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What does a sales person have to understand about their prospects?

Know your market, your product offering, and your customer.

You should not be selling contracts meant for a 100k-people company to a 1k-company. Your budget and your sales techniques should match with the customer and their needs.

Rick Jordan, for example, only sells to 20+ people company because those are his best customer. They already understand the pain his product is curing. If he tried to sell to a smaller company that has never seen the need, it would just waste a lot of time for both.