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The Sales Limbo: Preventing Stalled Deals
 

The Sales Limbo: Preventing Stalled Deals

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There was a time when the signing of the deal was the culmination of all the seller's efforts and the logical conclusion of the sale. Today however a surprising number of deals are becoming un-stuck ...

There was a time when the signing of the deal was the culmination of all the seller's efforts and the logical conclusion of the sale. Today however a surprising number of deals are becoming un-stuck even after an apparent agreement has been reached. That leaves sellers in limbo - waiting for the paperwork to be signed, or the purchase order to be issued. In this whitepaper we look at the reasons why deals get stalled at the last minute and what sellers can do to prevent it.

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    The Sales Limbo: Preventing Stalled Deals The Sales Limbo: Preventing Stalled Deals Document Transcript

    • Retail Price: $4.99Preventing Stalled DealsSales Limbo: Are You StillWaiting For The P.O.? There was a time when the signing of the deal was the culmination of all the sellers efforts and the logical conclusion of the sale. “Salespeople are in limbo: Today however a surprising number of deals are becoming waiting for the un-stuck even after an apparent agreement has been paperwork to reached. That leaves sellers in limbo − waiting for the be signed...” paperwork to be signed, or the purchase order to be issued. In this whitepaper we look at the reasons why deals get stalled at the last minute and what sellers can do to prevent it.
    • The Final Hurdle To The SaleThe paperwork is the final hurdle to be surmounted, but often it is thebuyer rather than the seller that is struggling to jump it. The seller islooking on from a distance helpless to intervene. Meanwhileresources (personnel, raw materials, working capital, etc.) mayalready have been allocated to the project with costs being incurredby the seller as a result of the delay. “...the commonBut the challenge may not even end at getting the PO – there can bedelays in getting delivery, or go ahead dates, or even worse in getting factor is a falsethe first, or even the final cheque. The common factor underlying all start of someof these events is a false start of some kind or other. The seller is in kind...”limbo suspended somewhere between the promise and the reality ofthe sale.The 7 Causes Of Sales LimboSales limbo has 7 main causes, as follows: 1. The sponsor(s) fails to convincingly sell the decision. It maybe a case of last minute cold feet, a lack of confidence, influence, or commitment on the part of the sponsor(s). Maybe the sponsor has prematurely moved onto the next challenge assuming that his, or her work is already done. More fundamentally the problem may be that the business case, or justification for the purchase may not be strong enough. 2. A key stakeholder withdraws support or reneges on his/her commitment. 3. A major internal or external change, the main ones being:  A merger, consolidation, or takeover  A market downturn  A global change in direction  A manpower change.P a g e |2© The ASG Group 2011
    • 4. Approval/sign-off is not forthcoming either from; the buying team, from senior management, or from procurement. 5. There is a problem with the legals − a legal question is raised regarding contract terms, or compliance issues arise. 6. There is a problem between procurement and finance, for example with terms agreed not meeting finance approval. 7. A ploy by procurement to prepare the ground for another negotiating round and perhaps the aptly named salami technique.But, if these are the main reasons for deals going into limbo, thereare many other underling factors.Business Case LimboThe number one reason why deals get stalled is the lack of asufficiently compelling business rationale, or business case for thepurchase to go ahead. Either the numbers do not stack up, or there isa problem in terms of risk, strategic fit, or compliance.When the purchase decision is scrutinized by senior manager, such asthe CEO, or the CFO, or perhaps even the board, the straight forwardwhy are we doing this? question will be asked. If a compellingjustification is not forthcoming another project or purchase is likely totake pole position.The manager who has not tested in advance the business case with itsfinal audience leaves himself, or herself exposed. To his or her surpriseothers may not consider it to be a good decision, or at a minimummay not have all the information needed in order to give theirsupport.P a g e |3© The ASG Group 2011
    • The sellers key challenge is to help the buyer to build the businesscase. That is a compelling reason to buy and to buy now. That includesmaking sure that the cost of any delay is clear (incl. lost revenue, lostsavings, additional costs, etc.).Procurement LimboInternal approval procedures are rigid and uncompromising in manyorganizations. If all the ts have not be crossed and the is dottedthen the decision may be stalled, or de-railed.In extreme cases there may be a serious violation of internalstandards, or procedures − what is termed miss-procurement. Forexample a key step may have being skipped, or some aspect of thecompetitive tender process by-passed. In this case the manager will “If procurementbe called to account and the deal will either be delayed, or deferredwhile remedial action is taken. has not been involved itIn these instances procurement is often out to prove a point in terms may take itsof its stone-walling of the errant buying decision, or non-compliantmanager. The manager is left with egg on his/her chin (so to speak) revenge...”and may be reluctant to let the salesperson know of the event.The extent of the violation determines the extent of the re-mediationrequired. Perhaps some additional information, documentation oranalysis is required. In the worst case scenario it may be right back tosquare one, with for example a re-running of the tender process.If procurement has not been involved, consulted or engaged at anypoint in the buying process, then it may well take its revenge bystalling at the final hurdle.The role and power of procurement varies from organization toorganization and with it the degree of flexibility of the rules. In somecases the response may be it is ok this time, but dont do it again, inother cases it may be much less forgiving in the application of therules.P a g e |4© The ASG Group 2011
    • The seller should help the buyer to ensure that procurements needsare met and to ensure compliance with buying process andprocedures.Change LimboSlow buying decisions that take place over many months. That meansa lot can change in the many months between the start and the finishof a complex buying decision.By the time the purchase order is to be signed the context for thepurchase may have changed substantially. Suddenly the buyingorganization may realize:  ‘Our needs have changed...’  ‘The market has moved on...’  ‘We have bigger problems to deal with...’  ‘We need to see what happens next...’  ‘We are not ready to start yet...’  ‘There is too much going on at the moment...’  ‘There is a bigger more strategic decision to be made first...’Will the buying decision withstand a change in the status quo?That includes:  Internal changes in respect of the companys; needs, priorities, strategies, or  Changes in its external environment, such as; a rise in interest rates, a slowing of market demand, the entrant of a new competitor, a natural disaster, etc.It is a real challenge for the seller to attempt to insulate the deal fromunanticipated changes. However, ensuring that the buyer has someroom to maneuver is important. That includes an agile approach toimplementation, or delivery, such as providing for the re-evaluation ofneeds, amendments to specifications, etc.P a g e |5© The ASG Group 2011
    • Legal LimboThe manager-buyer may stress the point that signing will bestraightforward, but just wait until legal gets involved. Most buyersdont like vendor contracts full‐stop; when it comes to signing them, itis often surprising the issues that arise.The legal department is very slow to sign any vendor contractspreferring to write its own. In addition to the delay that results, theseller may face additional legal costs.Sellers should anticipate in advance the issues that are likely to ariseattempt to involve legal on both sides earlier.Where possible, simplify all legal and contractual documentation,including the use of standard contract terms, templates that havebeen approved by professional bodies, etc.Risky LimboRisk can stall a deal like nothing else. That is risk in any of its forms;business, project, technical, supplier and so on.Risk is the equivalent of the hand-break in modern buying and has thepotential to slow the buyer to a stop.Of key importance is the buying organizations sensitivity to risk, aswell as the sophistication of its approach to risk analysis andmanagement.Risks have an annoying habit of rising to the surface as the buyerreaches the point of an irrevocable commitment. The risk wasprobably always there, but it either was not fully appreciated, or wasnot sufficiently addressed during the buying process. If it had beenaddressed earlier it could have been managed and its potential to stallthe decision minimized.P a g e |6© The ASG Group 2011
    • Decision LimboThe word decision comes from the Latin decidere which literallymeans to cut off from − because making a decision means the buyercutting him/herself and the buying organization off from alternatives.The decision to go one route, implies a decision not to go another. Ifthe chosen solution is not seen by all to be head and shoulders abovethe rest then that point of decision may be slowed.There is often messy stuff involved in many buying decisions, includingconflicting requirements and other complicating factors. In thiscontext the issue of strategic fit, competing priorities, projects andpast or future decisions is important.The buyer must be ready to make the tradeoffs required and theseshould have been well sign-posted in advance. That means thecompetition for the seller is not competing vendor, but an alternative “Ensure the dealstrategy, technology, or solution. has the backing of a viablePolitical Limbo sponsor.”Decisions are not made in a vacuum, but rather in an environment ofcompeting projects, conflicting interests and organizational politics.Politics in particular can kill a deal dead. There may be a stakeholderwho feels neglected or threatened, waiting in the long grass ready tohijack a deal at the last minute.Managers are slow to correct the seller who overestimates themanagers power or rank. The challenge for the seller is to align itselfwith the key stakeholders and to ensure that the deal has the backingof a viable sponsor with sufficient power and influence.P a g e |7© The ASG Group 2011
    • How To Prevent A Deal Going Into Limbo?The seller must guard against deals getting stalled in the first placeand if it is too late re-ignite deals that are already in limbo and getthem back on track. With this in mind here is a checklist to enable youto measure the risk of a deal going into limbo:  Is the business case compelling?  Can it be passionately articulated by the sponsor?  Is the cost of a delay clear to the buyer (including the opportunity cost)?  Are there any unresolved risks eating at the buyer?  Is there politics involved?  Is anybodys nose out of joint, does some department or project feel threatened?  Is there a competing project?  Does the sponsor have sufficient power and support?  Has there been C Level oversight and approval throughout?  Are all the stakeholders signed up?  Has the consultation process been extensive enough? Has anybody been over-looked?  Has the sponsor followed all the rules?  Has procurement been involved?  Are there any information gaps?P a g e |8© The ASG Group 2011
    •  Are there threatened changes in the buying organization or its industry?There are implications for selling, including; closing, negotiation anddelivery or implementation.A summary of the key tips include:  Assume it will take longer than expected.  Stand firm. The seller most not appear panicked to the buyer at any times.  Update project plans to show the impact of any delay.  Make the consequences of delayed start clear, where possible quantifying the costs and consequences of a delay for the buyer.  Put time limits on your commitment of time and other resources to the project ahead of getting the paperwork.  Explore ways of enabling the buyer to jump start the project, or to begin with a pilot or start phase while the hurdles to the full go ahead are addressed.  Help the buyer to mitigate the costs and consequences of a delay (after all a friend in need is a friend indeed).P a g e |9© The ASG Group 2011
    • The Science Behind This PaperThese insights and tools are based on:1. Buyer Research – our ground-breaking research into how modern buying decisions are made and the implications for sellers.2. Best Practice Research – Over 1 million pages of best practice sales case studies, books and research.3. Common Practice Research – Our peer comparison benchmark of 1,000s of your competitors and peers.The Sales Engine® and SellerNav are trademarks of The ASG Group.The entire contents of this document are copyright of The ASG Group and cannot bereproduced in any format without written permission.Want help in tackling your sales challenges? Contactenquiries@theASGgroup.comwww.theASGgroup.comP a g e | 10© The ASG Group 2011