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The Advanced Selling Podcast
How to Talk Financial Impact with Kevin Koharki
00:22:59
Bill and Bryan are joined by Kevin Koharki, an accounting professor at Purdue University who specializes in teaching sales professionals how to speak the language of finance. Kevin shares his unique journey from investment banking and now helping...
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- [00:00]
Brian Neal
Foreign. Welcome everybody to the Advanced Selling Podcast, the longest running sales training podcast in the history of podcast. My name is Brian Neal.
- [00:13]
Bill Caskey
My name is Bill Caskey.
- [00:14]
Brian Neal
We are here every week for your listening enjoyment. If you've not joined our LinkedIn group, please do so. We're starting to get more active there, Bill. We're starting to post things in the LinkedIn group. And if you haven't joined Insider, we say it every week. Why not? Now's your chance. First Friday of every month. Live coaching with my man Bill. And yeah, great people in there too. It's great group.
- [00:33]
Bill Caskey
Yeah, it's a good group of people. We had a good session last Friday, which was our June session on how do you leverage your assets? You know, we all sitting on this mountain of assets and not financial or real estate, but personal, personal assets. Our lists, our, our know how, our knowledge. And we had a great session around that. And so if you do want to join, go to advancedsellingpodcast.com insider. You will get access to the prior, I think the three prior months of training. So if this topic appeals to you, once you enroll, you'll get access to that.
- [01:04]
Brian Neal
So I love that.
- [01:05]
Bill Caskey
Just a little bonus. So I had something that, you know, the last time we recorded last episode, I think it was the last one we talked about how when you get older you start referring to things as your like, you know, you're going to go out and take your walk, Brian.
- [01:20]
Brian Neal
Yes, my walk. Yeah, I'm going to get read my paper and have my coffee.
- [01:23]
Bill Caskey
You're going to have yogurt?
- [01:25]
Brian Neal
My yogurt, yes, correct.
- [01:27]
Bill Caskey
Well, I've heard that like four or five times in the last week, the last two weeks. And. And I've got to come up with something clever and kind of smartassy to say to it. Like now this is yours. Can I have it too? Or is this just your fruit or.
- [01:46]
Brian Neal
So if others allowed on your walk, or is it just your walk? Do we need to clean the streets?
- [01:51]
Bill Caskey
I've got, I've got to come up with something more clever than. What are you talking about? Are you. You're getting old. And then I had something that reinforced it. I have a guy coming out, he's putting in a new laundry room. Actually, it's a bigger story than that, but a new laundry room and really nice guy, contractor. You know, these guys are salt of the earth dudes. They're just good people. I had another project, so can you just help me? And he did, and he was just very kind. And so we were Talking. He said, you know, people up in this neighborhood are. He goes, sometimes. Are not very nice. They're not very nice. And. And he says, you are. You are. But most, you know, wealthy. He said, wealthy people aren't very nice. And I said, well, I'm probably excluding myself from the wealthy class. Sometimes they're just rude. And he says, how long are you going to stay here? Because you guys are getting older. Modest house. I mean, it's a nice house, a great house. It's not 10,000 square feet. It's 4 or 45, but we have no trouble. You know, I'm not crawling. I'm not buying those wheelchair things that go up the stairs, but. And then he kind of caught himself, and he said, oh, no, I didn't mean you were old. Said, well, you kind of did. Kind of did. Stop talking for a minute.
- [03:02]
Brian Neal
Reel that one back, big guy. All right. But it's nice. He's just talking from his heart, right?
- [03:07]
Bill Caskey
He was. And he's probably right. He said, poor. Poor people are nicer to him than wealthy people.
- [03:13]
Brian Neal
Yes, yes, yes.
- [03:14]
Bill Caskey
And I said, okay, I can see how. I can see how that could happen. But I said, yeah, I didn't coach him. I. He wasn't hiring me to be a coach. He's got a little issue there with his.
- [03:24]
Brian Neal
I have to remember that that's a good little check, like your. How you treat your service providers. It's a little like, look in the mirror. I try to always treat him really nice. I buy them lunch all, you know, throughout my house. I like grabbing Jimmy John's or something like that to take care of me like that.
- [03:36]
Bill Caskey
It's not. Yeah, that's right.
- [03:39]
Brian Neal
So. But they've. I'm waiting for the old earth comment. I've got another thing about that. We'll talk about it next time.
- [03:43]
Bill Caskey
Okay.
- [03:44]
Brian Neal
Okay. We got a guest today. We have a guest. Now, Bill and I get hit up for guests all the time. And we told our guest this, and usually we say no, and then we go out and handpick our own guest. We made a joke that if this guest had reached out to us directly, we probably would have said no, but he didn't. We reached out to him. So today's guest is probably the most unique background guest. I'd say he's an accounting professor. Kevin Kohaki is a. A professor of accounting at Purdue University. I'm an IU guy. He's a Penn State guy, though. He's going to tell you a little bit about his background. But Kevin came And, uh, found a little niche in teaching salespeople how to talk about things, all things financial, especially as it were, as in terms of like the accounting side and what CEOs and CFOs look at. And he came and talked to some of our peer groups. I'm like, he'd be a great guest on the podcast. So we're going to try to squeeze in a really big topic in about 20 minutes. So I'm going to start with welcoming Kevin Kalarky, the Advanced Link podcast and tell us a little bit about your background then.
- [04:42]
Kevin Kohake
No, I appreciate you having me on, fellas. It's my pleasure to be here. Yeah, so my background, I like you said, I did all my degrees at Penn State, was an accounting guy, went into investment banking for a little bit, was at Morgan Stanley and then a private company helping them on their deal team. So I've been in a roundabout way, training people in finance for years. And then probably about 17 years ago now, I got the itch to become a professor full time. Did that was at Washington University in St. Louis for four years before Purdue gave me tenure. And then about four years ago, I kind of fell into this niche, like you said, of just training employees at kind of all levels throughout the organization and basic financial acumen. I got kind of lucky in that the CEO of a major aerospace and defense contractor contacted me and said he needed some help with this with his employees. And long story short, now they fly me around the globe for it. So I quickly realized this was not the only business that needed this and found out that I'm half decent at it. So that's one of the things I love doing. And that's obviously how we got connected.
- [05:43]
Brian Neal
It's going to be half decent at some things. Once you get full decent, man, you know, it's too much pressure on full decent.
- [05:48]
Kevin Kohake
Then I'm really gonna be, then I'm really gonna be running.
- [05:50]
Brian Neal
You're in trouble for sure.
- [05:52]
Bill Caskey
Then you'll be reaching out to people.
- [05:57]
Brian Neal
Stay small, man. Stay small. So, yeah, let's just start with. And the context that I think is good for our listeners. You know, I told you, 80 of our listeners are sales people. 20 are sales leaders. Good for both. At some point, if you sell anything B2B, there's a financial component to the decision on the buyer side. So just give us a really quick view of when we leave the process. So we've been through when we talked to everybody and done the things, what are the considerations in terms of investment that that other. The buyer CFO or CEO are going to go through as they're thinking about whether they want to spend money with me or one of our listeners.
- [06:36]
Kevin Kohake
Yep, now you're dead on. So the way I always think about it with sales teams is, you know, a lot of times the customers are going to say, look, I'm pretty sure your product works. It might be the best in the market, things like that. But I need to understand a couple of things. Is it going to either A, increase my revenue and or B, decrease my costs, and then of course, C, what kind of return am I ultimately going to get if I. If I buy your product or your service or whatever it is? In other words, how is it going to help my profit and loss, my P L? And if you're a CEO and a CFO and you're not asking those questions, I'd be surprised. And if you were a sales. If you're a sales rep, not thinking about that while you're talking to your customer, I honestly don't know why they want to buy your product because at the end of the day, that's what they're mostly worried about is growing their P L, growing their cash flow. And so you need to think about these things when you're talking to your clients.
- [07:32]
Brian Neal
It's really good. Take that then a step further because I would argue, Billy, validate me here. Most sales people the Bill and I come across are not degreed accounting people, most of them. And so when you say the word P L, they think they kind of know what that is, but not really. So if you're. I'm trying not to say dumb it down, I'll dumb it down for me. If you're simplifying, is that a better way? Simply, yeah, if we're simplifying P L accounting speak for a salesperson who may not have gone to business school, but they still need to talk about this. What are some small, little, easy to understand ideas or concepts they can present or talk about in a very simple way to a buyer?
- [08:19]
Kevin Kohake
Yep. Key. Key things right off the bat are something called the gross margin, if you will, or we're very simply, how many pennies per dollar of sale are we keeping after we account for the cost of manufacturing the product or providing the service? So if you think about building a Ford F150, let's say, right. And total cost all in is $20,000. And you're going to sell that thing for $30,000. Well, then you're keeping 10 grand. You're keeping $10,000. All right, well, 30,000 was your sales price. So 10,000 over 30,000 is 33%. Now you haven't paid the CEO, you haven't maybe even paid the sales team yet, but you have paid for all the material to build the build, all the people who are directly involved in making the vehicle. And so that's essentially your gross margin. It accounts for that cost of production. Now after that, what your CFO and CEO are going to think about is something called operating margin. Now this is after we account for all the costs that go into running the business, paying the CEO, paying the accounting staff and the finance people all that. And so essentially how many pennies per dollar of sale are we keeping after we account for all those costs? And those are the two big numbers that when we talk about profitability, particularly gross margin and operating margin are the two big ones that all analysts are looking at when they evaluate a company, all investors and of course your CEO and your cfo, that's what they want to know.
- [09:45]
Brian Neal
Interesting, Bill.
- [09:47]
Bill Caskey
So I've got a question. This is, this is really good. I got your three things here. A, B and C. A, does it increase revenue? B, does it reduce costs? And seed, what's the ROI on the investment? I love, I love those. And then I start to think, okay, well how does a person get to that? How do they get to this increased revenue? Because in my world, when I coach people, I always say that the customer has a decision to buy or not to buy. I mean, sometimes you might buy half, but to buy or not to buy. To buy means they're going to take money out of their pocket, give it to you. To not buy doesn't mean it doesn't cost them because there might be a tremendous economic penalty not to buy. And unfortunately, what sales professionals do is they only look at the financials of the, of the purchase rather than if they don't purchase. Is there any, I mean, if they're spending 200 grand a year foolishly and they don't buy my hundred thousand dollar thing to save them, that this is a stupid decision. So how do you, how do you suggest people start to talk about that, the economic impact of the purchase or not to purchase now?
- [10:50]
Kevin Kohake
Great, great question. So I've run into this actually recently with a, with a client where the, the customers they were trying to sell to didn't understand what's known as total cost of ownership. And so I'm going to tweak your example just a little bit. In this case, it was, it was actually a farming community that they were selling into and, you know, in a lot of ways it's, well, just make it as cheap as possible for me. And the sales rep was telling the farmers, look, we can do that. But the problem is that machine is going to break down probably five or six times a year, not two or three like you're used to now. So how much downtime are you willing to put up with on your grain silos and everything else because you want it to go another way? Well, this is the same thing. If they're not buying, right, let's say they're not taking advantage of the. Of the upgraded maintenance or service package, then things are going to start to break down on them. And now you got replacement parts, downtime, all this other stuff, and it just starts to add up. So what I always try to tell sales teams to do is you have to make people understand that the total cost is not when they purchase something per se, it's what is the total cost of ownership over the life of this product. And in a lot of ways, once people realize, oh, wait a minute, if I go the cheaper route or no route whatsoever, I don't buy at all. All of a sudden I'm gonna, I'm gonna. My. My throughput, if you will, is gonna go down by 33%. And then you start to model that out and say, wow, this is going to kill my cash flow. It's going to kill my ability to service my customers or make my shipments on time or whatever it is. That's kind of how people need to think about these decisions.
- [12:27]
Bill Caskey
Yeah, I think one, follow up here and then, Brian, I'll turn it over to you since you have better questions than I do. I love that. Total cost of ownership in certain cases that. In most cases, it's probably applicable. In some cases, like if it's on a machine, if it's a software service, it might not fit. But there's always the. What's the. What's the cost to doing it? And what's the cost of not doing. As we said before, the question sometimes is the salesperson has to be comfortable enough to have that conversation. Because if. If they're treading on ground that's unfamiliar to them, they're going to ask one question, they're not going to get the right answer, and they're going to. Well, that was close. Almost had to talk finances there. How do you recommend them getting of the right mind and getting in the right state of mind so that they can have these conversations intelligently and openly?
- [13:19]
Kevin Kohake
Yeah, the way that I've Done it. It's kind of the way I've built. I've built my business, if you will. There's short courses that people can jump into to kind of figure this stuff out. I mean, the beauty part is none of this requires you to go get a PhD in accounting like I did or anything like that. A lot of this material you could cover in a couple of hours. And it's really just a function of understanding. Okay, how does the profit and loss work? How does cash flow work? Once you get comfortable with that terminology and just a few minor calculations. And I'm talking calculations where the math that you need for this you learned in second and third grade.
- [13:55]
Bill Caskey
Right.
- [13:56]
Kevin Kohake
@ best, you need to be able to multiply and divide. At that point, you need to be able to ask your client the right questions about their business.
- [14:05]
Bill Caskey
Yeah.
- [14:05]
Kevin Kohake
So you start to piece things together. So I'll give you a quick case study. I have a well, former client now. He's, he's. He's out on the road doing his thing. He told me, he goes, you know, I was selling for 15 years, and he goes. And he goes, he did well. He did well at the business he was. He was in. But he said, he goes. Once I started to figure some of this terminology out and a different way to look at things, he goes, got promoted to regional sales director. Now he's running all over the country, managing teams and all this other fun stuff. But he said, he goes, I can't believe how easy some of this stuff is. We just know and ever showed us how to look at it this way. And so this is not something that should take months. It's really something that if you have the right resources, know where to look. And I, and dare I say, have the right instructor, you're literally looking at about two, maybe three days of investment time. And at that point you're set up and ready to go.
- [14:57]
Brian Neal
Yeah, that's great. And I hit. We're talking to Kevin Kohake, professor of accounting at Purdue University, also a little on the sales side of things now, teaching salespeople how to talk about financial stuff. I think that Bill's question is fantastic about the comfort level. And the comfort here comes from knowledge. And it's. I think that step one is just Google. I mean, go to Google and there's courses everywhere for fundamental, basic stuff.
- [15:25]
Bill Caskey
Do you offer a course, Kevin? Do you offer any kind of. I mean, I know you know what a Purdue, but you have. Offer a digital course.
- [15:31]
Kevin Kohake
Yeah. So I went out on my own and I formed CAE Consulting back about four years ago after that CEO of that defense contractor contacted me. So I started training sales teams, R and D teams, ops teams, just on my own as an independent, if you will. And so a lot of times what I'll do is I'll tailor my courses to this. Well, obviously to the particular job function, but more importantly to the company or industry. Because as a. I mean, I've been an analyst for 25 years, so I'm always looking at companies and industries and things like that. And so it's pretty easy for me to dive into something and say, okay, let me offer you this tailored solution on your industry, on your company. And so you know exactly the terminology, the key performance indicators and whatnot that are relevant to your industry, your customers, and your own company. And I think that's one of the things that separates me from the pack, if you will, because most people are using kind of a boilerplate offering. I like to go much deeper than that because that, to me is where the rubber meets the road, is when you can really help someone, particularly in their industry or company.
- [16:36]
Brian Neal
That's really good. And the other thing that I'm taking away from this conversation for our listeners is, you know, everyone talks about they could do the ROI thing, you know, like, oh, we got to get the roi. And their thought of ROI is when you get your money back. And the time horizon of when you get your money back. I don't know, an investor, a good investor on the planet that looks for us. Right, Right. I'm gonna give you a dollar and you're gonna give me a dollar back within a certain time period. That's not investing. That's helping a buddy out. Let's basically, this long view of, from Bill's question of, oh, what is the total cost of ownership of yes or no long term? And no one on earth should be getting a 1x return. You know what I mean? We're not give, we're not investing a dollar to get my, my $1 back. I'm investing a dollar to get a 10 or 20x. Do you agree. Disagree with that? And how do I put that into a sales, Sales environment?
- [17:40]
Kevin Kohake
No, I, I do agree with it. So what we're talking about is something known as the payback period. And it's, it's a very elementary way of looking at things. So be honest with you. Most clients that I work with, big or small, they'll use a payback period. But it's the first back of the envelope, if you will, input into the analysis and it doesn't apply to most industries. So it'll work in something like software with a very short turnaround cycle. But if you're selling anything like heavy equipment or stuff like that, just throw the payback period out the window because you're looking at a piece of machinery that's going to last 25, 30 years. Most payback periods are three years or less. So you have to go deeper. There's other metrics that are much more, for lack of a better word, scientific. The math is not much harder, but it takes into account other aspects of the business that you absolutely want to account for, particularly if, you know you're selling to the CEO or cfo, because they're going to be looking at these more advanced measures. So payback is a very rudimentary way of looking at things. It has a place in the tool belt, so to speak. But if that's all someone's relying on their maybe I don't even think they're getting 50 of the way there.
- [18:50]
Brian Neal
Right, right. Most sales teams I work with, they think that's roi. They think ROI is when you break even. This payback period, it's interesting.
- [18:58]
Bill Caskey
Yeah. And that also requires a certain skill. And maybe we can have. You want to get and talk about this or pay you. Pay you to do a course for us or something. But the idea of I got to get into that conversation in some way and that person may not be willing to go there with me, because when you start talking about intangibles like, well, let's talk about the value of this product over 10 years, people are like, I'm trying to figure out what I'm doing for dinner tonight. You're talking about 10 years from now. And I think our buyers today are in a 30 day. Can I make the budget this quarter? Thinking very little about, well, if this machine performs for 10 years, this could be a $20 million payoff. So I think part of that is, and I don't expect you to answer, that's probably more Brian and I's, but how do we. How do we open that conversation up so the buyer is a willing participant in it? Not feeling like we're dragging them into this economic discussion.
- [19:52]
Brian Neal
Yeah, that's a. That's our people transacting. They're transacting and they're chasing the month in the quarter bill. And I just did a podcast on that. And when you do that, you simply think of the transaction, then you think about the price of the thing, then I discount. I don't think at all about total cost of ownership and all the things you mentioned.
- [20:10]
Bill Caskey
Yeah. And I think a lot of times we get into this, we use this word justify. Well, how does the customer justify the cost?
- [20:16]
Brian Neal
Right.
- [20:17]
Bill Caskey
Oh, that's a terrible, terrible way to think about it. Because it's a, It's a small.
- [20:22]
Brian Neal
Yes.
- [20:23]
Bill Caskey
You know, we're dealing with the smalls when we talk about that.
- [20:26]
Brian Neal
The half, only halfway. The half goods. So a couple of my clients have reached out to Kevin to have him do some work for them. So, Kevin, if a listener is sitting here thinking, oh my gosh, I could totally use a dust up, dust off, or a new course or some consulting on how to get my sales teams to learn how to talk about the financial side of a sales deal, how do they get ahold of you?
- [20:52]
Kevin Kohake
Yeah. So, I mean, obviously on LinkedIn, that's easy. Easy enough. My website is www.caecoach.org. it stands for capital allocation enhancement. So caecoach.org you'll find, you know, cell phone number on there, email. So kevin.kohake.org it's k o Ohki. Because nobody gets that right?
- [21:14]
Brian Neal
No, I was gonna say for sure.
- [21:16]
Kevin Kohake
In 43 years, nobody seems to ever get that correct. But, you know, and I'm easy to find, obviously. And at that point, yeah, just, just reach out. I'm always happy to talk. On your last point, it was interesting when you said, when you said justify the investment because you use those exact correct words. Where if you're selling to a CEO or cfo, there is a process that they do that all their internal teams do. I don't care if it's operations or R D or sales. If you're asking for money, there's a very clear process they want you to follow. And that's just some of the stuff that I help people understand. It's multi. Part. It is not something that you could talk about in 30 seconds, that's for sure. But that's kind of, for lack of a better word, the holy grail, if you will, is trying to figure out how to do that. If you show them the right numbers and obviously the right strategy and everything else, you're, you're. It's not. Again, it's not a guarantee. But where you are in the pecking order goes up very, very quickly.
- [22:13]
Bill Caskey
And I would think that if I, if I'm a salesperson and I lead that, as opposed to follow it and react to it, I'm in a whole lot better position. Because now the vent, now the customer is like well, man, this. This dude knows what we go through. Let's. Let's bring him in. Let's bring him into that meeting versus just always reacting. Hey, the CEO wants to know what's a payback? CEO wants a. I don't want to. I want to lead. I want to lead there.
- [22:36]
Brian Neal
Yes.
- [22:37]
Bill Caskey
Hey, Kevin, thank you very much for coming. It's been really good. I think. I think there's another episode here sometime in the future, if you're okay with it, but I would agree.
- [22:46]
Brian Neal
All right.
- [22:47]
Kevin Kohake
Absolutely. Been my pleasure, fellas. Thanks for having me on.
- [22:49]
Brian Neal
Good stuff. See you next time. Cheers. Bye. Bye.