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Evaluation
Seasoned sellers appreciate that customers may financially evaluate investments any number of ways.
They also invest time to employ the most favorable metrics to close individual deals. Here are five approaches to consider on your next deal:
1. Start with the top line. Many people believe business performance is all about the bottom line. In contrast, seasoned executives and business analysts start with the top line. Why? Because they know it’s always harder to grow revenue than cut costs and that revenue trends best portend future business health.
2. Understand industry-specific metrics. Each industry uses a common set of metrics to manage their business. Such metrics can be found within analyst reports. For example, Retailers monitor sales per square foot or comparable store sales, whereas Service Providers will focus on metrics like average revenue per user (ARPU).
3. Get company or customer specific. Individual companies employ all manner of homegrown measures to compete and differentiate themselves in the market. For example, a technology equipment provider may track the amount of time it takes a customer to install or implement their product.
4. Use hard vs. soft metrics. When estimating return on investment, hard metrics, those that can be objectively measured such as total revenue or return rates, are almost always more powerful then soft metrics. This is because the latter, such as employee morale or brand reputation, are subject to subjective influence and bias.
5. Differentiate by role. It’s important to recognise that different roles within an organisation will track different metrics on their dashboards. Whereas chief financial officers closely watch cost of capital and cash flow, in contrast chief information officers may focus on a metric such as speed to integrate acquisitions.
