For your prospect

When dealing with the perception of risk in a business solution that you’re proposing, you need to consider what the elements of risk are to your prospect, which can be broken down into four major areas:

• May not work: The fear that the solution you’re proposing meets the prospect’s needs but may not work (or may not work correctly) may be a reasonable one to harbor at the beginning of the sales cycle as far as your prospect is concerned, but the sales cycle progresses as if nothing is wrong.

  Beyond the very early stages, this fear should diminish. If it hasn’t, then you’re probably not doing your job correctly. A fear that the proposed solution may not work isn’t a valid risk if your prospect continues with his buying cycle beyond the initial stages.

• May not do the job: The perception of risk that your solution may not do the job for your prospect’s needs can be taken back to the original requirement specification. You can reasonably assert that your solution meets the stated needs and is a good fit for the job as defined to you.

  If this risk is raised as the sales cycle progresses, then push back on your prospect and tell him that as long as the need requirement was done correctly, then he has nothing to fear because, as he’ll have seen for himself, your proposed solution more than adequately meets the stated needs.

• May be the wrong choice: The perception that your solution may be the wrong choice for your prospect is an area that you need to cover in some detail as part of objection handling (see Chapter 10) and qualifying real need (see Chapters 9 and 19). The essence of the new business sales role is about handling and overcoming such objections and ensuring that they don’t become perceived as risks.

• May be a bad decision: The perception of risk here is a tell-tale sign of an inexperienced or nervous buyer. You should have identified this as part of the qualification processes when getting to know the key members of the decision-making unit. And if you perceive the problem at that stage, that is when you should take action to perhaps ensure that another member of the decision-making unit is kept fully in the loop.

  The last thing you want to do as a new business salesperson is to get to the end of the sales cycle only to discover something you should have covered has reared its head and risks, at best, a delay or, at worst, cancellation of a project.

If your prospect begins to talk about risk in the early stages of the sales cycle, you need to qualify exactly what he means and take any necessary steps to ensure that it isn’t going to be a deal breaker as you get to the latter stages of the sales cycle. If he tells you that he’s risk averse or if it becomes apparent, the sooner you get the issues into the open to address them, the better the situation will be. Acknowledge any fears and don’t play them down as unimportant, but point out to your prospect that perhaps the biggest risk he faces is not addressing his fundamental need. Bearing in mind that he must be in a reasonably senior position to conduct the buying cycle with you, he wouldn’t have gotten into that position if his approach to risk was in any way going to cause a negative impact to his company.

For your company

By far the biggest risk your company faces in winning new business is one of delay or cancellation of the order, owing to circumstances that you haven’t seen or adequately covered — for example, a company takeover, your key prospect leaving his job, or simply you as the new business salesperson failing to correctly qualify the opportunity in the first place.

Beyond that, five separate areas have the potential for some risk. You need to understand these risks and be able to mitigate against them (I discuss dealing with risk later in this chapter):

• May not get paid: This is a genuine risk and will be your accounts department’s number-one fear. It falls under the pricing and affordability area, which you should have covered during your prospect qualification. Note that different companies have different processes on credit control checking, and you need to be aware of your company’s requirements regarding any needed deposits.
• May damage reputation: A deal that doesn’t go according to plan is one that can do untold damage to your company’s reputation, irrespective of who was at fault. It doesn’t matter whether the sale didn’t close when it should have or the implementation failed to go smoothly or indeed just failed. Of course, any deal represents a form of risk, and one of your roles as the new business salesperson is to guard against this.

• May overstretch resources: If a new business deal is larger than expected, is more complex than expected, or just comes in when it’s not expected, then it will have a serious impact on your company’s ability to deliver the ideal solution in the timescale required.

  In Chapter 13, I cover the impact of resources on a deal, which as an element of risk is important to note, but if the deal doesn’t match the expectations that have been set, it could cause a problem.

• May be a client from hell: We’ve all heard of them, and some have experienced dealing with them firsthand. The client from hell is one who really isn’t worth having, and you’ll be much better off just walking away from such a deal (see Chapter 20 for help). Unfortunately, sometimes the nature of the client doesn’t become apparent until it’s too late to do anything about it.

  Some warning signs are specific to your sector, but some are generic — for example, the prospect who wants special treatment or a special deal just for him and feels that his needs are so unique that a standard approach just wouldn’t be suitable, regardless of how many times your company has implemented the solution in the past. Another generic warning sign is when the prospect wants a pricing deal. Be aware of the risk of taking on a client from hell and consider whether it’s truly worth it.

• May lack commitment: A prospect who appears to want your solution but isn’t really committed to it can be worse than losing a sale in the first place. In many instances — indeed, the majority of the time — closing the sale is just the beginning, and if you perceive a lack of commitment from your prospect, then this truly does represent a risk that will only increase as time goes by.

  Putting your neck on the block is an excellent way of securing commitment. If you have a lot to lose, you’re going to go out of your way to ensure that whatever the risk is, it’s not standing in the way of success. Entrepreneurs understand this very well and indeed thrive on risk.

Keep all these potential risks in mind when progressing a sale so you can see that the burden of risk is shared between buyer and seller. Consider these different risks when your prospect is talking about the risk that he faces.

Protecting your prospect

Sometimes you may need to actively encourage your prospect to take a risk. For example, you may need to remind him that not taking action has negative consequences, too, and that his original needs or problem won’t be addressed if he doesn’t take at least a little risk. Or you may need to gently push him in the right direction and remind him of why you’re involved in discussions. Your job is to help him understand the reality and potential consequences of not taking certain risks.

If no one ever took risks, then nothing would ever get done. The world of business and commerce sees people taking risks every day, and the majority of them are relatively low-level ones that lead to progress. New business sales don’t usually incur high levels of risk in absolute terms, and sometimes you need to make your prospect get on board with this fact. Ultimately, your role is to get your deal over the finish line by mitigating the impact of any potential risk and not getting hung up by it.

If your prospect fears exposure to a perceived risk, then part of your role is to protect him from that exposure and guide the solution past the risk. To do this, you first need to understand what the real issue is; however trivial it may seem to you, if it’s a real issue for your prospect, don’t underestimate its impact on your deal.

Set your prospect’s expectations from the outset. You’re not offering to save the world from all ails. Your solution addresses a set of specific problems and does so in a unique way, but it may also have some side effects that your prospect needs to know about. Discuss and agree on how to fit your solution into your prospect’s business in realistic terms, not promising the world but showing how you’ll solve problems. Having a realistic set of expectations will help mitigate his perception of risk.

For example, if your solution is going to address your prospect’s fundamental problem successfully but do nothing about addressing a secondary problem, you need to set these expectations accordingly at the outset of the sales cycle so that perceived failure to address the secondary problem isn’t an issue that comes back to bite you.

Leveraging the power of qualitative data and third-party endorsements is a powerful tool at your disposal. This can be in the form of research papers or case studies involving your solution as implemented by other clients. A combination of articles from different sources, within and outside of your company, is ideal. (Flip to Chapter 2 for more details on case studies and other similar materials.)

User references are a powerful sales tool, but you do need to be careful how you use them because you have no real control over what people say. Your top customers are good reference sources, but so are some of your newest customers because they’ll be better able to identify with the risks that your prospect is facing, having recently come through the buying experience themselves.

External documents, such as press coverage and analyst or expert reviews, are worth their weight in gold. Showing your prospect that he’s not alone or being a pioneer will go a long way toward alleviating many fears. This creates a safer environment for him to operate in. If you have user groups, then that’s perhaps the safest environment of all to introduce him to so that he can see firsthand that he’s not operating in isolation. User groups, while primarily for the mutual benefit of your customers, are in fact a brilliant sales tool if you’re able to leverage them successfully.

Take the time to engage with as many stakeholders as possible. This is especially important if they form part of the identified decision-making unit. Don’t leave your prospect isolated if an issue of risk needs to be addressed. Direct engagement with stakeholders helps protect your prospect from side issues that he may not be immediately aware of. If you can head these off before they become issues, then you’ll be both protecting your prospect while also moving the sales cycle forward.

There’s absolutely no point in trying to hide any negative issues that are in the public domain, as social media and savvy prospects are sure to uncover them anyway. Be transparent in dealing with any negative issues; address them openly and move on, acknowledging that they exist and giving your spin on them before your prospect finds them anyway.

Protecting your company

One of your duties as a new business salesperson is to ensure that not only is your prospect protected against the perception of risk but also your company.

One thing I’ve come across fairly often in dealing with the perception of risk is that prospects want it all one-sided — that is, they’re interested in protecting only themselves. I’m quite open about this and tell prospects that I’m willing to take steps to share some of the risk but that I’m not going to carry all the risk. Push back if you get into this situation because it can be an early warning that all is not right.

I’ve encountered this situation a few times when selling services. The prospect wants every form of guarantee possible in order to protect himself and wants me to take all the risk; in other words, if anything however remotely connected to the project doesn’t go according to plan, then the prospect wants me to resolve it and will accept no responsibility, even if the issue comes as a result of his actions. I always push back on this and try to demonstrate reasonably that his expectations are unrealistic. This is one situation where I will walk away from a deal rather than have risk be too one-sided. (Look at Chapters 12 and 20 for more on walking away from a deal.)

Sharing a risk is fine in new business sales because it shows belief in your solution, but transferring all the risk onto yourself isn’t a smart move and is usually linked to a lack of commitment on behalf of your prospect. Lack of commitment is a surefire sign of a deal or implementation that has trouble stored up for you.

You may need to address compliance issues as part of a deal. My business quite often faces this when clients provide us with data to work with. We need to ensure that the relevant data compliance regulations are correctly dealt with, and, although we’re happy to sort this out, we do charge for it and are upfront about this. We also won’t proceed with a deal unless this is agreed on because we’re not prepared to take all the compliance risks. I turn these issues into sales benefits by suggesting that the prospect may like to consider how our competitors who don’t insist on compliance are going to handle it and who will have the ultimate exposure. Being open, honest, and upfront about it positions us well in the prospect’s mind as a company that will protect him, even though there’s an extra cost for doing so.

Credit risk — the risk of not being paid for your work — is a big risk that you need to mitigate against. Ultimately, you can only go on proven past performance and can credit check this, and you should do so. Tell your prospects that they need to pass a credit check before you sign them up for a deal, and if you encounter a problem, then get them to pay in advance. Do be prepared to stand your ground here. I tell prospects that we’re not a bank and we’re not going to fund the work.

Product liability can be an issue at times, and you can insure against this. If your solution falls into this category, you should have a suitable insurance policy in place to protect you in the event of a problem. You need to discuss liability insurance with your senior managers and insurance company.

Addressing risk during qualification

As a successful new business salesperson, your prospect’s perception of risk should never come as a late surprise because you’ll have dealt with it during early qualification (covered in Chapters 9 and 19).

You need to gain an understanding of what the problem is and of the real risk your prospect may be hiding behind something else. What exactly is the problem or potential stumbling block? You of course can address only issues that you know about, so make it clear that you can probably help but only if you know what you’re facing. For some reason that has never been satisfactorily explained, prospects don’t always tell you the truth and will hide behind something else almost as a smoke screen. You need to penetrate the smoke screen to uncover the real underlying issue so that you can address it and move the sales cycle on.

Handle risks in the same why you do objections (see Chapter 10) because, in effect, that is what they are. As you would with objections, document everything in contact reports, which are vital in showing that you’ve already closed off issues. After you’ve dealt with an issue, risk, or objection, then that door is closed, and you need to adopt a strict regime in keeping it closed. Documenting everything in contact reports (introduced in Chapter 3) gives you an audit trail of issues that you’ve already addressed.

When dealing with the perception of risk during qualification, don’t just accept it as a real issue; push back, seek to understand the details and why a risk is perceived, look for an immediate solution to head off an issue, and document it in a contact report.

If the perceived risk is noise level to any reasonable observer, then confront it and be prepared to walk away if common sense doesn’t prevail. Accept that you can’t fix everything and that your primary focus is on selling a solution that fits a business need and not pampering to unreasonable demands. Your prospect still needs to have his original business need addressed and may have lost sight of that, so a sobering action on your behalf may result in him returning his focus to the main issue of solving the business need rather than worrying about some side issue.

Understanding the importance of relationships

As with many areas of winning new business, I can’t overstate the importance of building a solid business relationship with your prospect. The strength of this relationship will frequently guide your prospect beyond the perception of risk and toward a deal. (I explain how to start with making a good impression in Chapter 3.)

Wherever possible, you should take a consultative approach to selling, positioning yourself as an industry expert whose role is to guide your prospect toward making the right decision, while protecting his interests and helping him to mitigate against any risk (as I explain earlier in this chapter). A solid, supportive sales relationship keeps you in good stead when it comes to dealing with some of the more difficult aspects of risk.

If your prospect allows you to guide him, using the benefit of your experience in selling and implementing solutions similar to his requirement, then you’re well positioned to act as his champion and to lead him around any obstacle that stands in the way.

Bear in mind that some prospects do thrive on being trailblazers, and if you have a prospect like this, your role is to support him. The likelihood is that the opposite will be true in the majority of situations, so don’t set out to make your prospects be trailblazers unless that is their intention. It comes down to understanding where they are in the adoption cycle and understanding their attitude toward risk. If you successfully cover these two issues, then you’ll be well positioned to successfully guide them to a mutually beneficial conclusion of the deal.

Revisiting the deal structure

If you can mitigate the perception of risk by revisiting the structure of the financial aspects of a deal, then this may be a worthwhile exercise to conduct. (Chapter 11 has full details on structuring deals.)

As I discuss in the earlier section “Protecting your company,” any movement toward restructuring a deal is on the basis of sharing the risk and not passing the risk entirely to your company. Taking on the entire risk of the project is a poor business deal, whereas sharing risk is often a sensible move that can assist in driving the deal toward a successful conclusion.

Structuring the deal in terms of stages with associated stage payments is often a sensible approach. Bear in mind, however, that this arrangement can have a negative impact on your company’s finances if your normal terms are payments in advance. One way you can alleviate this payment risk is by being prepared to load costs — in other words, accept stage payments — but increase the overall cost to compensate for the delayed revenue. This is something that I do as a matter of routine when prospects request stage payments. Sometimes this leads to objections, but it then becomes a matter of discussing sharing the risk instead of one party carrying it all. If no deal is possible here, then you need to consider whether this is a client you really want to work with.

Another way of dealing with the financial element, and one that’s related to stage payments, is to consider an escrow agreement, where a proportion of funds is held in reserve pending a predetermined set of events that lead to its release. This tends to be rather complex and should never be entered into lightly, although it can be a good solution for large, complex deals.

In Chapter 11, I discuss guarantees and offer some advice on how to work with them. Guarantees also play a role when the perception of risk is an issue, and providing a structured guarantee can be a good way forward and around any impasse. Be aware, however, of exactly what you’re guaranteeing, and make sure there’s no room for ambiguity, with everything clearly defined in writing.

One of my first consulting clients demanded a personal guarantee as his way of mitigating against risk. Undoubtedly, this cost him business and was seen by many as an over-the-top reaction that was very one-sided in its implementation. I could never recommend this as a solution, even though I did sign such an agreement once as a new supplier to this client, who did on one occasion threaten to implement the personal guarantee and that proved to be the kiss of death to that business relationship. The phrase “having your cake and eating it, too” seems most appropriate here.