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How Top Sales Leaders Acquire CFO Approval For Sales Performance Projects

Posted by Jamie Shanks on May 2, 2019 5:00:00 PM

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Over the last couple of weeks, we’ve been working with customers whose projects were large in scope—and a big investment for these companies. A Chief Revenue Officer and Vice President of Field Operations at these companies were wondering how they could acquire funds from the CFO.

Here’s my advice: The most important piece when acquiring funds from the CFO is to put yourself in the mind of the investor: meaning capital allocation.

What does this mean? When I put a dollar into something, it will have a compounded annual return rate greater than alternative costs and opportunity costs.

When your company’s CFO deploys capital, they want a rate of return—and they want a business case that showcases that rate of return.

However, many sales leaders and sales enablement leaders are fixated on what they can control and what they’re used to: pipeline creation, working the big deal, and filling in open head count. Essentially, they’re working in the business, but not necessarily on the business. That’s the difference between them and the CFO.

As a sales leader, one of the best tactics you can use is to build a business case around the opportunity cost of the most logical capital deployment strategy.

approved

CFO’s know that sales leaders typically require funds for three main reasons:

1) Increase headcount.
2) Increase sales and throughput per seller.
3) Acquire new product or markets.

The easiest of these reasons for a sales leader to talk to the CFO about is the one they have the most historical record of being a part of: increasing headcount.

The biggest operational expense in the sales department is always human capital, and your opportunity here is to learn how to have a structured conversation around opportunity cost.

If you want to deploy a sales performance project like training—and this is where we help companies with social selling and creating pipeline–you need to build the following business case.

Building a business case

1). What is the current capital allocation strategy? – You may have an open head count in a certain geography, or perhaps you’re about to attack a new vertical, or open up a new department for a new type of seller such as inside sales or SDR’s. These are all great, but there’s a cost to a full stack seller. There’s the cost of recruiting, onboarding, salary, commissions, and tech stack, plus other operational expenses like healthcare, benefits, gym memberships, etc. This strategy means hiring those people in open headcount.

2). Model the rate of return of the capital of that seller – Let’s do some calculations. If a seller costs you $100,000 in salary, plus another $100,000 in commissions, and another $100,000 in other expenses (benefits, office space, etc.), that equals $300,000 of expense to a company. 

What you need to do to build a business case is to model their return to the company on a 1, 2, or 3-year horizon. For many account executives, let’s say they make $500,000 in revenue for the business in year 1, $1 million in year 2, and $1.5 million in year 3 – that’s the amount of money that a $300,000 investment can make you in three years.

3). Compare the cost of sales performance improvement (sales training). Now you’re using the same model – but you’re deploying the capital, and you’re multiplying it by increasing it times 100 sellers – that means $1,000 per seller.

If each seller were to create one new opportunity every quarter for one year, then two opportunities, then three – and if they won 25% of those deals—what is the return of investment based on the average price of $50,000? Now the rate of return is in the millions. Increasing the pipeline by 20-25%, and then increasing the win range by 5% times 100 people, the capital allocation strategy is far greater.

The CFO will argue that this model has less experience, so you need to build some buffer into your model. But this is how a sales leader thinks as an investor of a capital allocation model.

They will think that $100,000 will create much greater investment over the entire planet of sellers in all markets, rather than filling the void in one open market. They believe the best bet is to trade the opportunity cost of headcount for other programs.

That is typically the best argument you can make to acquire funds from a CFO.

CFO’s already know they need to allocate capital, but you’re just giving them an alternative strategy. Yes, the strategy has some unknowns and some risk, but it has a much greater upside per compounding growth of seller.

 

 

Jamie Shanks

Jamie Shanks

About the Author

Jamie Shanks is a world-leading Social Selling expert and author of the book, "Social Selling Mastery - Scaling Up Your Sales And Marketing Machine For The Digital Buyer". A true pioneer in the space of digital sales transformation, Jamie Shanks has trained over 10,000's of sales professionals and leaders all around the world.

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