Budget qualification is a tricky thing for salespeople to get right. In my experience, a lot of salespeople qualify on budget in the wrong way and at the wrong time.
The standard sales qualification tactic is to just ask outright, “Do you have a specific budget for this project?” And if they hear a number that’s high enough, they move on, assuming that they have a qualified buyer.
But this approach is more limiting than you might think, especially in a complex sale. By asking this question up front, the salesperson runs the risk of turning off prospects, not getting a straight answer, or even starting a negotiation conversation before they’ve established value. Here are four ways talking about budget too soon could derail your deal:
- You might come across as self-serving. When salespeople say, “So that I don’t waste your time, what did you have budgeted for this?” prospects actually hear, “So I can be sure I’m not wasting my time, what did you have budgeted for this?” And that sounds pretty selfish.
- Prospects might lie about their budget. If a prospect is enjoying their conversation with you but doesn't actually have a budget in place, they might invent a number just to keep talking to you.
- You might prompt a premature negotiation. In response to a too-soon budget question, savvy prospects will say, “We have budget, but your competitor already quoted us X price.” Unfortunately, at this early stage, you don’t know much about their needs to determine whether your differentiating factors will allow you to hold your margins. So you could get stuck defending your premium price blindly.
- You might scare your buyer away. Many prospects don’t have a budget in place early on. So if they haven’t yet decided to invest in any solution -- let alone yours -- how can they answer this question intelligently? And this quick, upfront budget qualification approach fails especially miserably if you’re selling a highly differentiated or new product, where the buyer isn’t likely aware they have the problem that your product or service solves. Then they’d have to be psychic in order to have a budget allotted!
3 Questions to Qualify on Budget
In order to avoid these scenarios, I qualify for budget in a different way. My method involves three separate sales qualification questions instead of just one. And while it might take a little longer, it doesn’t disqualify prospects too soon or start a one-sided negotation.
If you follow this process, you’ll be able to determine whether it makes sense for the prospect to buy, and you’ll also gain their commitment to the process. In the long run, the extra time is worth it if you want to know for sure whether your opportunities are likely to invest in your product.
1) What’s the upside of investing?
In general, there are three reasons why businesses buy something: to grow, to save money, or to avoid risk. Salespeople should first figure out which one (or more) of these goals their offering enables (and the prospect values), and then quantify the future impact of doing something differently.
The “quantify” part is critical. It’s great to tell prospects at a high level that your product will help them make or save money, but how much? Since you’re in the process of qualifying on budget, you need to talk in real dollars.
A question you can use to get a concrete value from your buyer is “What’s your target?” Specifically, how much are they trying to earn or save, or what proportion of risk would they like to mitigate? Once you have a dollar value, you can show in hard numbers how your product or service could help them reach that that goal. If you use the GPCT qualification method, think of this question as part of the “goals” section.
Bonus Tip: If possible, build a calculator that helps quantify the impact of your solution. At HubSpot, we help prospects understand the impact of the inbound marketing methodology on their traffic, leads, and sales with the inbound marketing calculator. Another example: Objective Management Group, a company that provides assessments to screen sales candidates, offers a calculator that shows the costs of hiring the wrong salesperson.
Now that the buyer has a clear picture of how much money they stand to gain or lose, you can move on to the next question.
2) What are you spending now?
Are your prospects using another product or service to address all or some of the functions your offering performs? If so, find out how much they’re spending on their current solutions. This allows you to get a benchmark of what amount they have budgeted and spent on fixing their problem in the past.
Usually, I start this line of questioning by asking the prospect, “What have you tried in the past in order to help you achieve the goals you've shared with me?” Then I follow up with, “How much did you invest in that?” or “Do you feel you got a return on that investment? How did you measure that exactly?"
Now that they’ve revealed and quantified their goal for you in the first step, it’s time to start developing a plan that you both agree will help them achieve their goals. Inquire how their effective or ineffective their current products are. Dig into the issues, and walk them through what you would recommend they do differently, sharing stories of how you’ve helped others in their shoes. Whenever possible, quantify the upside that you can help them achieve over their current solutions.
3) If I could help you, would you move forward?
At this point, you understand your prospect’s goal and their current state, and have expressed how you can help them build a better plan to achieve their goals more confidently and quickly. If you and your prospect are still on the same page (and you should be if you’ve done this right), now is the right time to ask if and how they will make a monetary commitment.
Simply ask the question, “If I could help you with your goal of X, what you be willing and able to invest?” If you sell a fixed-price product or service, you can now determine whether you can help them or not. If you provide custom quotes based on goals, plans, and budget, now is the time to talk about what you can work out.
If negotiations begin, you now know what their current (and past) expenditures have been, and they know the upside of investing. These two factors sets the stage for a well-informed conversation about the financial benefits of investing in your solution.