Art
Siegel

Mining For Treasure In Annual Reports

If you call on large business accounts, you have at your disposal an extremely powerful sales tool: the prospect's annual report. An annual report provides a wealth of information about the issues that are most important to the prospect, the company's values and many other clues as to what will make them buy from you. That's why an important part of your needs analysis is Mining For Treasure In Annual Reports. 

Fortunately, getting your hands on an annual report is easy. Call the company's main number and ask for "Investor Relations." If they don't have a department by that name, someone in finance or public relations serves that function. Ask the person you reach to mail you an annual report. You'll get it within a few days.

In a hurry? Check the library of the nearest business school. Many of them have files of annual reports which are used by students looking for a job. If you know a stock broker, ask them. In a pinch, drive to the company and ask the receptionist to get you one.

Below are ideas on what to look for and how to use the information you find in the annual report to help you build your winning sales strategy:

The Letter

At the beginning of every annual report is a letter from the CEO or chairman which typically summarizes the past year and makes commitments to the shareholders for the year to come. Few corporate documents receive as much care and scrutiny as this letter. It is the corporate equivalent of the President of the United State' state of the union address.

Corporate executives always strive to raise the value of their stock. They know that the markets will respond primarily to the facts (mostly the numbers) contained in the report, but they attempt to sway investor opinion in the letter by talking about successes the analysts might have missed, plus all of the wonderful things they plan to accomplish in the year ahead. These future plans are not reflected in the historical financials, but if they are carried out successfully, they might result in improved stock valuation.

There are two principal things to look for in the letter which can provide you with important clues on how to sell to this company:

• First is the word "challenges." It, or equivalent words, show up in most annual reports. The company says something like: "We encountered unforeseen challenges in our software re-engineering project . . . " In other words, they planned to accomplish something, and now they are embarrassed to report that they failed to achieve their goal. Unfulfilled plans, particularly if they received a great deal of public attention, are a major source of pain to companies.
• Equally important are statements of future goals: "In the year ahead, we will develop two new . . ." If these announced goals are not met, they will show up in next year's report as more embarrassing challenges.

Both the challenges and the future plans represent the innermost heart and soul of what the company's top management thinks about on a daily basis. If you can think of a way that your company's products or services could address either of them, you have a basis for writing an introductory letter to a senior executive suggesting you have an idea that they need to hear.

The Business

Another feature of just about all annual reports is a description of the nature of their business. This may be as simple as one page describing the company's core business, or as extensive as several pages on each of their divisions. At a minimum, these sections give you valuable information you need before any sales call about what they do at the company. You can use this information to tailor your presentations, as well as deciding which of your present customers to use as references.

Another thing to look for in this part of the annual report is anything that is changing? Do they talk a lot about a product line that has not been a major contributor to sales in the past? If so, this tells you the direction in which the company is evolving. They are more likely to spend on solutions that relate to the growth areas than parts of the business which are being de-emphasized.

The Financials

The financial figures always include quarter-to-quarter and year-to-year comparisons for total revenues and expenses, as well as for various line item categories. How valuable these numbers are depends upon the amount of detail provided. What you are looking for are clues that some area has a problem that you could help fix.

For example, are selling expenses rising faster than gross sales? If so, does your company offer a service that might reduce cost or improve sales productivity? What about administrative expense? Do you sell a product that could help there? For each line item which shows either a reduction in revenue growth, or an increase in expense, ask yourself whether you could make a case why your company could reverse these adverse financial trends.

The Incidental Text And Graphics

Many annual reports include touchy-feely material such as statements of corporate values, pictures of employees at work, or customers enjoying the corporation's products. This soft content is more than just filler. It is the company's attempt to show they are an organization of people and guiding principles. They may represent the true character of the company, or only the way they want to be perceived, but they are worth your careful review for clues to the company's culture.

Executives

Finally, at the end of most annual reports, you will find lists of the company's directors and executives. Needless to say, the executive list is most valuable in telling you who heads each key area of the company, and it is likely to be more accurate than any mailing list you can buy.

As for the directors, most of whom probably sit on the boards of several companies, you might consider sending out an introductory letter to each of them as well. Board members don't get involved in purchase decisions, but they will sometimes recommend to corporate management a vendor who might help the company achieve its most important goals.

Now, suppose you look through the entire annual report and you still haven't found a thing you can see using to make your case. At the very least, you a prepared to walk in on your first call knowing enough to say: "Mr. Prospect, in preparation for this meeting, I took the liberty of ordering your annual report. One of the things that really impressed me is your new Mega X product line. I'd like to hear more about that."

What have you accomplished with this opener?

• You've impressed the prospect that you cared enough about his company to order and read their annual report. It says a great deal about you.
• Your enthusiasm about something the company is doing loosens up the prospect and gets him taking.

Ordering and reading annual reports takes time, but once you try it, you'll find that the effort more than pays for itself in sales. 

SeaBird Associates Inc
3011 NE 7th Drive
Boca Raton, FL 33431
Phone: 561-750-9233
E-mail: Art Siegel

About Art Siegel