By Bill Aulet

A new breed of financial executive focuses its skills on the function that needs them most — sales.

Today’s CFOs wear several different hats: accountant, ambassador to investors, efficiency expert. While they’re juggling all those responsibilities, however, CFOs have another important role to play: trusted partner to the corporation’s sales and marketing sectors.

The inherent tension between the finance and sales functions can be managed. Indeed, it can be reduced. The CFO can provide the sales organization with strategic information that can improve both sales and profitability. During my 25-year career, I have learned to apply the tools of financial analysis to the sales organization’s problems in ways that advance the agendas of both sides.

Every day, CFOs use analytical tools to assess the state of their business, set priorities and allocate resources. They can use the same tools to understand customers better — and understand the relationship between customers and profitability.

Look at the Actual Cost of Sales
Somewhat surprisingly, the costs of acquiring and satisfying a specific customer are often not quantified and tracked as frequently or as precisely as other data. What monetary value do you assign to the total time of a sale? How do you allocate the cost of helpdesk time after the sale has closed?

By asking such questions, a CFO can gain insight that enables marketing to segment its offerings and customers by their return on investment (ROI). That information, in turn, helps sales to focus on the prospects and customers with the greatest potential financial impact.

When I was running SensAble Technologies, I brought our marketing and finance people together for such an analytical exercise. SensAble’s product was a highly sophisticated robotic measuring device. Our primary market consisted of industrial designers, but university researchers also bought our device to study laboratory animals.

Our exercise began with our regular analysis of the business, specifically the revenue. After working with sales and marketing to put the revenue into different customer segments, we evaluated the ROI of each segment and compared it to what we needed to achieve to meet our growth and profitability targets.

Within each segment, we broke down our sales according to some key characteristics:

• Average transaction size in dollars and units
• Average price
• Selling cost
• Average discount
• The length of the sales cycle, from initial contact with a prospect until closing

Among other findings, the analysis revealed that the university researchers constituted an unbelievably profitable market for our products. They required almost no sales effort, and because there was no competition in this segment, the sales cycle was fast and discounts were low.

We found that we were able to increase sales to this market with just a little extra effort. We invited one of the researchers to one of our annual users’ group meetings, where he presented a paper highlighting the work that our product enabled him to do.

We also instructed the people on our helpdesk to refer other scientists to this researcher when they called to ask about our hardware. The researcher loved building a community of like-minded practitioners, and we were able to provide better support with little to no additional costs.

The research and education market offered low-hanging fruit that we couldn’t pass up, but it was never going to be our primary market. To attain the sales volume needed to hit our corporate growth and profitability targets, we had to improve our performance in the industrial designer market.

That meant increasing the average transaction size and speeding the sales cycle. Based on our analysis, we determined we would see tremendous gains if we could cut the time to closing from nine months to six.

Collateral Damage
The next step was to investigate how to achieve this goal in two of our focus markets: shoe companies and toy makers. Intensive interviews with the sales force revealed that one big roadblock was the lack of marketing materials. Sales spent a lot of time basically building customized product information for each fresh prospect.

So we standardized and supplemented our marketing materials. The $20,000 we spent on collateral materials enabled us to accelerate our sales cycle as well as increase our close rate dramatically.

Our analysis also made clear that the salespeople were spending too much time on small accounts. A change to our incentive structure put an end to that quickly: As soon as the salespeople learned that sales to small accounts would make them essentially no money, they left that business to third-party distributors. With the improved marketing materials, they soon had enough big deals in the pipeline to maintain a pretty steady close rate.

In effect, we were telling our salespeople to fire — or at least reassign — their least profitable customers. That’s a responsibility that no CFO can duck. Sales doesn’t have to follow that advice, necessarily, but the CFO’s job is to provide the data, analysis and recommendations. For CFOs, the work will always come back to the numbers.

About the Author

Bill Aulet is Senior Lecturer and Entrepreneur in Residence at the Sloan School Center for Entrepreneurship at the Massachusetts Institute of Technology. He has an engineering degree from Harvard University and a Masters in Management Science from MIT’s Sloan School of Management. Aulet’s career began with an 11-year stint at IBM, where he rose to CFO for New England sales and service, responsible for more than $700 million in revenue. He later worked for start-ups in a variety of roles, including CFO of Viisage Technology. Aulet’s work at the Entrepreneurship Center includes how companies can better align finance and sales and marketing functions.