Eight Questions About Financial Health of Customers

There are eight questions that you -as a salesperson- should know the answers about your customer. An added benefit is to learn the answers regarding your own company. Then and only then, will you be in a position of strength. Where does this strength come from – understanding the financial health of your customer.

Let’s exam the eight questions that hold the answer to your customer’s financial health. The eight are as follows: 

1. What were your customer’s sales during the past year? Did they grow, have a record year, or hold their own even in the economic downturn. You should learn about the quality of sales and where do they sell – domestic or international? Which brands or markets are strong for your customer. Do you sell into the growth or declining arenas for this customer?
2. Is the customer growing? Or is growth flat or declining? Is this growth picture good enough? While is it true that the economic situation will have this trending in the wrong direction – you still need to know the answer with accuracy. What were the trends prior to the past year? Trends are a powerful indicator of market presence and share of market. Trends are very important as they will tell you something about the mental side of management – growth oriented or protecting their turf. This mental clue will assist you in forming your proposals or offerings to this customer.
3. What is your customer’s profit margin? Again, looking at trends – growth, declining or flat will provide answers regarding the health of the organization. Can they fund the coming up turn in the economy or will they require additional credit lines? Also, the lower the rate of margin, the more cost concious the buyers become. High margin companies have the cushion to expand and take additional risks – again, impacting your offerings to the customer.
4. How does the profit margin compare to their competitors? To other industries? Here you are looking at the strength and growth prospect of your customer. Are their other industries that have greater margins and thus better opportunities for your selling time? Research and learn about your customers, then make strategic choices rather than just taking what you can get.
5. Do you know your customer’s inventory velocity or turnover rate? It’s easy to calculate if you have the sales and inventory numbers for your customer. It is true that larger companies have more divisions and product lines that can cause some calculation frustration. However, the larger the company the more information is disclosed in the 10-K data that is filed with the SEC every quarter. There you will find all the information you ever wanted plus some more!
6. Do you know your customer’s Return on Assets? This is the wealth building formula for your customer’s stockholders. Remember the formula: Return on Assets = Margin X Asset Velocity (Sales divided by Total Assets). This information will give you a picture of the success of management in leading your customer into the market. The higher the return the better the management decisions and choices. Low rates or negative rates of return is a serious indicator of upcoming financial crisis.
7. Is your Customer’s cash generation increasing or decreasing? Here you need to become a detective and learn the reasons behind the growth or decline. What choices are being made that will impact cash generation. If the company is in a mature or declining phrase of the life-cycle – is the cash going to a subsidiary or a holding company? Declining cash is an early sign of slow pay, no pay or potential bankruptcy. Learn the reasons behind the cash declines as the answers are not always bad reasons – they could investing in new production, warehouses, IT systems, etc. Thus, they are preparing for a growth cycle.
8. Is your Customer gaining or losing ground against its competition? Here you are looking at their overall marketshare. Since marketshare percentages can determine if a company is a dominant player, significant player or an at risk player in their industry – you must understand the importance of market share. The level of market share allows a company to plan there strategy with more purpose and a clear understanding of what it will take to win in the market. It will also tell you if the competition is really the eight hundred pound gorilla that can counter every move your customer makes. This leaves your customer only getting the leftovers or low margin customers for their business.

There you have it. Eight questions to learn about the financial strength or weaknesses of your customer base. Take this information and apply it to your own company to learn how to use or apply this knowledge in the market. Use your company as a guide for the meaning or application of the answers to the Big Eight Q’s. When you know how to find this information and then apply it properly – you will be thinking like a business owner.

Thinking like a business owner is one of the ten steps to becoming a sales superstar. Join the ranks of the stars. Use these questions to study your key accounts, make strategic moves to improve your customer base, and learn how to talk to C Level Officers about their company. It will make a difference for you and your customer.