angeles a changed man. I told my partners that I would do one more shopping center with them, after which I’d retire and reboot my career to pursue objectives that were a bit more sustainable than “malling” America.

Over the last two and a half decades of successfully pursuing that new career, I’ve had the privilege of interacting with the energy decision-making of more than three billion square feet of North American real estate.   The insights gleaned during that time form the backbone of many of the workshops we teach today on selling energy solutions more effectively.

Last week I received an email from one of our graduates asking what advice I’d have for young people who are still trying to figure out what they want to do when they grow up…or grown-ups who are now realizing that what they thought they wanted to do when they grew up has turned out to be a lot less fulfilling than expected.

Reflecting on the story of that Earth Day way back in 1990, I have half a dozen tips for those folks:

Get passionate about something. When I heard about what those East Germans were able to do, despite their very limited financial resources, it became clearer than ever that ingenuity and passion often trump financial resources in accomplishing a goal.
Take the time to understand your audience’s values. If you know the yardsticks with which they measure their own success, you’ll find it easier to craft a message that captures their attention.
Take the time to reframe the benefits of what you are advocating so that they can be measured by those same yardsticks – and hence, truly appreciated by your audience. For example, it’s a lot easier to “sell” sustainability if you understand (and communicate effectively) how sustainability helps your audience get what it already knows it wants.
Learn to communicate effectively. Professionals who know how to speak and write effectively will be better equipped to communicate their dreams. And remember, listening is one of the most important parts of communication.
Commit to taking massive action, measuring your results, changing your approach, and taking massive action again. We begin all of our workshops with a simple quote: “Successful people do what unsuccessful people are unwilling to do.” Research proves that one can accomplish mastery of virtually any skill by doing it for 10,000 hours. Some might say, “But that will take five years!” Others will realize that 10,000 hours could also be done in two years if you were to invest 5,000 hours a year doing it!
Embrace your inner sales professional. Sales is now the second-hardest role to fill in this country, right behind skilled trades. I’m unaware of any college or university that teaches students how to sell. There are sales management courses, but that’s not selling.   Meanwhile, U.S. colleges and universities graduate 89,000 psychology majors each year when there are less than 2,000 job openings each year for psychologists. One might say that a psychology degree is great preparation for selling; however, that’s not the point. One of the reasons my team and I dedicate our lives to teaching professionals how to sell is that we’ve seen this critical void in the workplace. Lack of sales professionals is hindering the economy. And it’s a block on getting worthwhile sustainability initiatives approved!

In closing, let me suggest to any young adult who is passionate about making the world a better place that pursuing a career in professional sales, and then focusing that career on a solutions provider that advances sustainability, could very well be the best thing you could do to achieve your social, environmental and economic goals.

And for all of those professionals seeking to transition to a more interesting and promising career path, realize that the energy industry is a growth industry, and that personally putting your shoulder to the wheel effectively selling the bounty of commercially available solutions that are out there is one of the best ways to participate in that advancing that industry (and your personal net worth).

We feel so strongly about the power of efficiency-focused professional selling that we’re happy to give a free electronic version of our Wall Street Journal bestseller, Selling Energy: Inspiring Ideas That Get More Projects Approved! to anyone who asks.   Just visit www.SellingEnergy.com/ebook to claim your copy in whatever ebook format works best for you. And by the way, if you have a son or daughter (or a friend or colleague) in need of a bit of career direction, please feel free to forward this blog so that they too can benefit from this free ebook offer.

In the words of Anthony Robbins, the famous motivational coach and speaker, most people spend more time planning a two-week summer vacation than planning their lives. If you’re serious about leveraging your interests and skills to create true value in the energy field – a field where the workforce is typically long on passion and short on communication skills – then take the time to download a copy of this book and read it. As was the case with me, a decision you make today on Earth Day might just change your life.

Love one of our blogs? Feel free to use an excerpt on your own site, newsletter, blog, etc. Just be sure to send us a copy or link, and include the following at the end of the excerpt: “By Mark Jewell, Wall Street Journal best-selling author of Selling Energy: Inspiring Ideas That Get More Projects Approved! This content is excerpted from the Sales Ninja blog, Mark Jewell's daily blog on ideas and inspiration for advancing efficiency. Sign up at SellingEnergy.com.”

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Business Acumen is Key

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I read that one of the fastest growing segments of the sales training industry is business acumen training for salespeople. Why is that? I believe the reason is twofold.

First, you need to understand what is driving your prospects to make decisions. What are the business drivers? What are they looking for and how are they going to evaluate any financial investment you place in front of them?


Second, you have to understand how price discounts affect your own company’s bottom line. What impact do they have on gross margin? What is the relationship between that contemplated lower price and the fixed and variable costs of your product or service offering?

Speaking of profitability, I often hear the question “Does efficiency enhance profitability?”  The answer, of course, depends on many factors. You cannot answer this question without asking an even more basic one: “What percentage of your overhead is energy?” In my business, energy is less than a quarter of one percent of our revenues. However, if we were in the business of smelting and molding aluminum, energy would be a very significant portion of our overhead. There’s a very big difference in cost structure. You can look at a company’s profit and loss statement to see how big of a line item energy really is and what impact it might have on the bottom line.

There’s a second question that I think is even more important – particularly if energy is not a large percentage of your prospect’s overhead: “Are there other non-utility-bill financial benefits of embracing energy efficiency in your operations – perhaps from a marketing or productivity perspective?”



Bottom line, business acumen is a very important concept, whether you aim to increase the profitability of your prospect’s business or your own!

Love one of our blogs? Feel free to use an excerpt on your own site, newsletter, blog, etc. Just be sure to send us a copy or link, and include the following at the end of the excerpt: “By Mark Jewell, Wall Street Journal best-selling author of Selling Energy: Inspiring Ideas That Get More Projects Approved! This content is excerpted from the Sales Ninja blog, Mark Jewell's daily blog on ideas and inspiration for advancing efficiency. Sign up at SellingEnergy.com.”

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Savings to Include in Your Financial Summary

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Yesterday, we discussed the costs that should be included in your financial summary. Today, we’ll dive into the savings portion of the equation:

Utility tariff: Which utility tariff did you use to calculate the savings? I’m always surprised to see financial summaries that fail to take into consideration off-peak, on-peak, and critical-peak power pricing. In some territories (such as parts of the Pacific Northwest), this is not as relevant since utilities there may charge the same amount per kilowatt-hour regardless of the time of day or year.  However, in many other regions (such as parts of California), you could see an almost twenty-to-one difference between off-peak-power pricing and critical-peak-power pricing. You have to be really careful to take into consideration when exactly the savings you are projecting will occur and what the cost per kilowatt-hour is at that particular time.

The start of the savings: When are the savings going to start for your prospect? If the implementation process is long, the savings may not start for many months – and this has an effect on the financial landscape of the project.

Interaction between the measures: If you're putting in a more efficient lighting system, that's one thing. However, what if you were to layer on lighting controls that decrease the time that those lights would be illuminated by 50%? You have to make sure that measure interactions are taken into account.

Savings: In keeping with yesterday’s blog on calculated costs, you need to consider who will be benefitting from the calculated savings. Is it the landlord? Is it the tenants? Is it both? The landlord and the tenants should both understand how the leases are written, what loads are connected to which meters, who pays for those meters, and ultimately, how the savings will be allocated after the retrofit.

Love one of our blogs? Feel free to use an excerpt on your own site, newsletter, blog, etc. Just be sure to send us a copy or link, and include the following at the end of the excerpt: “By Mark Jewell, Wall Street Journal best-selling author of Selling Energy: Inspiring Ideas That Get More Projects Approved! This content is excerpted from the Sales Ninja blog, Mark Jewell's daily blog on ideas and inspiration for advancing efficiency. Sign up at SellingEnergy.com.”

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