Four steps to successfully selling your IT project to senior management
by Mark Kuta Jr., May 2011
Salespeople know that their jobs depend on getting a customer to sign on the dotted line. Successful salespeople often approach this challenge by using tools that better align with the executive who has the checkbook. This means presenting a clear business case and delivering a concise, compelling C-level message that will increase the chance of making the sale.
When significant investments that can run into the millions of dollars are involved, utilizing this same approach can help an IT manager gain funding for an internal project. It can shift the focus of the IT department away from features and functionality and toward strategic support of management’s core business goals. Approximately 80 percent of most IT budgets are for maintenance and support of software, so the competition for new investment is intense. Here are four sales tips that can help enterprise techies and line-of-business managers close the deal on essential IT projects.
Step 1: Focus on Profit
Bob Wood, a marketing director for Sony PlayStation, says it is important to focus on profit while selling a project. “Managers who don’t think profit are not likely to be aligned with their CEO,” Wood says. “While managers devote time to projects, processes, and managing resources, this is not the same as thinking first and foremost, ‘How is what I am doing driving profit?’”
The first step is to equip the team to generate value. To do this, everyone on the project team must understand the company the way the CEO does. Forget the divisional or product-level responsibilities for the time being, and get the information to analyze the company from the aggregate level. The best place to start is the company’s annual report. Many employees misplace this document when it comes in the mail, but it is still possible to pick one up from the shareholder relations department or download a digital record of the company’s financial results from the corporate Website.
As a first step, the team should review the company’s metrics, as well as those of several industry competitors. What have revenues done over the past several years? Has the company kept up with the competition or exceeded it? Now look at the gross margin, and see how the company compares. If the company’s gross margin is higher than the competition’s, it’s either because the company is more productive or because it can sell its products at a higher price. The trend of the gross margin is one of the telltale signs that executives look for. At this point, it would make sense to start looking at ways to drive gross margin at the departmental level. If the company is lagging in the market, what can be done to increase gross margins by a small amount every day?
Another great productivity measure that company executives consider is sales per employee. A company that is utilizing its resources in a productive manner has higher sales per employee. How does the company compare? IT managers who couch investment requests in terms of additional sales that full-time employees will generate—and the break-even point of the investment decision—will have a much greater opportunity to get their project reviewed.
An excellent overall metric that brings to bear market realities on the impact of faster decision-making is called the cash2cash cycle. Sometimes referred to as the cash conversion cycle, this quantifies how speed in decision-making affects the cash required to run the business. For example, if a project will allow a company to execute processes that will let it collect cash from its sales three days sooner, the executive can easily see the financial impact that this will drive. Make no mistake—senior executives know that in today’s business, it’s all about speed, so get to know this metric.
Step 2: Speak the Language of Business
To gain an advantage in getting the project funded, everything should be presented in the language of business, which is the language of the CEO. Rather than use the term money, discuss capital. The project won’t affect sales, but rather will drive revenue. If the project will increase profit, it’s best to outline which type of profit it will drive. Gross profit, as we discussed above, is generated by higher sales revenue or productivity. Operating profit will increase if the project drives productivity in the administrative functions.
On the spending side, costs are what are required to drive sales. Expenses generally fall into the general and administrative groups. For example, reducing the requirement for parts that the company’s product requires is driving down costs. When it comes time to discuss the reason for investing in an IT project, speak the language of business by speaking not just in terms of ROI but of a specific metric. For example, “This project will generate a 45 percent IRR [internal rate of return].” Speaking the language of business will allow you to effectively communicate the message to senior management.
This is particularly important for technologists, who operate with their own mystifying and arcane language. Speaking the language of business will align the project with the vernacular of the CEO and will help dispel some of the long-standing barriers and prejudices that often define the relationship between IT and the business. To make a successful pitch, technologists should trade in their TLAs (three-letter acronyms) for those favored by their peers in the lines of business. This can show that IT has not only the best interest of the business in mind but also the ability to match solutions with strategic business goals.
“In order to close sales with top executives, you must get inside their heads, understanding what they want, and—perhaps most important—what they worry about,” says John Rutledge, chairman of Rutledge Capital, a private equity investment firm that owns a portfolio of manufacturing companies.
Step 3: Align the Project with Strategic Objectives
Every year, executives have to make decisions that economists call “the allocation of scarce resources.” To CIOs or CFOs, it simply means that they decide which projects to fund, and which will die by the wayside. IT projects—as well as IT careers—often depend on which projects get funded. A software salesperson faces this pressure all the time, and despite how unappetizing it may seem, IT managers pitching internal projects are often in the same boat as the salesperson.
However, there is one area where selling an internal project provides a distinct advantage. The idea revolves around one of the best ways to get momentum for an IT project—aligning it with the overall goals and profit strategies that the CEO is driving. An outside salesperson has to figure this out, while internal employees will have a much easier time understanding this strategic direction. Company meetings, divisional presentations, and budget forecasts will prove to be a big help in this regard.
To increase the chance of getting the project funded, frame it in terms of how it supports these objectives. Does the company have a growth-through-acquisition strategy? If so, how does the project drive cash generation and speed information integration? (Remember that growth equals cash requirements.) Is the company facing a highly competitive sales environment in which revenues are driven by capturing competitive market share? Show the anticipated gross profit impacts in terms of raising sales. Would it be easier to drive sales an additional 2 percent, or to fund the project?
Step 4: Think Like Your CEO
All projects require ROI, but successfully presenting the analysis in terms that differentiate among the various projects and investment decisions will increase the chances of funding. It is a capital-budget horse race, and the objective is to present the project as a winner in the style of Secretariat—rather than that famous talking horse of the 1960s, Mr. Ed.
To do this, remember that the CEO, the board, and senior executives are looking at not only returns but also the risk associated with the project. Present the project in a way that both addresses the question of risk and takes it off the table. The best way to do this is to subject your project to a sensitivity analysis that outlines the various risks involved with the implementation and what those risks do to the returns.
For example, if a project as outlined by the team shows a 125 percent IRR, delay the anticipated returns by several quarters and analyze how this affects the IRR. Do another analysis with the costs escalating beyond what the assumptions said. Think of the risk factors, and adjust the base model to see what the returns are. Then, during the presentation, outline these risk factors that the team has quantified: “The project shows an IRR of 120 percent, but if the returns are half as much as anticipated, the IRR drops to 75 percent. If the returns are half as much as anticipated and the costs are double, the return drops to 40 percent, which is still twice our hurdle rate.” This type of statement tells a much different story than “the anticipated ROI is 40 percent.”
The Byproduct: Career Acceleration
With the approach described here, team members associated with a project will be viewed by both superiors and peers as profit generators. By succeeding in the competitive environment of capital projects, team members will find their newfound expertise in demand on the departmental or divisional level. This expertise can lead to other initiatives and can generate more responsibility—fast. “The way that I have used these steps to understand our suppliers has been a huge value generator for our business,” says Jo Fickes, procurement manager at Ascent Healthcare Solutions. “We are also able to understand the risks of purchasing from different suppliers based on their business models. An added benefit is that these steps help us in the negotiation with those suppliers.”
Fickes and her team are able to bring in metrics that few others look at when negotiating. For example, as her team members negotiate with suppliers, they do a complete analysis of their supplier using the steps above and further outlined in my book Think Like a CEO (Flow Publishing, 2007), and use what they find out in the negotiations. Her team once uncovered that a potential supplier paid bills on average 20 days later than other similar suppliers. They realized that cash was a much more important issue, and used this insight to drive price concessions from the supplier for quicker payment terms.
Although IT managers and executives may not earn commission, it is still their job to drive value for the firm. A senior executive once said that no matter what job his employees had, they were always on commission. IT managers who can think like senior executives will drive significant value for their firm and have expanded opportunities in their careers.