It never ceases to amaze me how many business people assume that a budget dictates what the buyer can spend. In my experience, this is almost never the case. The truth is that in most cases, budgets are guidelines, and nothing more than that. Additionally, they are sometimes based on a flawed or limited understanding on the part of the buying party of what is actually required.
Of course, most sales people fall into the trap of selling to the budget. They build their entire proposal around this number, assuming that their recommendation must conform strictly to, or be below, the budget threshold. They ignore the issue of value.
They don’t take the time to find out what the customer is actually trying to accomplish, and they miss opportunities to both increase sales and serve their customers better.
It is worth noting, also, that budgets are often the domain of people who do not have final approval authority. In other words, when a person tells you, ‘my budget is R’, this statement usually means ‘I have been given permission to spend no more than R’.
This tells you that you are talking to a person who is not a decision-maker. The real question here is this: who gave the permission? The person who approved the budget is the one who buys based on value – and isn’t limited to the budget number.
Budget constraints
Influencers spend based on what they are allowed to buy. Decision-makers get whatever they want. Put another way, if your decisionmaker decides that they need what you are recommending, they will simply purchase it. This is an important point.
Before you assume that you are constrained by a budget, you must first determine if the person that you are talking to is the ‘right’ person. Assuming that they are, this doesn’t mean that you should ignore a budget number. Instead, look at it as a guideline. However, remember that when we try to put together proposals that meet a predetermined amount, we usually end up proposing something that is less than what the client would be best served by purchasing.
For this reason, budgets are an obstacle to both the buyer and the seller. The seller is constrained by a ceiling of expenditure, but more importantly, the purchaser is limited to getting a solution that is probably less than ideal.
How to get around this issue?
The key skill here is to execute a thorough needs analysis. The more that you know about the needs of your client, the better you will be prepared to deal with the budget issue. You must get on the buyer’s side of the table and look at the decision from their point of view.
Once you have completed this key step, and are ready to prepare a proposal, the following method is a highly effective way to sell around budget constraints:
- Prepare two options:
• Option A is based on the client’s budget
• Option B is based solely on addressing the client’s specific needs, and therefore disregards the budget.
- At your proposal meeting, begin with Option A. Say, ‘here is what we can do for you, based on what you want to spend.’ Review this with the buyer first.
- Next, present Option B. Say, ‘now, here is the best possible solution for what you want, but this option ignores your budget.’ Since we are ignoring the price issue here, this option should contain a much higher level of value than the budget-based one.
- Option B should stand out on its merit. This option needs to maximise perceived value. It must be a perfect fit for what the buyer needs.
Win-win
Follow this process consistently, and you will consistently close sales that exceed budget numbers. This happens because the buyer realises, after reviewing both options, that what they need, and what they initially planned to spend, are not in sync with one another.
They will immediately discard Option A, and will focus their negotiation discussion on the option (B) that fulfills their requirements. Of course, it is a moot point that you must be selling to a decision-maker for this method to be effective. Assuming that you are, you will find that they often select the recommendation that is the best fit for their needs – which is the higher-priced option. And if they don’t, so what?
Your plan ‘A’ – the proposal that matches the budget – becomes the fall-back option. So you have nothing to lose, and everything to gain. What are you waiting for? Make this a permanent part of your proposal strategy.
