Mark Jewell's Blog: Selling Energy, page 314

Now, Discover Your Strengths

As humans, we have a natural tendency to fight against our weaknesses and to attempt to develop them into strengths. While it’s important to strive to improve our weaknesses, this focus on self-improvement can lead us to ignore our existing talents and strengths. One person’s weakness is another person’s strength, so from a business perspective, tasks should be assigned based on the existing strengths of each team member.

According to Marcus Buckingham and Donald O. Clifton in their best-selling book, Now, Discover Your Strengths, it is more productive to put time and effort into developing existing talents and strengths than it is to focus on correcting weaknesses. This implies that we are self-aware enough to recognize our own strengths. Fortunately, Buckingham and Clifton provide a tool for exactly this purpose – the “StrengthsFinder.” This tool helps you recognize your five dominant strengths so that you can make a conscious effort to develop them further. If this topic intrigues you, I highly recommend picking up a copy of their book.

Here’s a summary from Amazon Books:

“Unfortunately, most of us have little sense of our talents and strengths, much less the ability to build our lives around them. Instead, guided by our parents, by our teachers, by our managers, and by psychology's fascination with pathology, we become experts in our weaknesses and spend our lives trying to repair these flaws, while our strengths lie dormant and neglected.

“Marcus Buckingham, coauthor of the national bestseller First, Break All the Rules, and Donald O. Clifton, Chair of the Gallup International Research & Education Center, have created a revolutionary program to help readers identify their talents, build them into strengths, and enjoy consistent, near-perfect performance. At the heart of the book is the Internet-based StrengthsFinder® Profile, the product of a 25-year, multimillion-dollar effort to identify the most prevalent human strengths. The program introduces 34 dominant "themes" with thousands of possible combinations, and reveals how they can best be translated into personal and career success. In developing this program, Gallup has conducted psychological profiles with more than two million individuals to help readers learn how to focus and perfect these themes.

“So how does it work? This book contains a unique identification number that allows you access to the StrengthsFinder Profile on the Internet. This Web-based interview analyzes your instinctive reactions and immediately presents you with your five most powerful signature themes. Once you know which of the 34 themes -- such as Achiever, Activator, Empathy, Futuristic, or Strategic -- you lead with, the book will show you how to leverage them for powerful results at three levels: for your own development, for your success as a manager, and for the success of your organization.

“With accessible and profound insights on how to turn talents into strengths, and with the immediate on-line feedback of StrengthsFinder at its core, Now, Discover Your Strengths is one of the most groundbreaking and useful business books ever written.”

 

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Weekly Recap, November 9, 2014

Monday: Read Steven D. Levitt and Stephen J. Dubner’s best-selling book, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything for some pragmatic and enjoyable lessons in economics.




Tuesday: Discover a great strategy for conveying the cost of delay.




Wednesday: Learn why the “maximum 2-year simple payback” rule of thumb doesn't make sense.




Thursday: Use the "Power of 12" to determine the decision-making chain when selling to a large organization. 




Friday: Learn how to leverage the cap-ex cost recovery clause to secure more projects in commercial real estate.




Saturday: Read this article from Entrepreneur and learn how to increase productivity through daily task planning. 

 

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Time to Plan

One of the most powerful productivity strategies that I’ve come across – and one that I use on a daily basis – is to commit a little time each day to task planning. When you start your day with a clear game plan, you save yourself the hassle of having to go through everything on your to-do list (or in your mental to-do list) to decide what you should do next. Not only does this allow you to get more done, but it also prevents tasks from inadvertently slipping through the cracks.

An article published this week on the Entrepreneur blog suggests blocking out 20 minutes each day for this planning session. The author recommends you choose eight goals per day – six of which are professional goals, and two of which are personal. There’s no “right way” to create your list, and what works for some may not work for all. Regardless of the structure you choose to use, the important thing is that you actually take the time to plan. I prefer to do this planning session at the end of each day for the following day; however, you may find that planning your day first thing in the morning works better for you.

For more on this topic, read the full article from Entreprenuer:

http://www.entrepreneur.com/article/239297

 

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The Cap-Ex Loophole

Last Friday, we discussed the landlord/tenant dynamic and the metric to focus on when presenting an expense-reducing capital project to a landlord. Today, I’d like to delve into a bit of bonus landlord/tenant content that I cover in the weeklong Efficiency Sales Professional™ Certificate Boot Camp.

Here’s the question: Could the landlord use a “capital expense cost recovery” clause and have the tenants repurpose wasted utility dollars to help improve the building? The short answer is “in many cases, yes,” and in the next several paragraphs I’ll review this often-overlooked lease provision and how you might leverage it in your future efficiency projects.

The cap-ex cost recovery clause is something that most experienced real estate operators will know about. Many of them, however, are really financial engineers who authorize the capital to buy buildings. They may not have really read many of their leases cover to cover. They may not know that the ability to claw back savings that you generate for your tenant by investing in expense-reducing capital projects is actually hidden in a definition of operating expenses. It’s a provision that's not often called out in a separate section of the lease.

The lease will describe various categories of operating expenses that are customarily passed through: roads and grounds, housekeeping, security, administration, utilities, etc. The description of operating expenses will typically prohibit the landlord from passing through capital expenses. 

However, you may very well see that certain capital expenses CAN be passed through as long as they meet one of the following criteria:

Mandated by government regulation
Necessary for life safety reasons
There is a reasonable expectation that a capital improvement will generate operating expenses for all tenants, in which case you could pass the capital costs through using a reasonable amortization schedule. 

The lease usually has some language as to whether or not they can charge carrying cost while the debt is being amortized. In some cases, the lease may also mention that the pace and magnitude of the savings that the capital expenditure(s) produces will determine the pace and magnitude of the tenant assessments.

If you don’t already sell to non-owner occupied properties, I recommend you consider adding them to your list of potential targets. The last time I looked, the Department of Energy's Commercial Buildings Energy Consumption Survey (CBECS) estimated that 38 to 40 percent of the built environment in the office and retail sectors is non-owner-occupied real estate. That's a big slice of the market pie that certainly merits getting smart on how to best position your efficiency solutions in landlord/tenant settings.

 

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Use the Power of 12

How do you gain access to the influencers and decision-makers when approaching a new organization with an efficiency project? I like to say, “Use the power of 12.” Why 12? Because 12 is the biggest number I can think of that's a single syllable. It could be the power of 37 for all I know, but bottom line is, it’s not power of one.

When someone invites you into the organization or you encounter someone in the organization and you ask that person what he or she needs in terms of energy efficiency, that individual’s response is not necessarily the best barometer of what the entire organization needs.

When you’re doing a project with a large organization, you’re going to be working with many different people. They’ll have different personalities, different organizational imperatives, and different challenges they need to face everyday. How your project impacts those goals, wishes, dreams, and desires may be totally different depending on who in the organization is making the decisions and who will be giving you direction to provide a solution that will alleviate their pain.

In the context of large organizations, forget the “Power of One” and think bigger. Zoom out and look at the organization as a whole. Determine who the different players might be, how they fit into the decision-making chain, and then map their relationships to determine the path to project approval. (For more information on influencer mapping, read A Map to Lead the Way, published back in July.)

 

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A Broken Rule of Thumb

I talk a lot about “broken” financial metrics on this blog and in my online and in-person workshops. Many of the metrics by which prospects evaluate efficiency projects fail to take into consideration the complexity of the investment at hand. One of the “rules of thumb” that is commonly used by decision-makers is the “maximum 2-year simple payback” rule. For whatever reason, people have gotten it in their head that an investment that takes more than two years to pay for itself is a waste of time.

When I started in business back in 1980 in California, prime was at 18.75%. In fact, in 1981 prime went to 21%. I distinctly remember walking into a federally insured Savings and Loan in Brentwood, Los Angeles and getting a 6-month CD for over 16% (and I was still shopping for a better rate). Interest rates were crazy back then. Fast-forward thirty years to 2010, and prime is at 3.25%. I went to a local bank recently, asked them for a 6-month CD, and the percentage was ridiculous. It was closer to 0.6%.

So, why in the world would you be clinging to a mandatory 50% return on investment per year (which is essentially what two-year payback means) in both 1980 and 2010? It makes no sense at all because the backdrop of alternative investment vehicles is totally different in those two time periods.

If someone says that they’re wed to this idea of 50% return on investment (which is essentially the reciprocal of Simple Payback Period), you might ask a couple of simple questions (pun intended): 

In what other area of your core business are you currently enjoying 50% return per year?
What risk do you have to exercise to get that return? 

You might also say something like, “It’s interesting. I’ve done a little research on your industry, and the average return on equity or assets is X or Y…nowhere near 50%. I’m wondering why, when it comes to energy efficiency projects, your management thinks it’s appropriate to require 50% returns. If they didn’t invest in that energy project, they might invest it back in the core business and get maybe 12%.”

 

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Motivate Action

“Value is created by the compression of time.”

The quote above comes from Peter Drucker, an acclaimed management consultant who wrote nearly 40 books during his career and who is widely recognized as a sort of “Einstein” of American management theory. In the context of energy efficiency, this quote means that if you know that there is something valuable that you should be doing to enhance energy efficiency, the faster you do it, the more value you will create for your shareholders or other stakeholders.

Conveying the cost of delay with calculations using hypothetical scenarios can be very effective in motivating your prospect to take action immediately. Below, you’ll find a pair of scenarios that uses five four-year simple payback period projects and five two-and-a-half-year simple payback period projects (not that I embrace simple payback period as a metric… this just gives you some layman’s terms that allow you to get your arms around how quickly these projects provide financial returns).

In Scenario A, you do all ten projects this year. In Scenario B, you do two projects per year over the course of five consecutive years.

If you do Scenario A, you will invest approximately $1.7 million, and over a five-year investment horizon, you'll wind up with a net present value of $1,016,071.

If you do Scenario B, it will cost you slightly more to fund the projects (because inflation raises the price of labor and materials over the course of five years), and when you add up the savings that you are getting from all of these projects, your decision to phase in the projects costs you over $400,000 in net present value.

So why is there such a big difference in net present value? If you only do two projects in year one, you have eight other projects that have not yet begun producing savings. In the second year, you have two more projects feathered in; however, you still have six projects that have not yet started their savings streams. Ultimately, you have this delta of missing savings, and that is what constitutes the $437,000 in lower net present value.

Keep in mind what this means. You can get a 75% higher net present value if you did all 10 projects this year as opposed to phasing them in over a five-year period.

Now, your prospect may see this information and express concern about having the manpower to do all 10 projects in one year. When this kind of objection comes up, I would say something like, “Well, $437,000 of additional net present value buys a heck of a lot of performance bonuses, not to mention Chinese food and pizza in late night conference settings to make sure these projects are done.”

Then they may say, “Well, I don’t have the money.” How do you respond to this? Ask them a question like, “If I offer to give you a 25% discount on any of the projects that you manage to get done this year, how many of these 10 projects will you get done?” Most people say, “Wow, 25% off?! For a discount like that, I would probably do all of them.” Then you respond, “Okay, well let’s take a closer look at the numbers. The $437,000 of net present value is very close to 25% of the $1.681 million of first cost. So if you’re telling me that you are going to jump through hoops to find the money, find the staff, and find the resources, even if you have to outsource and borrow some money to get these projects done at a 25% discount, essentially that is what you are getting without an additional discount – assuming you do all ten projects this year.”

Finally, they may express concerns about the debt service, assuming they need to borrow money to do all the projects in one year. You can simply emphasize the fact that $437,000 pays for a lot of debt service, especially at the low interest rates that are now available for energy efficiency projects.

So what’s the moral of the story? Replace myth with math and motivation. Reframe the situation so that there is a compelling reason to move forward immediately.

If you were confused by any of the calculations used in this example, check out my three-part Financial Analysis of Efficiency Projects online training series. If you really understand how the math works, you’ll be better positioned to use it as a motivator in your next meeting.

 

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Freakonomics

As a Wharton Finance graduate and a life-long entrepreneur and businessperson, I can confidently say that having a strong foundation in the principles of economics has had a significant impact on my professional success. While economics and finance have served me well, the pragmatic lessons that I've learned regarding how people make financial decisions has been even more useful. If we as sales professionals can think more like pragmatic economists than academic ones, we’ll have a better understanding of how purchasing decisions are actually made, and in turn, see an improvement in our overall sales performance.

While I don’t necessarily expect you all to have the time to take a full course in economics (or even to read an economics textbook, for that matter), there are some lessons in economics that can be easily (and enjoyably) digested in Steven D. Levitt and Stephen J. Dubner’s best-selling book, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. This book does not teach your typical economics topics (like supply in demand, monopolies, elasticity, and so forth). It does, however, provide a pragmatic view of how economic decisions are made, and teaches you how to view the world through the lens of an economist. I highly recommend picking up a copy of this book if you’re interested in expanding your “economic mind.”

(For those interested in delving even deeper, I recommend checking out Levitt and Dubner’s podcast, Freakonomics Radio.)

Here’s a summary from Amazon Books:

“Which is more dangerous, a gun or a swimming pool?

“What do schoolteachers and sumo wrestlers have in common?

“How much do parents really matter?

“These may not sound like typical questions for an economist to ask. But Steven D. Levitt is not a typical economist. He studies the riddles of everyday life—from cheating and crime to parenting and sports—and reaches conclusions that turn conventional wisdom on its head. 

“Freakonomics is a groundbreaking collaboration between Levitt and Stephen J. Dubner, an award-winning author and journalist. They set out to explore the inner workings of a crack gang, the truth about real estate agents, the secrets of the Ku Klux Klan, and much more. 

“Through forceful storytelling and wry insight, they show that economics is, at root, the study of incentives—how people get what they want or need, especially when other people want or need the same thing.”

 

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Weekly Recap, November 2, 2014

Monday: Read Jim Collins' best-selling book, Good to Great: Why Some Companies Make the Leap…And Others Don’t and learn how to create a company that will continue to be successful and profitable many years down the road.




Tuesday: Discover three questions you should ask yourself when attempting to determine what niches and value propositions will help stack the deck in your favor.




Wednesday: This is a continuation of Tuesday's blog, with two more examples of how you might determine the best value proposition for your efficiency project. 




Thursday: How does your product or service fit into your prospect's world? Read this story about how a sales professional selling anti-violence training successfully reframed the benefits to help her prospect achieve his goals.




Friday: Discover the metric that you should focus on when presenting an expense-reducing capital project to a landlord.




Saturday: Read this article from Fast Company and learn how to create a culture of productivity in your workplace.

 

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The Productive Culture

It’s the goal of every business owner or manager to create a company that is as productive as possible. While it’s always great to keep up with the latest productivity trends and incorporate them into your business’ productivity strategy, the best companies create a culture of productivity from the start.

So what does a “culture of productivity” entail? It’s a combination of who you choose to hire, how you choose to run your business, and how you interact with your employees. An article published on the Fast Company blog this week suggests a number of strategies for creating this culture.

Is it ideal to implement these strategies when you first open up shop? Of course. However, these tips can still be applied to existing businesses to boost the productivity of team. If you’re an owner or manager, I highly recommend reading this article:

http://www.fastcompany.com/3037703/how-to-create-a-culture-of-productivity

 

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