When Clients Ask for Financials

Today’s enlightenment was supplied by Blair Enns, CEO with Win Without Pitching

I recently spoke with an agency ownership team about an RFP they had received from a new prospect. One of the submission requirements was a copy of the firm’s financial statements.

How do you respond in such situations?

You would be well within your right to issue the most impolite of two-word responses to such a demand. Of course that’s not necessary, though. This is, after all, merely a game. Rather than stress you out, such a request should bring a smile to your face and an eager acceptance of the challenge. Let’s go over how to play the Show Us Your Money game.

Is This a Game Worth Playing?

Before we begin, prepare yourself for the fact that any selection process that begins with a request for financials might not go well. When the client opens this way then they’re likely a price buyer. If the relationship begins through procurement then whatever you’re being asked to bid on is seen as a commodity and you will have no power. It’s a price-driven decision all day long. Best to bow out.

If things have gone well in the sales cycle only for procurement to pop up at the last minute and demand financials, that’s actually good news. When procurement gets involved at this stage its almost certainly because they see this as final negotiations with the preferred firm – although they will never let on that this is the case. You’ve got more power than you realize in this situation but wielding it begins with the word “no”. Until you clearly say no, procurement is hearing yes. There’s rarely a need to get uppity or indignant. Remember the WWP key principle of kind ruthlessness: be ruthless in your behaviour – in this case getting right to the issue of why the client is asking and what a more appropriate answer might be – but be kind in your words. So a healthy amount of skepticism and direct professional questioning is called for.

Playing The Game

First, let us recall the Win Without Pitching Four Priorities of winning new business:

1. Win Without Pitching, if possible. If you cannot then…
2. Derail the pitch. If you cannot then…
3. Gain the inside track. If you cannot then…
4. Walk away.

Priorities two and three are about gaining concessions that affect the buying process thereby giving you an indication of how likely you are to win. You proceed with opportunities where you have proven that your odds of winning are good, ideally better than 1/n (with n being the number of firms under consideration). The assumption is someone has the inside track. If it’s not you, it’s someone else. This is the inverse of the saying about poker, that “If you can’t spot the sucker at the table, it’s you.”

Now, the step-by-step guide to our game. A lot of these steps are the same as those you would follow for any RFP response, with the specifics around financials added.

Step 1: Pick Up the Phone

The first thing you do is call – even if the RFP says no phone calls. Don’t apologize, just ignore and call. Get to a real decision maker and not a gate-keeper or process manager if you can. If the opportunity has come to you through procurement and you can’t get to a decision maker then you’re either a filler candidate rounding out the roster, perhaps there as a source of pricing pressure on the others, or the entire engagement is seen by the client organization as a commodity. In either case you want to think deeply about the merits of proceeding.

Step 2: Why Us?

Once on the phone ask why you’ve been selected. You’re looking to see who referred you, if anyone, how they see you and ultimately, how much power you might have in the relationship. Like step one above, this is standard RFP response protocol. “Thanks for thinking of us. I’m curious why you did think of us?”

Step 3: Raise The First Objection

Now put the RFP objection on the table. “We don’t typically respond to RFPs.” You can say this in different ways but I strongly recommend you use these exact words. Now pause, if you have the stomach for it, and listen. Whatever you hear next will be invaluable in letting you know where you stand with this client.

Leaving the objection on the table, which subtly implies the smallest of openings through the word ‘typically,’ proceed. It might sound something like, “I did want to say hello and explore whether or not there’s a path forward here.”

Step 4: Now Raise the Financials Objection

Proceeding full steam ahead you are now putting on the table all of the items in the RFP about which you have questions or issues. “There are some things in here I’d like to talk about.”

Right to the financials. “You ask for financials. We’re a private company and there are no circumstances under which we would hand over financial statements, but tell me what you’re looking for and why? I’m certain there’s a way to get to you what you really need.” You’re saying no but also that this is not a barrier but a bump. Let’s get over it together.

Step 5: Identify and Address the Real Issue

Now you are two people having a real conversation. You have placed aside the direct request and are in search of the reasons behind it. Some are valid. Some are not. Let’s explore each.

Valid Reason #1

The client wants to know what percentage of your total income their account would represent. This is perfectly valid. You want to know this, too. You want your new clients to be in the green zone, representing between 10% and 25% of your total revenue.

0-4% red zone
5-9% amber zone
10-25% green zone
26-35% amber zone
36%+ red zone

Smaller than 10% would not meet your minimum level of engagement (MLOE) and larger than 35% would be dangerous. The research that ReCourses CEO David C. Baker has done across hundreds of firms shows that when a firm loses a client that represents 35% or more of its income there’s a greater than 50% chance the firm will go out of business.

So, this is valuable for both parties to know, therefore it’s appropriate for you to disclose your revenue and even the number of clients you have, and it’s equally appropriate for the client to disclose the budget. If the client will not take you at your word for your revenue then this isn’t going to be a good partnership, is it? Go ahead and say that, if necessary.

Valid Reason #2

The client might have legitimate concerns over your financial stability. In the example I gave at the top, the agency had over two decades of experience doing this type of work for Fortune 100 clients. If that’s not enough to assuage someone’s stated concern about stability then the concern is a lie and there’s something else the client is looking for.

Find other ways to prove stability. There are many, including references from clients or your bank. Financial statement disclosure should not be required. Some RFPs, especially those crafted by procurement, attempt to pass all risk onto you and that’s just not realistic. They know that – they’re not demanding, they’re negotiating! Don’t assume because it’s in the RFP it’s mandatory. “I have to ask… if you think we’re a fly-by-night operation that might not be around to see this project through then why did you send us the RFP?”

The Big Invalid Reason (Which The Client Will Deny)

The client wants to dictate your profitability. Ahhh, now we come to the real reason. The procurement department wants to control your profit, ideally having you work at or close to cost.

You might want to lean right into this one. “Your only concern regarding our profitability should be that any work we might do for you IS profitable. How profitable is our business and not yours. You just want us to be profitable. And you don’t have to worry because we price all of our work so that it’s profitable for us and for our clients.”

If your spider-sense tells you this a price buyer, lean right into that too. “I’m concerned with this focus on our financials that this decision is all about price and I’ll tell you right now that we’re not likely to be the lowest price.”

The two valid reasons are easily dealt with without having to share your financials. The invalid reason, if it is the reason, needs to be outed and addressed head on before you politely walk away and leave it to your competitors to do the stupid thing. Sometimes that is just as gratifying as a win.

Wrapping Up

In summary, never share your financials. That’s like going into a fencing match in which your opponent decides he’s going to try something outrageous and ask you to hand over your foil – and then you do! Never give procurement the upper hand this way. Yes they sometimes ask but they’re laughing their asses off when you comply.

Look for the reason behind the request and if it’s a valid reason find another way to get them the assurances that any reasonable person would require. If they want to dictate margin to you, tell them to get stuffed. But do it kindly. This is, after all, but a game. Win or lose this should be fun.

Footnote: In any AgencyFinder review, you will know why and how you were selected. But as Blair points out, other parties including Procurement can join in after invitations go out. You can also ask me if you think some questions are out of line!

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