"How do you recommend setting up at risk deals?" - Carolyn M.
Carolyn, great question. As usual, I have qualifying questions, what is your position with your company sales person, sales manager, CFO, President? Typically sales people cannot set up their own 'Risk Sharing Deals.' Obviously, I will assume you are in a position where you can set up the deals or you are making recommendations to decision makers at your company. I like risk sharing deals because shows your commitment to your solutions and your company. Additionally, risk sharing deals can differentiate your solutions from your competitors in the market place.
There are many ways to set up 'At Risk Deals', below are some examples:
- Return on Investment
- Go Live / Installation Dates
- Budget
- Use of solution
- Solution Outcomes
- Quality
At a high-level, once you have determined the area you want to share the risk with your client. Is the outcome measurable? Very often soft ROI is not measurable or there are too many other areas affecting the outcome in addition to your product. For example if you say you can reduce time, does this mean the client can actually reduce headcount or will the time simply be reallocated to other areas, or with technology does your client need to add resources in IT to support your product. How much of the outcome do you control and how much does your client control? What happens if the outcome is not met and it is not your responsibility. An example is your product will be live by a certain date and if you don't make the date, it is often a combination of the client and vendor. Does you client’s budgeting process allow for risk sharing (paying a bonus, getting a refund, or noting having to pay)? Does your contract support you getting paid on the deal. If you are at a publically traded company, does the accounting rules, allow you have put part of your deal at risk without affecting revenue recognition.
Are you in a high or low margin business? If you are in a high margin business you should have more flexibility on your deals. Once, you have determine your strategy, review previous deals to see if you would of gotten paid on the risk sharing portion of the agreement. If you are 99% certain you can get more aggressive, if you are 60% certain you need to be conservative. Do you have to set up requirements for your prospects. Example, do they have hire a project manager.
Next determine what matters to your clients and prospects, and the market. In the beginning, I recommend starting out with definable and trackable 'Risk Sharing' parameters.
Carolyn, Good selling 'At Risk" opportunities and let us know how it goes! Reader Feedback, please click the comments below to give 'Carolyn' additional information on 'At Risk Deals' and I want your feedback on my response. Shaun P
Carolyn, great question. As usual, I have qualifying questions, what is your position with your company sales person, sales manager, CFO, President? Typically sales people cannot set up their own 'Risk Sharing Deals.' Obviously, I will assume you are in a position where you can set up the deals or you are making recommendations to decision makers at your company. I like risk sharing deals because shows your commitment to your solutions and your company. Additionally, risk sharing deals can differentiate your solutions from your competitors in the market place.
There are many ways to set up 'At Risk Deals', below are some examples:
- Return on Investment
- Go Live / Installation Dates
- Budget
- Use of solution
- Solution Outcomes
- Quality
At a high-level, once you have determined the area you want to share the risk with your client. Is the outcome measurable? Very often soft ROI is not measurable or there are too many other areas affecting the outcome in addition to your product. For example if you say you can reduce time, does this mean the client can actually reduce headcount or will the time simply be reallocated to other areas, or with technology does your client need to add resources in IT to support your product. How much of the outcome do you control and how much does your client control? What happens if the outcome is not met and it is not your responsibility. An example is your product will be live by a certain date and if you don't make the date, it is often a combination of the client and vendor. Does you client’s budgeting process allow for risk sharing (paying a bonus, getting a refund, or noting having to pay)? Does your contract support you getting paid on the deal. If you are at a publically traded company, does the accounting rules, allow you have put part of your deal at risk without affecting revenue recognition.
Are you in a high or low margin business? If you are in a high margin business you should have more flexibility on your deals. Once, you have determine your strategy, review previous deals to see if you would of gotten paid on the risk sharing portion of the agreement. If you are 99% certain you can get more aggressive, if you are 60% certain you need to be conservative. Do you have to set up requirements for your prospects. Example, do they have hire a project manager.
Next determine what matters to your clients and prospects, and the market. In the beginning, I recommend starting out with definable and trackable 'Risk Sharing' parameters.
Carolyn, Good selling 'At Risk" opportunities and let us know how it goes! Reader Feedback, please click the comments below to give 'Carolyn' additional information on 'At Risk Deals' and I want your feedback on my response. Shaun P
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