The Forbidden Question: What is Your Budget?

 In Industry News

I am sure that you have been asked this question many times by a salesperson.

Have you also been in a B2B situation where you asked that question to customer representatives (companies cannot answer questions – only human beings can)?

What type of answer did you get?

I have been in sales most of my life and I must have asked this question a thousand times.

Here are the four types of answers that I get:

A: We have allocated X million to this project (10%)

B: We do not reveal our budget (40%)

C: We do not have a budget yet. When we have received the proposals then we will ask for the budget (20%)

D: We will cover the investment out of our current budget or find the additional budget required (30%)

You will probably conclude that I only got a straight answer in 1 out of 10 situations, but that is not the case. Each type of answer is valuable and can take me to a series of additional questions.

Let me give you some examples:

Situation A: We have allocated X million to this project!

How did you arrive at that number? Is it X million this year or over the lifetime of the investment? What do you consider the lifetime of the investment? What is included in the X million (which functionality, implementation, but not support and maintenance)? Does it make a difference if we take care of the financing?

Depending on the answers there will be a multitude of additional questions we can ask to understand the financial circumstances.

Situation B: We do not reveal our budget!

Why not? Do you have a firm budget? What is included in the budget? Will a project with an X million price tag be more or less than what you expect? Does it make a difference if we take care of the financing?

Again, each answer can lead to additional questions, but reluctance to share budget information is always a “red flag.”

Anyway, in most cases someone will tell you the budget somewhere down the line.

Situation C: We do not have a budget yet.

If there is no budget, then there is no project yet.

We can still probe for a ball-park figure, but we are better off working on the non-financial requirements. Helping the customer define the requirements and indicate the price will improve our chances later in the purchase process.

We now know that this opportunity is at the top of our pipeline, with a low probability and an uncertain time line. That is valuable information for the management of our pipeline.

Situation D: Out of our current budget

The project is considered urgent and important and the people that I am talking to can probably make the final decision. I will verify if that is the case. If so, then I can work with the customer’s team designing a solution which balances the budget she is willing to allocate with what I can deliver.

Why ask for the budget?

In general: We only get the information we need when we ask for it.

As you can see above, the budget question actually gives us important information irrespective of the type of answer we get. (The customer representatives may not have the information or may not tell the truth, but that is the case with the all the questions we ask and therefore should not be a reason for not asking.)

The budget allocated to a project is an important indicator of the type of solution that the customer is looking for. If we get that information, we can assess if we can provide the product/service/solution within that budget or we have to withdraw. The readiness to share budget information is also an important indicator of how the customer works with her key partners. Is the style engaging and cooperative or rather distant and hostile?

Price versus Performance

There are many ways to satisfy a need and let me conclude this post with some B2C scenarios.

You can watch a film at the theatre, at home on a small and old TV, on your iPad or on a brand new huge HD LCD screen (just to mention a few options). The film is basically the same, but the experience and the price is obviously very different. It is extremely valuable for the salesperson to know our budget so she can advise us on our options. She will show us options under, at and over our budget, but will not waste our and her own time by making suggestions that will take us way off budget.

I recently helped a friend of mine buy a western guitar and the budget was set at €1.000. I went to the music store an hour before my friend came and I told the salesperson what I was looking for and the budget available. We lined up 5 guitars that were way under, a little under, at, just above and well above the budget. After having tried the guitars we went for lunch at a diner around the corner. While eating our pasta carbonara we checked the prices of the chosen guitars on the Internet. Back at the shop we tried the guitars once more. My friend chose the guitar just above the budget (which was clearly better than those less expensive, but obviously not quite as good as the more expensive one). The price at the shop was a little over the price on the cheapest web shop, which we mentioned to the sales person. He threw in a capodastro, a couple of picks and a strap into the deal and we were done. There were hundreds of guitars in that shop and without a budget I would still be there trying them out.

Did the chap in the guitar shop sell us anything? No. He helped us make a quality purchase decision within the budget we had made available. Two weeks later I went back and bought a US version of a Fender Telecaster from the same chap.

Note: The shapes Price and Value above are exactly the same size.

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