Prequalify for Better Results

Sale reps and vendors spend a considerable amount of time and money to identify and get in front of the right potential client. The opportunity to directly engage with a prospect is often considered a victory in of itself yet many sales people fail to get valuable information about the client’s ability to pay for their product or services during that encounter.

A sales meeting, whether in person or by phone, is an opportunity to listen the clients’ needs and identify which product can solve their problem. The rest of the meeting is spent on how many benefits your solution offers and all the other little perks it will provide which they didn’t even know about. Pulling off a tight, well orchestrated sales meeting with a spontaneous feeling of confidence leaves a positive impact on both the prospect and sales person but you should qualify the client’s ability to pay for your product at some level so that your mission is complete.

A financial prequalification means that your prospect not only has the desire to purchase your goods but also the ability to pay in either cash or by financing the transaction. It is understood that a sales person or vendor should never be in the position to ask for sensitive financial information, like tax returns or personal financial statements but there are other key questions that can be asked which will give you a good idea on their ability to pay. You want to know this information because whether they pay in cash or use financing, it will affect how the transaction flows.

A marginal ability to pay means if they decide to pay cash, you may want to get a larger upfront deposit or 100% prepayment before delivering the goods. You will also want to keep all your paperwork in order including signatures and acceptance vouchers in case there is any litigation down the road. A marginal credit will have issues financing your product as well so if they decide to go this route then you should bring in your finance agent to quickly access the situation so you don’t spend time and money pre-ordering merchandise which may be canceled.

As you can see, it is to your benefit to evaluate, even on a superficial level, the credit quality of the business you are engaging with. That way you can decide if you want to do business with them or not and the safeguards you have to take. Here are some simple key questions a sales rep can ask including what the responses might mean; these questions are non-intrusive and if your prospect has a problem answering them then you better move on to the next client.

1) How long have you been the owner of this business?
Less than 2 years and you have instability issues and higher risk. It does not matter if the business has been there 50 years; you want to know how long that specific person has been the owner because the success will be determined by their ownership style.

2) How has business and sales been the last couple years?
Owners usually open up and say, “It has been great” or “we had some dips in the road” which means their Paydex score may show slow payments to their creditors. If they have done great the owner will typically brag about it, if not you will hear excuses; this question often urges people open up a little bit.

3) Do you handle your accounting internally or have a firm do it for you?
Internal handling of accounts can mean things are not reported properly especially when a family member is the bookkeeper. Outside accounting services are usually very organized and follow the rules of accounting more closely and those statements can be more reliable.

4) Have you had a loan or financed anything in the past?
Whether they want to pay cash or use financing this is a great question because if they have taken out any type of loan in the past that means they were approved as an acceptable credit risk which is a green light. But if they have never financed anything before then they are too new, their business is stagnant and not growing or their credit is bad. When an owner tells you he pays everything cash then keep your radar sharp.

Simple prequalifying questions can give you an initial feel for the prospect’s credit and financial worthiness. Then it is up to you on how you want to engage with them and what level of risk you’re willing to accept. Many vendors will ask for trade references no matter how the client decides to pay which is another step that can be taken; other vendors require 100% upfront payment and in certain industries, they can get away with it. But as a norm, you will want to prequalify each client and follow guidelines which are appropriate so you can close more business and reduce bad debt and experiences.