Discussing Net Profit Margin Effectively
It should come as no surprise to anyone who reads this blog regularly that it’s vital to reframe your product or service to make it as compelling and desirable as possible. One method that we find works wonders in a business-to-business sale is equating projected energy savings with additional bottom line profit. If you know the net profit margin of the organization you’re targeting, it’s easy to calculate the amount of revenue that would be required to generate the same positive impact on the P&L.
(Before we continue down this road, realize that “net profit margin” is the measure of profitability that’s calculated by expressing net profit as a percentage of revenues.)
So how can you leverage this comparison? Let’s look at a hypothetical scenario. Suppose your prospect’s organization is operating at a 4% net profit margin. If you were to bring the organization $1 in energy savings, that would be the equivalent of earning another $25 in revenue. You can calculate this by dividing the projected energy savings in dollars by the net profit margin (1 / 0.04 = 25).
This is a very powerful driver. You’ve probably heard me say, “People don’t make decisions – they make comparisons.” Most managers know how difficult it is to generate $25 in revenue. It may be a revelation to hear how easy it is to generate the net profit margin equivalent of that revenue through energy savings. By comparing the intangible energy savings to a figure that they understand well, you make it a lot easier for them to see the value of the project.
Don’t know your target’s exact net profit margin? You should be able to find net profit margin estimates for that particular industry online. A little research ahead of time will tell you if the relationship between energy savings and equivalent revenue generated is an angle worth leveraging as you build your case for project approval.
Want our daily content delivered to your inbox? Subscribe to the Selling Energy Blog!