If you regularly obtain your customers’ annual reports, you know that reading the entire document is impractical, if not impossible. Use the shortcuts below to help you quickly find the critical information you need.
Start with the Letter to Shareholders
The Letter to Shareholders is your best source of information about a customer’s business and written in straightforward language.
Look for the following:
- External factors: What are some factors outside your customer’s control that are impacting everyone in their industry? Which ones align best with your business value?
- Key initiatives: What strategic initiatives has the customer identified that align with your value proposition?
- Forward-looking statements: What insight can you gain into the company’s future objectives?
- Business metrics: Which metrics, financial ratios and prior-year successes are identified as important?
- Significant trends: Are any market, product or divisional trends discussed that align with your solutions?
Next, Search the Financial Statements
- Income Statement:
- What was the company’s revenue trend over the past three years?
- Did any significant product or service mix changes occur?
- Did a significant percent of revenue change occur by region or business unit?
- What was the company’s gross margin trend over the past three years? Did any significant year-over-year percentage changes occur by region, business unit or product segment?
Areas showing a downward trend represent a selling opportunity.
- What was the company’s profitability trend over the past three years?
- Assess the percent of revenue for each major expense category: R&D, sales and marketing, general and administrative, and any others that apply.
Line items showing an upward trend also represent a selling opportunity.
- Balance Sheet:
- Over the last year, did the company’s total assets grow or shrink?
- Did any significant asset categories (accounts receivable, inventory, etc.) record a notable change in balance?
Any asset category (other than cash) that shows a growth trend represents a selling opportunity because decreasing non-cash assets improves cash flow.
Wherever you can correlate asset category trends to income statement trends there’s a selling opportunity.
Management Discussion & Analysis:
Whether you’re selling to a strategic business unit or looking to identify a SBU as a point of entry, the MD&A describes high growth areas.
Look for:
- The results of operations
- Changes in financial condition
- Risk management strategies
High growth areas represent a selling opportunity.
- Notes to Financial Statements:
Look for references to relationships, contingencies or other factors that could enable you to build a strong business case and perfectly align your solution’s value.
Look for places where your solution aligns with the prospect’s key initiatives and business performance metrics – those are your best selling opportunities.
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