Hey, 👋 Scott from The Sales Mastermind here.

Today’s edition only takes 3 minutes.

Sellers lose their jobs for deals that don’t happen; buyers lose their jobs for deals that do happen and go wrong.

Today we’ll cover:

• Storytime
• A-symmetry
• Four types of Risk
• Wrap Up

Storytime

While living in London, a mate asked me to buy his dad a beer at a typical English pub.

It was an odd request. First, I barely knew his father (let’s call him Steve*); second, Steve lived in New York.

My mate explained, “Steve’s flying into London for business meetings in Nottingham and would love to hear an Aussie accent beforehand.”

Out of both curiosity and as a favour, we grabbed a beer.

It turned out Steve was in the process of a gigantic buying journey.

He was driving to Nottingham to decide whether to award the contract for a 9-figure ERP rollout (enterprise resource planning) to Tata Consulting, Dimension Data, or Deloitte.

I was instantly intrigued because the largest company I’d ever worked for barely turned over 9-figures, let alone bought something for more than 100 million dollars.

Steve was a senior finance officer in a publicly listed manufacturing company.

And they were signing a 9-figure contract because the business had recently experienced a catastrophic failure, with manufacturing halted at a major facility due to a power outage.

The power was cut because no one paid the power bill. No one paid the bill because no one even knew it was due.

During the beer with Steve, I learnt about risk, how buyers (especially CFO-type buyers) think about it, and why it differs from how sellers experience risk.

*Steve is not his real name, and I changed specifics.

A-symmetry

Every buying journey has risk because nothing is proven until it actually happens.

Yes, there are numerous raving case studies, examples, testimonials, and reviews. But the specifics of every deal are just different enough that all other evidence could be misleading.

Buyers have to factor in the potential failure of buying your product/service, and finance team buyers assume your examples will be misleading or outright wrong (see individual risk below for why).

The risk is therefore completely asymmetric. A seller is highly incentivised to close speculative deals, while buyers are desperate to minimise all risk.

Rarely has a seller lost their job for closing the wrong deal, but buyers do every day. Because:

• Sellers lose their jobs based on the sales they don’t make
• Buyers lose their jobs because the purchase they made goes wrong.

Four Types of Risk

Buyers who are actively engaged in a buying journey are balancing up to four types of risk to the deal:

Individual Risk: the risk to the individual. The risk that a buyer may lose their job if the deal goes wrong.

To de-risk Individual Risk, help your buyer answer the question:

Organisational Risk: the risk that the product/service doesn’t benefit their organisation because of the quirks of your company, their company, or somewhere in between.

An extreme example of organisational risk is that many AI companies will not use Microsoft’s “Azure” cloud, because there is a risk that Microsoft will learn their secrets, add them to CoPilot, and the AI business fails.

To de-risk Organisational Risk, help your buyer answer the question:

Change Management Risk: the risk that something will go wrong during the implementation or rollout of the product/service.

This risk is well-founded in the context of digital transformations. Research out of McKinsey (and others) shows ~70% of digital transformation projects fail to meet “stated objectives”.

To de-risk Change Management Risk, help your buyer answer the question:

Timing Risk - the risk that the deal’s timing could be a problem.

For example, many businesses have a rule against making big changes in December or before a big national holiday.

To de-risk Timing Risk, help your buyer answer the question:

Finish the Story

I don’t know who Steve chose for the ERP rollout.

But the initial contract Steve signed was for four years at ~$25 million per year.

And he was expecting the provider to price-gouge if it went longer. So internal budgeting expected ~$50 million for years 5 and 6.

A 6-year, ~$150 million decision.

We caught up ~4.5 years after the beer in London, and I asked how the rollout was going.

Steve told me, “There have been a lot of hiccups and false starts. We’re finally going live next month.”

Quick Note - I’m skipping next week as my wife is giving birth to our daughter this week

Until next (next) week,
Scott Cowley

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