Numbers Matter – The Key to Creating a More Compelling Value Proposition

By November 29, 2018 No Comments

Presenting an idea or a proposal to an executive is never easy, but its difficulty is compounded by the lack of financial justification. The term value proposition can easily be replaced with business case. Every actionable business case requires a financial argument designed to illustrate the benefit. Unfortunately, we substitute terms, such as efficiency, effectiveness, or productivity, to replace the lack of measurement. None of these terms carry impact and will work against you. An executive is interested in the measurement of these terms. Your idea must either illustrate a potential gain or a potential loss (if no action is taken).

The key questions to measure a business case are: 

  • How large is the size of the opportunity?
  • How fast is it moving?
  • How much will I need to invest?
  • What are the financial returns I can reasonably expect?

There will always be a financial justifier that will review your business case to establish if the investment makes sense. A CFO, for example, is the equivalent of a professional investor. They are charged with the responsibility of evaluating opportunities to reap maximum returns for invested cash. Every idea or proposal that crosses their desk will need to be justified by either a payback period, an ROI (Return on Investment), or a Net Present Value. They are continually looking for ways to maximize returns and limit liabilities. If you fail to include financial measurements or return information, you are virtually guaranteeing that your idea will be rejected.

Providing a business case that shows savings is also a potential liability. Clearly, every financial justifier is interested in saving money. Unfortunately, you are only telling 50% of the story and leaving the remainder blank, while expecting them to draw their own conclusions. Every savings amount represents “trapped capital.” That is, cash that no longer needs to be expended and can be re-invested. Essentially, if you have a savings proposition, you have “found them money.” It would be far more powerful to suggest how that money may be re-invested in a project or initiative that can create an ROI. Numbers breathe life into your business case. They help the justifier answer the questions listed above and they create excitement about what may be accomplished.

Recently, an experienced salesperson presented a Wi-Fi technology platform designed for shopping malls, airports, and other large consumer-oriented applications. The focus was placed on the technology and the greater levels of productivity that could be achieved. After a coaching discussion, it was determined that the proposed technology could provide a savings of $20M within 15 months for an investment of $2M! The net return of approximately $18M – minus a 15-month interest carry rate on the $2M, PLUS the ability to invest the return for a positive ROI differentiated the account team and resulted in a win.

Numbers matter. Quantifying the business case and justifying the benefit to the business can increase the estimated probability of winning by an additional 15-25%!

 

Personal Challenge: Review your two most recent proposals. Have you answered the key questions listed above? Could you present these internally to a financial colleague who can assist you with building a better business case with greater levels of justification? Are you using words to describe your business value without any financial context? How would you change this?

 

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