Essential Business Acumen Terms Every Salesperson Should Know Today
Buyers have spoken they do not want or need transactional “sales reps” pitch slapping them. Theses pitch slapping sales reps assume the buyer has problems and prematurely pitching their products and services. What 85% of buyers shared in a Florida State survey was they want salespeople who can connect the dots between what they sell and how it can impact the buyers bottom line. Sadly, the same buyers shared less than 14% of salespeople have those skills today. We must train and coach our salespeople in the language of business and improve their business acumen.
Building your financial literacy, beginning with your senior leadership team’s financial vocabulary, is a great way to increase your competitive edge. In this post, I will share the importance of financial literacy in manufacturing sales.
Business acumen is a critical skill for salespeople, enabling them to understand the broader context of their clients’ industries and make strategic decisions that drive sales success. Sales professionals must familiarize themselves with key terms related to business acumen. In this post we’ll explore and define essential terms that empower salespeople to engage in more informed and strategic conversations with clients.
1. Market Segmentation:
Definition: The process of dividing a broad market into smaller, more manageable segments based on common characteristics such as demographics, behavior, or needs.
Significance for Sales: Understanding market segmentation helps salespeople tailor their approach to specific customer groups, ensuring more effective targeting and communication strategies.
2. SWOT Analysis:
Definition: An acronym for Strengths, Weaknesses, Opportunities, and Threats, SWOT analysis is a strategic planning tool used to identify internal and external factors affecting a business or project.
Significance for Sales: SWOT analysis equips salespeople to assess their own offerings and those of competitors, enabling a more nuanced understanding of the competitive landscape.
3. ROI (Return on Investment):
Definition: A financial metric used to evaluate the profitability of an investment by comparing the net gain or loss relative to the initial cost.
Significance for Sales: Salespeople should be able to demonstrate the tangible ROI of their products or services to clients, showcasing the value proposition and justifying the investment. This is particularly critical in B2B manufacturing sales. If you sell a piece of manufacturing equipment that sells for $500,000 or more you must be prepared to build an ROI.
4. Customer Lifetime Value (CLV):
Definition: The predicted net profit a company expects to earn from a customer throughout their entire relationship.
Significance for Sales: Knowing and maximizing CLV guides salespeople to focus on long-term customer relationships, emphasizing customer satisfaction and loyalty.
5. Pricing Strategy:
Definition: The method companies use to set and adjust prices for their products or services, taking into account factors such as cost, competition, and market demand.
Significance for Sales: Salespeople must understand the company’s pricing strategy to effectively communicate the value of the product or service in relation to market dynamics. We encourage our clients to price based on the economic value they deliver to their customers and market prices for similar products and services. We do not encourage a cost-plus price model. In this model manufacturers and some distributors review their cost and determine price based on a multiple of cost.
6. Lead Generation:
Definition: The process of identifying and cultivating potential customers for a business’s products or services.
Significance for Sales: Successful lead generation ensures a consistent flow of potential customers, enabling salespeople to build a robust pipeline and meet revenue targets.
7. Value Proposition:
Definition: A statement that summarizes the unique value a product or service brings to customers, highlighting its competitive advantages.
Significance for Sales: Articulating a compelling value proposition is essential for salespeople to differentiate their offerings and address customer needs effectively.
8. Revenue:
Definition: The total income generated by a business from its primary operations, including sales of goods or services.
Significance for Leaders: Revenue is a fundamental measure of business performance and growth. Leaders must focus on increasing revenue streams through effective sales strategies and diversification.
9. Profit Margin:
Definition: The percentage of revenue that represents a company’s profit after deducting expenses.
Significance for Leaders: Profit margin indicates the efficiency of operations and is crucial for assessing the overall financial health of a business. Leaders should aim to optimize profit margins through cost management and strategic pricing.
10. Cash Flow:
Definition: The movement of cash in and out of a business, reflecting its liquidity and ability to meet short-term obligations.
Significance for Leaders: Positive cash flow is essential for day-to-day operations. Leaders must monitor cash flow to ensure the availability of funds for necessary expenses and investments. Several of my clients have trained their sales teams to speak in terms of improving their customers cash flow with just in time service.
11. Working Capital:
Definition: The difference between a company’s current assets (e.g., cash, accounts receivable) and current liabilities (e.g., accounts payable, short-term debt).
Significance for Leaders: Maintaining positive working capital is essential for meeting short-term obligations and supporting day-to-day operations. Leaders should optimize working capital to ensure business continuity.
12. Debt-to-Equity Ratio:
Definition: A financial ratio that compares a company’s total debt to its total equity, indicating the level of financial leverage.
Significance for Leaders: Monitoring the debt-to-equity ratio helps leaders assess the financial risk of the business. Striking a balance ensures a healthy capital structure and sustainable growth.
13. Budgeting:
Definition: The process of creating a detailed plan that outlines expected income and expenses over a specific period.
Significance for Leaders: Effective budgeting allows leaders to allocate resources strategically, plan for contingencies, and maintain financial discipline, supporting profitable growth. In our training and coaching we help salespeople build business cases to help their clients build a budget based on the economic impact to the clients’ business.
14. Return on Assets (ROA):
Definition: A ratio that measures a company’s ability to generate profit from its assets, calculated by dividing net income by total assets.
Significance for Leaders provides insights into operational efficiency and asset utilization. Leaders should aim for higher ROA to maximize the productivity of resources. Salespeople must understand this concept when selling capital equipment.
15. Earnings Before Interest and Taxes (EBIT):
Earnings before interest and taxes (EBIT) indicate a company’s profitability. EBIT is calculated as revenue minus expenses excluding tax and interest. EBIT is also called operating earnings, operating profit, and profit before interest and taxes
Buyers have spoken they want and need business consultants masquerading as salespeople.
Salespeople must learn to speak the financial language of business.
Their conversations must share how their product or service will….
Increase Revenue
Reduce Costs
Increase Ebit
Reduce Scrap
Reduce Downtime
Increase Net Income
Improve Cash Flow
Reduce the cost of Quality.
Reduce Safety Occurrences
Increase Gross Margins
Increase Market Share
Increase Shareholder Equity
Reduce Operational Costs
Reduce Manufacturing Variance
Increase Operational Efficiency
Increase Throughput
Mastering these business acumen terms provides sales professionals with a solid foundation for navigating the intricacies of today’s business environment. By incorporating these concepts into their approach, salespeople can engage in more strategic conversations, build trust with clients, and drive successful outcomes in an ever-evolving marketplace.
Let’s schedule a call if you would like your salespeople to evolve from reps into trusted advisors and improve their close rates while increasing their sales pipelines.
