Question 1: Prospects want to know if this is a financially wise decision to invest in a document imaging system.
At some point in the sales process you will need to be prepared to justify the investment. For some prospects that may mean as little as answering the question of what is the price and can they afford it. For others it can entail a more comprehensive analysis that evaluates payback periods, Internal Rate of Return, and the present value of the return on investment.
First let me define the three most important financial calculations that you may have to provide.
What is the payback period of time? In this calculation you will determine how quickly it will take to pay off the price of the system with the savings generated by the investment. For example, if the system costs $10,000 and you save $5,000 a month then the payback period is 2 months. One of the advantages of our monthly lease program is that the payback period is generally less then a month which is phenomenal.
What is the Internal Rate of Return? In this calculation you are actually calculating what you would have to get on an investment to equal the return one will receive with a document imaging system. This calculation recognizes the long term benefits of this investment. For example lets say that you save $10,000 every year for 5 years because of this investment but you only pay $10,000. The IRR is 99% meaning that you would have to get a return of 99% on your money to do as well as you can by investing in a document imaging system.
What is the Net Present Value of your savings on your investment? In this calculation you are taking a series of savings over a period of time and based on a factor such as inflation, you are calculating what that is worth as a lump sum today. For example in the previous illustration of an investment of $10,000 that saves you $10,000 a year for 5 years, has a NPV of $38,835 at an inflation rate of 3%.
You can also take this number and divide it by the amount of the original investment and get how much the will make from each dollar invested. In this case the get back $3.88 for each $1.
These are numbers that a CFO or business owner will want to know to assist them in their decision making. They want to know these numbers because they could always invest in something else and they want to know which is the best alternative. The only way to know that is to make these calculations.
Question 2: What data do you need to know before you can make these calculations?
To answer this question you first need to understand what they are doing now and how a document imaging system will impact their business. The typical places that you would start are with the major benefits of document imaging.
First you should look at the increase in efficiency and productivity. We know that office personnel will save 15%-25% of their day when a company installs a document imaging system. You should access how many people work in the office, what their responsibilities are, and how much time they spend filing. For example, a filing clerk may spend 100% of her time filing where as someone in accounts payable may only spend 15%-25%.
Next I would look at the amount of office space required to maintain the paper-based filing system. It is generally easy to get an estimate by counting the number of filing cabinets. This could be a very big motivation for someone. Let me give you two examples. In one case the file storage was located on the second floor of an office and the floor was sagging by the shear weight. In another case the client already had blueprints drawn and was going to add a $250,000 addition to their office just because of the volume of file cabinets. After we installed our document imaging system he nixed the addition. We immediately saved him $250,000.
One final note, you will want to get an estimate of what the cost per square foot they are paying to store files. You will find that some organizations are paying $7 a square foot while others are paying $30 a square foot.
Next I would find out how many new files are created each year. For some people that can be a large number. You should also find out how much they believe it costs to create a new file. In my son's medical practice the cost of file folder savings alone is $81,250 a year plus the time it would take to create the file.
Next I would find out how many copies they make each year. You will also need to find out what are their copy machine costs, copy paper costs, toner costs, etc. You should also find out what percentage of their copies are distributed internally and what percentage externally.
You should find out if they are storing documents off-site. What are their costs?
Finally, you should find out how much their filing is growing each year. First get an idea of how many documents are created each day on average. This should be from both inside sources and outside sources. Then divide the annual figure by 2,500 and you will get the number of new file cabinet drawers they need to add each year. Don't forget to add internal copies because most copies get filed along with the originals.
This seams intimidating. How does one take all this valuable data and turn it into something meaningful that can be used to sell a system?
We have actually made that easy for our Resellers. We have a copy-written Excel Spreadsheet where you can just plug in the data and it will make the calculations for you. You can then print the summary and provide it to your prospect.
This can be a very powerful sales tool. It is not uncommon for us to see IRR of 300-400%. We have even seen returns over 1,000%.
Question 3: Randy, you have said that our biggest competition in document imaging is the status quo. Can you explain why you say that?
I'll be happy to. You will discover that seldom will you call on a prospect and find that you are competing against another vendor. If another vendor arrives on the scene it is usually when a copy machine salesman stops in and learns that your prospect is considering a document imaging system.
Most of the time you are competing against the status quo; in other words, it is your document imaging system against doing nothing. Doing nothing can be a formidable enemy. Why? Because your prospect knows the current landscape. Implementing a document imaging system means change and it is natural for people to resist change.
Many times a paper-based filing system is an irritation but it just doesn't hurt enough to make your prospect want to change. It's kinda like the stranger that comes up to a farmer sitting on the porch and asks why his dog is yelping every once in a while. The farmer says that he's lying on a nail sticking through the floor boards. The stranger asks why doesn't the dog get up and move to a different place on the porch. The farmer says because it just doesn't hurt enough.
Our job is to increase the pain. We need to point out how much it is costing the prospect to do nothing. Until you increase the pain enough to make the prospect want to move, you'll never sell a system.
Question 4: Three resellers questions are answered in this segment.
Here is a list of the resources that are discussed in this webinar.