Bridging the Business Acumen Gap- A Primer for Transparent Conversations

Business acumen means understanding how business works, including the vocabulary used and the concepts that provide a foundation for decisions. Even though you sell B2B, you will encounter many people who lack business acumen. Occasionally, you will meet one of these people in a conversation; other times they could be a contact.

One way you discover a client lacks business acumen is that they look at the financial investment they spent with you, believing that your company keeps the entire amount of revenue as profit. Your client isn’t dumb, but they are ignorant about what they are paying for, meaning they don’t know what they don’t know. When your competitor tells this client that they can save them money, the client engages. Much of the time, the competitor is generating a revenue number that isn’t too different from the revenue you were generating.

Revenue is what you collect from your client. Gross profit is what your company keeps after the cost of goods or services you provide. Net profit is what your company keeps after paying for everything, including your commission.

When a person doesn’t know the difference between these three metrics, you may try to help them understand the costs in your business and just how little finds its way to your company’s bottom line.

The Risk of Transparency

Being transparent about your input costs works well when your contact is a mature leader with the business acumen to understand your business model. Where you get in trouble with transparency is with a contact who lacks the business acumen to understand the costs and their impact on the results you provide. An attempt to help release this person from their ignorance often ends badly. If they can’t read a financial report, they lack the knowledge and experience to understand the numbers and ratios, even if you walk them through it.

You may find a person who knows the term gross profit but has never heard of net profit, which is a fraction of the gross profit. Your contact who lacks business acumen may tell you that you should spend less money, before boldly complaining you are spending too much in some category they don’t value, even if it’s important. A lack of business acumen makes explaining your costs a risky gambit. Without understanding foundational concepts, your contact will easily become confused.

When a person has business acumen, the odds of your helping them understand your model and your expenses improve. You create business rapport with these clients.

The Conversation about Your Investments and Why

One senior leader of a large and well-run company complained he was spending millions with my company. I explained that we didn’t get to keep his millions, as 75 percent of that number was the cost of providing him the services we provided. I opened the window and invited him to look for my Ferrari in his parking lot, before I started to explain the costs, the same ones his company paid. He was embarrassed he hadn’t figured in the costs, saying “I should know all those numbers and costs.” Then said, “I am the vice president of this department.”

This is one of very few conversations about business costs that ended well for me. Others would argue about costs, failing to recognize that, if they weren’t necessary, no business would invest in them. A few less savvy contacts will ask you what you pay for certain things your company needs to provide their product and services.

My advice goes two ways. If you don’t have the business acumen you need, you should not engage with a contact about how your company spends its money. Even if you have business acumen, you may find it is better to provide a surface-level understanding than getting in the weeds. You may also sit down with your sales manager to determine what you can and cannot share.

The person who lacks business acumen is trying to do right by their company, even if they are out of their depth. Keep this mind, to prevent yourself from becoming negative or evasive. You don’t want to have a conflict that might ruin your relationship.

Your Competitor Will Do What You Won’t

A competitor may promise the contact a lower price, even though they may spend an amount that is so close there is no real difference, but a lower price is often enough for someone to accept it.

If you have this sales conversation, you may need to explain how your company invests differently to produce the results you provide. Given the choice, it’s much better to do this early, when you are on your front, than when you are closer to asking for the business and on your back foot.

You Can Do What Your Competitor Won’t

In an early discovery meeting, you can proactively share information about the client’s investment and your company’s costs with the leaders and contacts you are selling to. This can position you, your company, your solution, and your business model. Later, when a greenhorn starts asking questions that will lead to answers they will not like or understand, you can go back to the buyers and decision makers to defend yourself. They’ll remember the conversations that helped you differentiate.

Bridging the Business Acumen Gap: A Primer for Transparent Conversations

You must first determine if you will engage in a conversation about what your clients pay you and how you spend that money to take care of them. Avoid discussing this with a person who lacks the concepts, vocabulary, or business acumen they need for the conversation.

When dealing with a person who owns a profit-and-loss report, you increase your odds of defending your revenue and your business model, the one they found most compelling when you found them.