Financial Literacy—Critical For Sales
Financial literacy is critical for sales success. We have to be able to understand the numbers. We have to be able to understand the impact of our solutions on the customer–presenting the impact in financial terms.
Yet I’m constantly amazed by the lack of basic financial literacy among sales professionals. There are little hints in all sorts of conversations: “The ROI on this deal is 7 months.” ROI is always expressed as a percent, Payback is expressed in months/years.
Or sales people are troubled by the lack of CAPEX budget, yet they never look at financing alternatives to take advantage of OPEX spending. (If you don’t know what CAPEX/OPEX is, you should start to worry).
Dollars, Euros, Pounds, Yuan, Yen, Pesos are the language of the financial decision-makers of our customers. ROI, Payback, ROE, ROCA EBIT, ROA, P&L. Cash Flow, Balance Sheets are things they think about and manage every day. If we don’t understand them and can’t engage our customers in financial conversations, we are severely disadvantaged. We won’t be able to connect and communicate with them in a meaningful way.
A critical element of Insight, is the ability to present understand the business and financial impacts of the Insights we provide.
If we want to go beyond price and discounting in our discussions with customers, we have to engage them in meaningful financial conversations.
I just read a fascinating article and took a basic test on Financial Literacy. The test, developed by FINRA, was applied to consumers, but my guess is that many sales people would fail this basic test. It poses 5 questions:
- Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, how much would you have? Answer choices: More than $102, exactly $102 or less than $102.
- Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today? Answer choices: More, same or less.
- If interest rates rise, what will typically happen to bond prices? Answer choices: Rise, fall, stay the same or no relationship.
- True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less.
- True or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund.
The results are startling–only 14% of 25K Americans surveyed can answer all five questions correctly. But these are fundamental to personal and business finance. Can you answer the questions correctly: Try It Here
If we want to connect effectively with our customers, we need to connect in terms relevant to them. Understanding and presenting our solutions in financial terms is critical. Make sure you can hold your own in these conversations.
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