Three ROI mistakes that could derail your next dealMay 31, 2023
It’s no secret building an ROI business case can help drive a deal, and with an increasingly shaky economy, “no decision” is becoming the more common decision facing technology sales reps. This is why it’s more important than ever to lead with a strong value message. But what defines a strong vs weak value message? When we look at business cases that failed to close a deal, we see three common mistakes that could have been easily avoided.
Less is more
The highest ROI doesn’t win the deal, the most credible one does. A 300% ROI the prospect believes with make them a strong champion. A 40,000% ROI they find incredible will make your prospect a less enthusiastic supporter. Make a tight and believable business case around the top 2 or 3 benefits and you’ll close a deal. Pile every possible benefit into a business case and you’ll kill the opportunity. Don’t lose sight of the elevator pitch. What would your prospect say about your solution if they got on the elevator with the CFO? What’s the value behind the one big benefit?
Get the calculation correct
It remains amazing to me just how many companies calculate ROI incorrectly. It is not the total benefit divided by the total cost (that’s the cost to benefit ratio). It’s not the IRR of the project (IRR is not ROI, nope, don’t start with me on this). It’s not the first three years of benefits divided by the initial cost (inflating the ROI number Salesforce, really?). And it’s not some “risk weighted” NPV of the normalized benefits divided by some made up number (that’s just pure fiction Forrester).
The Nucleus Research Standard ROI Tool has been downloaded more than a million times and guarantees you’ll get the calculation right every time.
ROI is the average net benefit during the first three years of the project divided by the initial investment. That’s it. Think of that great big poster you stare at in line at your bank. You put $100 into their CD and get $15 each year for the first three years. The ROI for that investment is 15%. Take the 15 and divide by the 100 and get .15 or 15%. Got it. Act quickly and get a free water bottle.
Lead with payback and follow up with ROI. Your prospect might understand a 300% ROI is good, but they’ll “feel” a 4-month payback is great. Lead with the time to value and you reduce the perceived risk of the project. “How long until I cover my cost?” is the question everyone will need to answer so lead with that in every opportunity. ROI may be popular, but payback is king.
If you want to learn more, take our in-depth, practical learning experience that provides the tools you need to successfully build and deliver an ROI financial business case for a technology decision at ROIUniversity.com.