Effectively Sell in a High-Interest Rate Environment
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The Sales Warrior Within | Season 2 Episode 49 – Effectively Sell in a High-Interest Rate Environment
Andy Olen is a Business Leadership Trainer and High-Performance Coach. Andy works with talented salespeople, business teams, and leaders who seek empowerment, improvement, and insight. Andy’s clients strive to be the best in class.
“Good Selling, Good Leading, Good Living.” – Andy Olen
Effectively Sell in a High-Interest Rate Environment
- Interest rates are currently high in the U.S. and around the world. Should salespeople be concerned about selling in a more challenging environment?
- Andy Olen shares his thoughts on the cost of volatility for businesses
- Interest rate changes have created more uncertainty and volatility for businesses
- When rates are high, businesses may reconsider new investments in your products and services
- When rates are going down, which is not at this moment, businesses may be more willing to invest in your solutions – Andy explains why and how this works
- Andy shares his advice with salespeople on how to overcome a high-interest rate environment
- Focus on selling the positive economic benefits of your products to overcome a challenging moment
- Good luck Sales Warriors; great salespeople thrive even in challenging environments!
Get in touch with Andy Olen @ andyolen.com. Andy enjoys engaging with the Sales Warrior Community.
Speaker Andy Olen
| 00:02 | There’s a sales warrior within each of us. My name is Andy Olen, and I’m here to help you discover and empower The Sales Warrior Within. Welcome to another episode of The Sales Warrior Within podcast. My name is Andy Olen and it is really cool and great to be with all of you. I hope you’re out there having a great run here in the second quarter already of 2023.
| 00:32 | The year is quickly scoot and vibe and I feel like I say that pretty often actually that things are moving pretty fast and we’re going pretty fast through this year and it just is a good reminder that sometimes you have to step back, take a deep breath, enjoy sort of the moment, live within the moment and to reflect on all the great things you’re doing out there as sales warriors.
| 00:55 | So if it’s building a great new relationship with a prospect customer, if it’s reigniting an old relationship that may turn into something beneficial, even if it’s not a relationship where you’re going to sell something out of it, maybe it’s just that connection with another person or that reconnect with one of your former customers brings you a lot of joy. So a lot of different ways to celebrate what we do in our sales profession and here on The Sales Warrior Within. That’s what we talk about on a regular basis.
| 01:25 | I’m going to make a hard detour from that opening here and talk about something that is top of mind, I think for a lot of people, but maybe salespeople don’t really know what it means or why it’s important that we as sales warriors really look after and look at the changes in interest rates. I don’t know if you expected me to go there after my opening, but that’s where we’re going today. Why are interest rates important for salespeople?
| 01:53 | Why should we be paying attention to interest rate dynamics in the economy? And how do they impact our business? How do they impact me as a salesperson? And what should I do about it in a changing rate environment? To back up a little bit, one of the things that I learned in business school was that the greatest cost to business is variability. And what that means is that if one day it’s really hot outside and the next day it’s cold outside and the next day it’s hot outside the next day it’s cold.
| 02:26 | You really aren’t able to predict what’s going to happen. There’s no, hey, you know what? It was 50° yesterday. It’s going to be 50° again today and it probably will be tomorrow. Well, when you know and have some good understanding of how the business is rolling out, moving forward, what’s coming in, what’s coming out, how sales are developing, how prospects or how your funnel is developing, you have some predictability around that. And when you have predictability, that means you can plan for future events the best way possible.
| 02:56 | That’s why so many people are excited and get excited about funnels and customer relationship management because it gives some sense of organization and some sense of predictability. Hey, you know what? When we have ten deals in the funnel, we close three of those within three months. That’s our history. Well, if you have ten deals in the funnel, probably odds are more likely than not based on your history, you’re going to close three of them and you’re going to close three of them within three months. But all of a sudden, if you don’t close any for the next three months, then you close ten the three months left after that and back to zero and then in 15, that variability is expensive.
| 03:30 | You don’t know how to plan for it. You don’t know how to engage or how to predict or how to build resources or how to build products that can meet those surges. And so a lot of quick ups quick downs, variability, very expensive for businesses. So if you think about variability and you think about the interest rate environment that we’re in, we were living for probably since basically 2008, maybe even before that a little bit, a very low interest rate environment.
| 03:59 | And so when interest rates are very low, that means businesses can go and make investments in their company. And there are people in their facilities. They can make those investments and take loans out of the bank or from the public market. And the interest payment on those loans are going to be pretty low. That’s a low interest rate environment. And if you think about when a company has to pay the interest, say, monthly, quarterly, every 6 months, whatever interval has been worked into the contract and to the arrangement.
| 04:33 | That if that interest rate is low, that’s a low operating expense for a business, right? Because business has so many dollars that it can spend and invest. And if they don’t have many dollars going towards interest payments, then they can invest in other things. So they get the benefit of taking out money to use to deploy to grow their business at a very cheap, low interest rate, and that creates low expenses for them, obviously at some point you have to pay back that loan.
| 05:01 | And so, but that could be 5 years, ten years away. So it’s a lot of capital. It’s a lot of money to make big investments, and then with a very small interest expense. While fast forward, now volatility, the change in the environment. In the last 12 months or so, the U.S. Federal Reserve or the Central Bank has gone from basically 0% interest rate environment to now 5% interest rates and set another way.
| 05:29 | They’ve raised interest rates, what are called basis points, 500 basis points, that’s equivalent to going from zero to 5% in the fastest time and the fastest velocity, maybe ever in the history of the Central Bank. I believe that it is the growth in interest rates and the expansion of interest rates from zero to 5% is the fastest ever within this 12 month period. While there were a lot of people not ready for that.
| 05:56 | And if you’ve heard of Silicon Valley bank or first republic bank or signature bank, banks that have all failed recently in the United States, they weren’t ready for those changes in interest rates the way that they had built their investments and the change in interest rates created havoc and really depressed some of the financials for these banks. And the depositors got nervous and did a run on the bank, pulled the money out, and the bank falls apart. Ultimately, they’re to be taken over by the government and or bought by another bank.
| 06:27 | So that quick change, variability, the cost of change cost a couple of banks there banking privileges and ultimately their corporation. Now let’s apply the changes in interest rate this rapid change. What is it doing to salespeople out there? Well, go back to my example in a very low interest rate environment. Companies, your customers can take out loans and build and expand their business at very, very low rates, very cheap.
| 06:59 | If you have a home mortgage, for example, you’d prefer to take out the mortgage and execute the mortgage of the home purchase or a refi when rates are really low because that will bring down your monthly mortgage payment. If you’re buying a house when rates are really high, your payment is going to be higher because you have more interest to pay back. It’s the same idea and same principle that applies to businesses.
| 07:21 | Now when companies are looking to expand their business and they need a loan, they have to go to the bank and instead of getting maybe one or 2% interest rates are getting 7, 8 or 9%, so they still have access to the money most of the time to expand. Okay, that’s not bad for salespeople. However, if they’re interest expense and their interest payments that they have to make on that loan, quadrupled, that’s a huge new business expense, and maybe these businesses have to make tough choices elsewhere.
| 07:54 | And the tough choices they make, possibly impact you. As a salesperson, if you’re selling a product or a service, and you are going through this interest rate environment change, this rapid volatility and change from zero to 5% and for businesses probably even higher than 5. And all of a sudden, a customer comes to you and says, Andy, you know, I really would like to buy this. I know we’ve been talking about it, but I got so much new so many more dollars I have to pay in interest on my new loan.
| 08:25 | I’m going to have to wait on this purchase with you. And that’s where this change in interest rates can really negatively impact salespeople is because the money that customers thought they had a year ago, they may not have that anymore because they got to pay back the loans at a much higher interest rate. And that volatility, that change that going from 0% rates to 5% rates, that volatility, which wasn’t predicted, I think we all thought that the rates are going to go up, but maybe not that steep that fast.
| 08:59 | That creates a huge expense for businesses and in return, it can create volatility for you that the three deals closing every three months or a deal a month, basically. Uh oh, everything’s going to slow down a little bit as customers budget as a reprioritize and maybe they delay their decisions with you. That’s why interest rates are so important for salespeople. Low interest rates free up money where they can say yes to you, maybe a little bit quicker.
| 09:29 | Maybe you’re the priority. High interest rates mean that they have to maybe spend more time prioritizing the interest payment and have to make tough choices or cuts somewhere else and that may negatively impact you. So that’s why interest rate changes in volatility or movements up and down can you know create some challenging moments for salespeople like you when interest rates are moving up or when they’re moving down they may create opportunity for you and here’s a little bit of silver lining here is as of the recording of this episode in early May 2023, it looks like at least for the time being the Federal Reserve is going to hold and pause with interest rate hikes.
| 10:10 | That would be good. That’s called the end of the tightening cycle and what happens at the end of the tightening cycle if everything works out in inflation comes down is usually that over time the Federal Reserve will lower interest rates lowering interest rates as long as there’s not a big recession will ease the cost of borrowing or the payments will go down further and further on any loans that businesses take out.
| 10:37 | And if you buy a new house or refinance your mortgage payment is going to go down same principle same idea and as the interest expense that companies have to pay on their loans and their debt reduces their ability to buy from you may actually increase. So you want to be a student of interest rates you want to get out ahead of it. Moreover, if you’re selling products or services that actually companies will take out loans to buy, say you’re a capital goods or you’re a big dollar products that you sell.
| 11:07 | They may want to finance it and they may be waiting to finance it until later when interest rates come down and as rates start to either plateau or lower you want to be ready to go and seize on that opportunity to get that sale done in a declining rate environment where it’s cheaper for your customers to move forward. Customers will still need good ideas, good products, good solutions no matter what the interest rate environment is quite frankly no matter what the macro environment is.
| 11:37 | If you have an economic value proposition on your product that is sound convincing and can be realized by your customer, congratulations no matter what environment they’re in they’re going to buy it. Why? Because it’s going to save them money. It’s going to make them more efficient. Make their teams more productive. And so to me, I’m not selling differently in a high rate environment like we’re in now.
| 12:03 | I am still selling the economic benefits of my products and the belief and the, for me, the knowing and hopefully my customer, the realization, that my products and services will save them money. And you know what? In an environment where you got to pay a little bit more for interest. If my products and services can actually offset that a little bit, that’s a win.
| 12:25 | So that’s the silver lining here is that if you have a really good economic value proposition in your technology, your products or services, sell with that, lead with that, and you may actually be offering a solution to help ease some of the financial burden of higher interest rates. Conversely, or in addition to, I should say, in addition to that, as rates start to go down, maybe even more of a reason to take that calculated risk with you to invest in your products and your technology in a lower rate environment where the cost of financing is less.
| 12:58 | So make sure an insurer and this is the tip of the podcast here. And the best practice is make sure and ensure that you have a great economic sales message behind your products and services. Tell your customer why even in a tough interest rate environment, this is going to be helpful for them. Make sure that they understand the economic utility or the economic goodness of your solution and even if they’re paying more for higher interest rates, it may be very compelling for them to move forward with you.
| 13:28 | We want to avoid getting stuck in this. Oh, I can’t buy from you now, Andy, because the rate environment is so big. So I’m just going to wait. Wait a second. Waiting delays the positive benefit for you, mister and misses customer. So act now save the dollars now and you can apply those savings to that higher interest rate on the other projects you’re working on. So become aware of the challenges and be aware of the challenges your customers face as a result of a higher rate environment.
| 13:57 | In fact, you can ask them, hey, how are higher interest rates impacting your business? You can think about how it’s impacting you, like I said, if you’re trying to refinance a house, this may not be the best time this may not be the best time to do it. If you have a home equity line of credit or a variable rate loan of any type, rates have gone up. So you understand how it’s impacting you. You may understand how it’s impacting your own business, ask your customer how it’s impacting them.
| 14:23 | And when they start to reveal how it is, then later in your economic selling message and the economic goodness of your products and services, and hopefully you can address some of their pain points. So when it gets tough in the financial environment for customers, it really puts a premium on you delivering the economic utility and benefits of your goods and services. And that’s how we’re all going to make it through the tough moments and the tough economic moments like we’re in now.
| 14:54 | And how we’re going to thrive when we’re back in a lower interest rate environment, which who knows? Maybe it’ll be a lower year from now. Either way, it doesn’t matter. I’m moving forward and going to describe and implement great solutions that help my customers out in all aspects of their business, including on their P&L, their profit and loss statement, their income statement, and helps them become even more financially dynamic and strong, even in this very challenging environment.
| 15:24 | Sales warriors fund conversation on interest rates. I hope you enjoyed it as much as I enjoyed sharing it with you. My name is Andy Olen. I’ll be looking forward to talking with you real soon on another edition of The Sales Warrior Within podcast. And in the meantime, and as always, good selling. Good leading. And good living.