OK, I Can Spare You A Minute

Build credibility and rapport
When you first get the chance to have a conversation with someone in anything that might turn out to be a business context, there are several important things you must establish extremely quickly.  You need to start building credibility and rapport; you need to start allowing the other party to decide whether a 'relationship' with you might be of value to them.  You need to be 'interesting' and 'interested'!

You need to start building credibility and rapport.
You need to be 'interesting' and 'interested' for this.

Train your sales team
When this rapport has got off the ground, you may need to start 'training' this possible member of your 'surrogate sales team' to spot others who may find knowing you of value.  The ability to do this part clearly and succinctly is often referred to as an Elevator Pitch.

"An elevator pitch is an overview of an idea for a product, service, or project.  The name reflects the fact that an elevator pitch can be delivered in the time span of an elevator ride (for example, thirty seconds and 100-150 words)." - Wikipedia

Start training your 'surrogate sales team' to spot others who may find you of value

Where to start?
Before you can start constructing and refining your elevator pitch you must have the following information available to you about your business.

• Who is your ideal customer?
• What problem do most of them have?
• What pain(s) does having that problem cause?
• What good does your customer get out of what are you selling?
  i.e. How does no longer having the pain make them feel?  All the ways!
• Why do your customers choose you, and not one of your rivals?
  All the ways!

Note which of these are singular and which are plural!

Just one ideal customer type should be defined purely by information in the public domain.  For example, there isn't an SIC code for companies with cash-flow problems!  We all know you can work with other types but you have to pick one at a time.

Their biggest problem is unlikely to be voiced at first, but finding and fixing this will remove their pains far more effectively than merely relieving one 'symptom'.  Understanding their symptoms will lead you to your diagnosis of the underlying 'disease'.  It will take a conversation with an individual to discover whether or not they display these symptoms.

Define your ideal customer by public domain information.
It will take a conversation to discover their symptoms.

Size matters!
Now you can start to construct your 'Elevator Pitch'.  In fact I believe you need several elevator pitches: 60 seconds, 30 seconds, 1 breath, 1 word or phrase - all have their place.

Practically you'll have to start long, then distil and refine.  You just won't get it right starting short and trying to expand.  You'll need to test and measure to see if your messages are coming across, and being received and understood.  Get a friend to ask someone what you do!

If you are a regular networker, you may feel the need to vary your pitch so you don't seem repetitive, but this risks confusing your listeners.  Getting the one-phrase version right, and then using this every time as an 'Anchor', you become known for that phrase, people aren't confused, and you can safely ring the changes.

You need several elevator pitches: 60 seconds, 30 seconds,
1 breath, and 1 word or phrase

A helping hand
One possible template for a longer elevator pitch is:
"I work with (ideal customers) who (widely held problem) which means that (widely suffered pain).  I help them (pain relief) so that they (life without pain)."

An alternative opening might be:
"You know how (ideal customers) are always (widely held problem) which means that ......"

Go on!  Give it a try.  Confidence come from practise, not further study!  Use the one-breath version as your intro on cold calls too, for instance.



Both of these ideas steer miles away from:
"I am (what it says on the second line of my business card).  I can do (a list of all the things you ever have or ever might have done)."  Followed by the unspoken, "What do you think?"  Or more likely, "No, please don't walk away from me.  Surely you can't go and find someone more interesting!"

I work with (ideal customers) who ...
I help them (pain relief) ...

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Be Interesting; Be Interested

I am making a huge leap of faith here.  I am going to assume that you don't want to be viewed as being dull and boring!  Or do you think you will be better liked and stand more chance of getting referrals if you are?  Was I right?  I sincerely hope so.

If people aren't already telling you that you're one of the most interesting and friendly people in the room, then you might want to do something about it.

Back in summer 2009 there was a lot of talk about a Swine Flu epidemic, but why do you suppose are there only epidemics of bad things?  Epidemic actually means 'a larger number of cases than expected', so how might you create an epidemic of people who think you're interesting?

Some of the ideas discussed in my 'Pricing By Value' Workshop are definitely applicable here.

To be interesting and memorable you must provide what the other person regards as valuable, for a very reasonable investment on their part, and receive in return something you rate highly profitable.  This applies whether you are meeting someone for the first time or re-encountering an old friend.

Taking the second of these ideas first, you may think the reasonable investment will consist of the other person taking the time to listen to you tell your tale - so you'd better not take too long.  But this is very 'me-centred' and is time-based, and thus cost-based.  How would it be if the other person's 'reasonable investment' was taking the offered (by you) opportunity to tell you about their business?  To recruit you into their surrogate sales team and train you?  Wouldn't this show you to be 'interested'?  Surely this is one of the components of being 'interesting'.

This takes us back to the first idea above.  One value outcome for the other person would be to have recruited and trained a new salesperson.  Additional value may have been perceived through your probing questioning, where you ensured you fully understood their market and product, which has helped them understand it more too and hence become better able to explain it to others in future.  But how might this be profitable for you?

By behaving in this way, which is so unlike the way most people behave, you are seen as being highly memorable by being highly interesting as well as highly interested!  But this won't be the end of the encounter.  Having derived so much value from you, the other person will feel obliged to reciprocate, and if they don't you may wish to do a little prompting.

Now their 'reasonable investment' is listening to you, so reply in a way that answers some of the questions you have recently asked them.  Do resist though, the temptation to do this without a break.  Part of the value to the other person is being allowed the opportunity to practise the questioning skills they have just heard you use, knowing how nice is was to be treated in this way.

Their value outcome this time results from their very clear understanding of how you help your customers, who they are, and the good they get out of you doing so.  The fact that they can add to their own value to their clients by bringing you in when appropriate is part of this value.  And your profit this time is in having another well-trained member of your sales team.

Of course it's possible to swap 'you' and 'other person' in all of this and it reads just as well, and is just as true!  Genuinely win-win I'd say.

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The Customer's Route To Your Sales Team

At some point, every single one of your customers was totally oblivious to your existence and to the products and services your business provides.  And I hope you will agree with me that your best customers are those who not only buy a lot from you, very often, but who are also active members of your 'surrogate sales team'.  If you could get more of the 'oblivious' to become 'sales team', that would be good wouldn't it?

If only there was a clearly defined, well signposted route available to them, don't you think that many of them would get a long way down that path?  By understanding the sections this route needs to have in its construction, you can make it easy for them to do so.

The first thing is to register on the prospective customer's senses, to achieve consciousness.  You need to provide several means by which this first perception can happen, and you should be doing so in places where you know your ideal customers are likely to be.  You can't expect them to come to you at this stage.

Next, the prospect has to have a better acquaintance with you and the things you can provide.  This could be provided by the other 'consciousness' messages which they happened not to come across first.  Equally it could be the repetition of a message.  In either case, the prospect will not start to absorb your messages until they have this acquaintance with you.

Now, with prospects very aware that they know of you and are familiar with you, they are in a position to absorb what good they will get out of doing business with you and what sets you apart from your competition, your distinctiveness.  If you try to ram your messages down their throats before they have arrived at this point, your efforts will have been wasted.  And 'ramming' is unlikely to be productive at any point!

Now the prospect has an interest in possibly purchasing from you, and you need to make sure there is a simple and obvious means for them to communicate this interest back to you.  All the previous effort will be wasted if the prospect has to 'jump through hoops' in order to indicate that they'd like to know more.

The fifth step is to convert their interest into an initial sale, and for now all I will say is that this is a subject of its own, and that yet again there is not one fixed 'one size fits all' mechanism for doing this.

Having bought from you once, you will be trying to get the customers to buy from you again, to gain repeat business from them.  As before, there will not be just one single tactic that will work on every occasion.

Maybe after their first purchase, or maybe later, you would be hoping that your satisfied customers will be letting their contacts know how good you are and how pleased they were to have used you.  To achieve this you must not neglect the need to provide the means and the encouragement for them to do so.  In other words you need to recruit them into your sales team and then 'train' them.

Several things now become apparent from this route from 'oblivious' to 'sales team'.  Firstly, that it is actually a circular path, because the activities of the 'sales team' will introduce previously 'oblivious' new people at the 'consciousness' level.  Secondly, that enabling a prospect to journey through consciousness, acquaintance, distinctiveness and the cultivation of interest is Marketing; from interest to sale and to repeat business is Sales; and that through repeat business, sales team and full circle to new consciousness is Marketing once more.

Thirdly, the three 'mores' of growing a business can also be mapped onto these ideas.  The first part of Marketing is getting more customers; the early part of sales can also focus on getting them to buy more; and the later overlap of Sales and Marketing to achieve repeat business can also encourage buying more often.

Out of all these thoughts is born your Sales and Marketing strategy!

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How Does Your Garden Grow?

On the basis that most if not all business owners could easily shrink their business, let us focus on how to grow it instead.

To start with, what does 'grow' mean here?  If you grow sales, is this the whole answer?  Well, if each sale loses you money, then obviously not!  So is it growing profits?  Well, yes, but you can only go so far with cutting costs, so you need to grow profitable sales.

But will profitable sales grow your business if your customers never get around to paying you?  Of course not!  Your business will die through lack of cash!

Leaving debt collection aside for another time, let's look at growing sales, bearing in mind we'll need to ensure they are profitable too.  There are only three ways to grow sales!  Sales growth comes from a combination of:

• More Customers
• Spending More
• More Often

And that's it!

Your strategy for sales growth should consider all three 'mores'; how easy it will be, how much you will need to invest to get the return you seek, how profitable it will be.  Your strategy will be unlikely to focus on just one of these mechanisms either.  Almost certainly it will be a balance of all three, probably with one playing a larger part than the others.

Attracting new customers who've never bought from you before will involve promoting your name and your marketing messages, and is unlikely to produce instant results.  Your 'new customer' strategy will need to take your messages to where your ideal customers will see them.  You can't rely on strangers coming to find you where you are.

These strangers will probably need to receive your messages several times before they start absorbing much more than your name, however compelling your messages may be, so this needs to form part of your 'new customer' strategy too.

Persuading customers, be they first timers or repeat buyers, to spend more relies on having 'more' for them to buy!  Not exactly earth shattering, but nevertheless often ignored!

It may be that you can persuade them to 'upsize', or you could 'upsell' by convincing them to add extra products or services to their purchase.
Whatever you do, you need to have the 'more' available for them to buy.

When it comes to the upsize, you will almost certainly be able to do this yourself by adding extra value to your basic offering, checking of course that these extras are actually seen as being of genuine value by your ideal customers.

Providing products and services to be 'upsold' does not however have to rest entirely with you.  This is an area where Strategic Alliance Partnerships can be very important.  If your partner's products complement yours, it is reasonably likely that your products complement theirs, so you can help each other.

Lastly, there is the question of how to persuade customers to come back for more, and get them to do so more frequently.

As existing customers, they are already know you and presumably remain happy to have bought from you in the past.  Your task is to ensure that the next time they want what you supply, they will come back to you, isn't it?

Well, yes, of course, but it goes beyond that simple picture.  They may only be aware of the narrow range that they actually bought from you previously, and not your entire 'repertoire'.  And this repertoire may have changed since they last purchased from you any way.

You also need to be in the front of their minds at the time they decide to take action to satisfy their new want.  In this regard 'a miss is as good as a mile' in terms of the timing of your messages, and there's the clue.  You have to be in the front of their mind shortly before they make their decision.  As you have no idea when this may be, you have to regularly remind them of your existence and capabilities.  In short you need an effective 'keep in touch' system.

As a parting thought, what if you consider yours to be a one-hit business?  As my friend the Undertaker reminds me, he doesn't sell to the deceased!  He sells to their family.  And guess what?  They're all going to die one day too!  So maybe yours isn't a one-hit business after all!

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Can Your Team Really Ever Be A Team?

Previously I've used sporting analogies to talk about business folk in general and then Sales people in particular.  This time I'm returning to business people generally, though maybe with a slight bias towards Marketing and Sales.

Let me ask you, is a sporting analogy appropriate in every instance?  Or is it true that every group of people striving to reach a common goal is a team?
Is the Three Musketeers' cry of, "All for one, and one for all" appropriate all the time?

In your Sales team or your Marketing team, do you view your colleagues as team-mates or competitors?  If you get an order, does this mean that one of your colleagues hasn't got it, or have you only deprived a competitor company of the business?

If one of the team achieves what they set out to do, is this seen throughout the organisation as the team achieving what the team set out to do?  Or does the reverse apply, where the individual may have reached their goal but the rest of the team are seen not to have reached theirs yet?

Let's look at this from a sporting perspective.  If a rugby player scores a try, the team gets the points.  If players from the same team score many more tries than the opposition, the team gets lots of points and, in the absence of penalties, the first team win the match.  This then is definitely a team sport.

If a racing driver starts from pole position and stays in the lead until the chequered flag, or has passed all the cars that are in front of them by the end of the race, they are the winner, but is it a victory for a team or an individual?  Of course it is a victory for a team!  All the 'supporting cast' will have had to play their parts to perfection too for their driver to cross the finishing line in first place.

In fact it would be hard, if not impossible, to think of any sport that isn't a team sport, even if there is only one performing athlete in the mix.

Back in business though, things can be subtly different.  The skill sets and the rewards structure may be such that one person can meet their target and be rewarded, whilst another doesn't and so doesn't get rewarded.  They may well be part of a group who all report to the same person, but compared with our sports example, they don't appear to be a team, however the office jargon may describe them.

So how should we describe that group?  A useful alternative in this case is to call them a 'Committee'.  A team is where all win or no-one wins; the team's performance matters more than individuals' performances.  A committee is where one person can win but others can lose.  If you have a committee, the sports analogies actually ring very hollow, especially those about team spirit!

Is your team focused on short-term goals, as with a sports team, with importance and intensity characterising the members' behaviour - a desire to win the current game - or not?  Do they give their all for today and let their position in the league table take care of itself?  Are the elements of competition and results strong in your 'team'?

Most business scenarios do not have this same degree of short term intensity.  Instead they are complex and there are obscure links between cause and effect.  Even in competitive industries, many of the people in one organisation never get to meet their competitors, and the evidence of the results of their work is usually not as strong as in a sports team.  Many cannot see how their individual efforts contribute to the overall result.

If only the 'team' behaved more like a team, there may be more to be gained from these analogies.  A relay squad knows its job it to get the baton to the finishing line, but that only the runner on the anchor leg will actually cross the line with the baton.  Good communication, the mutual trust to pass clients from expert to expert as their needs change throughout the sales process, and the knowledge that the only thing that matters is the order, not who gets it, would stand many business teams in a lot stronger position.

We need to use sporting analogies with care here then.  Plus, there will be people in your organisation who hate sports, for whom competition is anathema, and indiscriminate sports analogies will alienate those people, not include them.

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Succeeding In Spite of Yourself

What does it mean to shoot yourself in the foot?  Is it that you're not just aiming too low, you're aiming so dangerously low that your foot is in the sights as you pull the trigger?  Or is it what the military call a 'negligent discharge'?  Have you accidentally pulled the trigger while your gun is still in its holster, muzzle downwards?

Whichever you prefer, the common thread is carelessly, stupidly, naïvely doing something that causes you pain and delay, and does you more harm than good.

I have come across many examples of businesses shooting themselves in the foot, so I thought I'd list some pitfalls for you to recognise and avoid.  You can imagine a (falsely) reasoned argument in favour of each of these.  I believe the counter argument carries far more weight in each case.

1. Selling to the wrong people
   Don't push your business on everyone you meet!  Know how to identify your ideal customer.  It's a waste of time trying to sell to people who simply don't need what you're offering.
   
   
2. Selling the wrong product
   Don't assume all your ideal customers want what you are selling!  Even if you believe they need it, they have to want it before you can sell it to them.  It's a waste of time trying to sell to people who don't even need what you're offering.
   
   
3. Forgetting your Unique Selling Point(s) - USP(s)
   You must offer more than just items of value to the ideal customers.  You must give them good reasons to buy from you rather than your competitors.  You must consistently tell them why you and your products are uniquely placed to help them.
   
   
4. Failing to focus on value creation
   Customers only want to buy from you because the value they get from the purchase far outweighs the value of the money they have to part with to do so.  If you don't create value for them, in their minds, they will see no need to purchase.
   
   
5. Haphazard Marketing
   You need a Marketing strategy that covers all areas of the customers' long-term relationships with your business - From them first finding out you exist, to them telling all their friends how good you are!
   
   
6. Ignoring the only three ways to grow a business
   Getting more people, to spend more, more often - These three 'mores' are the only three ways to grow a business.  You must balance your efforts to increase each factor according to your market and the needs of your business.
   
   
7. Ignoring repeat business
   The third 'more'! - You need to keep your customers aware of your existence, and have the 'more' there for them to buy
   
   
8. Ignoring Up-Selling
   The second 'more'! - You need to offer products or services that are complementary to the things the customers initially wanted to buy
   
   
9. Only advertising when you need Customers
   The first 'more'! - This is the one people usually focus on to the exclusion of the others.  "We need more sales so how can we find more new customers?"  Advertising isn't the only form of promotion, and promotion should be an on-going activity.
   
   
10. Not tracking results
    Not even the 'experts' can accurately predict what will work for you and what won't.  You have to test and measure each Marketing activity.  You have to know what produced what.  Then, if it doesn't work, drop it.  But if it does work, do more of it!
    
    
11. Not following things through
    If you're like most, you'll have many, many things you'd like to try.  Don't waste time and money starting something that you can't follow through.
    
    
12. Running an advert only once
    If you fix your 'haphazard Marketing', you'll be aware that people need to be given several opportunities to fully absorb your messages.  If your promotional activity doesn't produce results first time, it's probably never been given the chance!
    
    
13. Copying the Competition
    Do what you need to do because you know that you need to do it.  Believe me, all your competitors could easily be making the same foolish mistake!  Quite possibly because they all followed blindly!
    
    
14. Trying to save where it counts
    Don't try to save money in places where it shows.  When it comes to what your customers can see, you should spend whatever it takes to get everything looking right.
    
    
15. Spending too much money, unwisely
    Your business should put cash into your pocket, so before you invest money into it, be clear on how you're going to pull that cash back out again
    
    
16. Spending too little money
    Equally, don't be miserly and don't let frugality get in the way of efficiency.  Take advantage of skilled outsiders who can do certain tasks more efficiently than you can.
    
    
17. Going against your intuition
    While you might think that logic is the language of business, that's far from the truth.  If you base all your business deals on hard logic and ignore your intuition, you'll get hurt!
    
    
18. Being too formal
    Business is built on relationships and human beings don't want to build relationships with faceless corporations.  They only want relationships with other human beings, so build rapport and relax formality as appropriate.
    
    
19. Failing to optimize
    You can't simply focus on creating value, and imagine the rest will take care of itself.  As a business owner, you need to find a way to deliver your value in a cost effective way.
    
    
20. Not collecting your money on time
    Collecting money from people can be hard, so collect a substantial portion of the money first before you provide anything.  When it comes to debt-collecting, if you act like you don't need the money, you'll never get paid!

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Sales Presentations Are So Last Century

My advice to anyone asking about a sales presentation would be, don't do it!  What purpose do you think it will achieve?

Why would you ever need to make a sales presentation?  If you don't yet understand inside-out and upside-down the prospect's fundamental problems and the circumstances in which they exist, how can you possibly know what to present?

And if you do understand, it's not a sales presentation, is it!  You will be presenting your suggestions, your proposal, won't you?

Yet many thousands of words continue to be written on the subject of sales presentations, by well respected people in their books and in well respected publications.  Just looking recently at a small number of articles on this subject revealed some amazing things.

I find it frightening that this stuff is being broadcast to sales teams as state of the art, immutable fact, under the banner of professional bodies who claim to represent these teams' interests.  Within the 'sales advice' community there seems to be this continued fixation with:

1. Giving sales presentations - Generally involving PowerPoint or something similar
2. Having a 'one size fits all' sales presentation, yet one that is flexible
3. Letting specialist outside companies produce your sales presentations

Authors identify the five situations where they feel you ought to want to give a sales presentation:

1. In meetings with buyers
2. In corporate account presentations
3. When helping your 'customer champion' to convince their colleagues
4. At events where 'customers' gather
5. As a response to a request for information!

The advice seems to be grouped into four categories:

1. General Advice
2. Detailed Advice
3. Presentation Design
4. Detailed Design Steps

My own reactions to all the points raised can be summarised as one of:

• Hear, hear! - because I agree
• Why? - because I don't believe they've justified their assertion
• Amazing! - said with huge irony
• Well, yes! - said with almost as much irony
• Expletive deleted! - said in genuine amazement that anyone could still think that way

Let me give you the detail on the first two.

General Advice

• Your presentation must be flexible - Repeated ad nauseam - Amazing.  So why try to have a one size fits all?
• Cover your scope and capability - Why?  Surely it should be about what the customer will get out, not what you can put in!
• Use a specialist presentation design company - Why?  Apart maybe from graphic design and PowerPoint coding, shouldn't your sales and marketing team be well enough skilled and well enough trained to write the copy themselves?

Detailed Advice

• Keep it to 15 slides so you don't bore the audience - #ED!  And 15 won't?
• Think from the buyer's point of view - Amazing!  Is there any other way?
• Don't just blow your own trumpet - #ED!  Words fail me!
• Start your presentation by describing the state of your marketplace - Why?  What interest does the audience have in that, that they aren't aware of already?
• Get an early agreement on something, anything - Hear, hear!
• Use your smartness to create a pleasant surprise - #ED!  And being a smart-arse is the way to build lasting, win-win relationships?
• Convince the audience by showing what you can deliver - Well, yes!  But if, and only if, what you deliver is being described in 'value to the customer' terms - which is quite a different thing from benefits - and is pertinent.
• There is often too much focus on what the salesman wants to say rather than on what the buyer wants to hear - Amazing!  And yet you're still trying to push the idea of a sales presentation!
• The salesman is trying to promote change and all change is risky - Hear, hear!
• Few sales presentations actually address the senior decision makers - Amazing!  You could never guess they would be involved in the decision making, could you!
• You don't need to be the biggest or the best to win - #ED! You don't say.
• Linking content to customer outcomes gives you the ability to quote higher prices - Why?  Linking content to outcomes allows the buyer to see the value, and thus see the return on their investment!
• Your audience is under time pressure and is inwardly focussed - Well, yes!  So cut the crap and get them to admit the value outcomes to themselves!
• Only present when you've established a potential need - Amazing!  Unless there is a full-bore want, why waste time on a presentation?
• Your presentation should turn 'need' into 'desire' - Amazing!  And there was me thinking your 'conversation' should allow the 'prospect' to do this for themselves!
• Research your audience and their business requirements - Hear, hear!  But do use the best source for that information - Your audience!
• Address the concerns of each member of your audience individually - Well, yes!
• Hone your abilities at handling supplementary questions in the Q&A session at the end - Well, yes!
• Spread enthusiasm and take your time - Well, yes!

There is another way, a better way.  If you recognise yourself or your organisation in any of these, please allow me the chance to talk to you and start to explain that there are other ways.

There's lots more advice like this in my regular bulletin.  Get your FREE copy!

You Can't Do Everything For Everybody

One of the crucial rules of marketing is that you're almost certain to fail if your strategy is to take a small slice of a large cake.  The idea sounds so plausible, doesn't it!  We must be able to take 1% and make a decent living for ourselves, mustn't we!  The trouble is it just doesn't work like that.

You might still fail, but you'll have a greater likelihood of success if you change your plans and aim to take a dominant slice of a different cake.

Imagine you've decided to take 1% of the illegal drugs supply into London.  Do you think you'll survive - and I mean that quite literally - your first day?  Will you even still be alive to enjoy your first coffee break?

You need a different strategy.  Either you and 10,000 heavily armed friends can go for 99% of London, or you aim to be the exclusive supplier to one addict.  Either way you have to plan to dominate.

You have to focus on a specific, under-served market niche if you want to be really successful.  Find a niche and carve out a reputation for yourself as the expert in that field.  A common mistake is to develop the niche product before establishing whether the niche market exists, and whether it's buying.

In their book "The 22 Immutable Laws of Marketing", Al Ries and Jack Trout list as their first two laws:

1. It's better to be first than it is to be better
2. If you can't be first in a category, set up a new category you can be first in

To find your own niche ideas, start by getting into the habit of writing down your ideas as you have them.  Don't try to filter anything out at this stage.  So, where to look for ideas?

1. Solve an existing problem
2. Use freely available, public domain information
3. Ask your current customers and website visitors
4. Combine products into new packages
5. Sell 'own label' products
6. Improve an existing product
7. Adapt an existing product for a different market
8. Exploit today's "must have"
9. Look at your own hobbies and interests
10. Combine ideas and improve on them

Expanding on this last point, if you can marry two diverse ideas, 2 plus 2 can often equal 5!  For example:

• Gutenberg combined a coin stamp with a wine press and invented printing with moveable type
• Long ago, someone combined two soft metals, iron and tin, and produced a strong alloy, bronze
• A French chemist launched a hair colouring product but soon branched out into cleansing and beauty products.  The modern name of his company is L'Oréal.

You can take an existing product and try to think of ridiculous ways to make it work.  Trevor Bayliss combined the electronics of a radio receiver with the mechanism from a wind-up clock to create the clockwork radio.

You can make unlikely pairings of businesses or people and create the most superb results; an idea particularly used in music:- Stéphane Grapelli and Yehudi Menuhin, Freddie Mercury and Montserrat Caballé, Luciano Pavarotti and U2.  Or in business, the car maker Mercedes Benz and watchmaker Swatch combined to create the Smartcar

You can take two everyday products and create a third which has a whole new market:- A trolley and a dustbin make a wheelie bin; a copier and a telephone make a fax machine.

It isn't always easy to create a new category.  In the field of human endeavour, we're all different, so you'd think that would be simple, but after a while it starts to get ridiculous.  I can't imagine the Guiness Book of Records having a category for the first left-handed pilot with red hair to fly solo across the Atlantic!

The irony is that when someone else finds a new niche, we all say, "Why didn't I think of that?"


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Destroying Your Reputation And Your Relationships

There are many ways to build a better reputation and great relationships.  It's probably true that it takes less time to destroy them than it took to build them, and it may well take even longer to re-build them.  We tend to notice these 'many ways' most readily when they go wrong in a big way, but often we are doing ourselves and our chances no good at all in small ways yet we don't realise we're doing it!

Communication
In our conversations and written communications we might be guilty of being patronising by asking lightweight, rhetorical questions at which the other person takes offence.  Even something as simple as, "Would you like to save time and money?" could be seen as patronising.

Then, our more heavyweight questions might be seen as too aggressive.  For example, "Are you sure you're getting it right every time?"

Many people dislike undue familiarity too soon in a relationship.  Using people's Christian names without even unspoken permission can set them against you, and they almost certainly won't tell you directly why they've now gone cold towards you.

Another gaffe to avoid is the use of highly dated clichés.  It just shows you've only learned what you know from a textbook, and you couldn't be bothered to buy an up to date one either!  This applies both to 'Sales speak' and to 'Adviser- or Sales Manager speak'.  Who wants to read, let alone hear, "And that's not all.  Just wait and see what else our product can do for you" or "Remember, people buy from people".  The thoughts may be correct but please, craft your own version of the message.

It is easily possible to get somebody's back up by being assumptively critical, so don't.  "You too can have an apartment in Monte Carlo like mine," isn't the best thing to say.  And putting people into categories when it's obvious you've had no prior contact doesn't do you any good at all, even if it's based on public domain information.  "As someone with two outstanding County Court Judgements against you ..."

Reliability
As well as in conversation and communication, another sure way to damage your reputation is by being seen to fail to deliver on promises you have made.  I have already explained elsewhere that the making and keeping of promises is an essential part of building people's trust in you.  If you behave like that before they're paying you, how much better will you be once they start?  And conversely, if you keep breaking promises before they start paying you, how likely is it you'll change your behaviour once they start?

The problem is that the apparent breaking of a promise can often be the result of the two parties having a different interpretation of what the promise actually was!

At its crudest, there are three elements to a promise.  For the sort of small promises I advocate you make and keep - actually I recommend you 'trade' them - continually, much of this doesn't require to be written, but it's still a good idea to make sure it is understood in the same way by both of you.

A promise generally consists of three elements, and it's essential to agree on these at the outset.

• Deliverables
• Payment
• Timescale

I believe deliverables are easy, but then my degree is in Engineering!  In that world there are some simple rules:

• If you want it, ask for it
• If it isn't in the design specification, don't be surprised if it isn't delivered
• The specification should be a list of 'questions' not 'answers' - You're paying for the 'answers'!
• If the form of the 'answer' is that important to you, it should form part of the 'question'

Going back to Henry Ford's quotation, don't ask for a faster horse if what you want is to be able to get 300 miles from Chicago to Detroit in just one day!
However, if you want to win the Derby, then ask for a faster horse!

Another thing that needs to be agreed up-front is how both parties will agree that the deliverables have been delivered - the Acceptance Criteria.  As I said, with very simple promises it's so easy it doesn't need writing down.  "I'll call you tomorrow at 10:30," contains the design specification, the acceptance criteria, the payment and the timescale.  But with more complex promises, failing to agree on the acceptance criteria at the outset leaves you open to a game of, "Oh yes I did - Oh no you didn't."

Agreeing the payment seems to be fairly simple once the deliverables and acceptance criteria have been agreed.  But, if you get into a negotiation, take a little care.  You may have to adjust the 'package' in order to reach a mutually acceptable 'price', so don't forget to feed back these adjustments into the specification and acceptance criteria.

So far, so good, but when we get to agreeing timescales, especially short timescales on more complex promises, things can get heated and emotional, if allowed to.  Only one person can control your use of your time, and that's YOU!  And it follows that you cannot control other people's use of their time.
They must do it for themselves.

On a complex promise, you need to get 'buy-in' from the rest of the team when it comes to timescales, and this must be done in an atmosphere where everybody feels free to say, "I just can't do all that you are asking within the time you are suggesting."

Have a great reputation and satisfying relationships.

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Whatever Happened To Joined Up Thinking - Part 2

The title implies that joined up thinking used to be widespread but recently we've lost the skill.  Not necessarily true; maybe we never had it!  But even ancient Greek generals debated the unpredictably far reaching effects of ripples on a lake when you lobbed in a stone.

People who can foresee the unintended ought to get a more than fair hearing, but often the opposite is the case.  They get labelled as negative, or resistant to change, or not being team players.

Even the most reasoned arguments don't guarantee that the foresight will be listened to, let alone accepted.  By 2001 scientists at the University of New Orleans were already publishing papers on the risks of having built a city near the sea, protected by levees that cause the ground behind them to sink below sea-level, as it was no longer being topped up by soil deposits from the tidal waters.

In the 1930s, sociologist Robert K Merton listed five causes of 'unanticipated consequences'.  The first two were Ignorance and Error, but the fifth is the one I find most fascinating.  The fifth cause is the Self-Defeating Prophecy, in other words the fear of a foreseen consequence drives people to find solutions before the problems happen.  The prediction then becomes false because it itself changes history.  Think of warnings of the future depth of horse manure on the streets of London, made in the 19th century!

Incidentally, it was only sometime later that Merton turned his original phrase on its head and coined the more well-known expression, the Self-Fulfilling Prophesy.

Whilst unintended consequences can hinder progress for the common good, I believe the real criticism should be levelled at the scale of the 'unintentionality', which is sometimes vast.

Popularly known today as a 'lack of joined up thinking', the possession of Critical Strategic Foresight is far from universal.  As noted in an earlier post, it seems extremely thinly spread amongst politicians of all persuasions!  Maybe President Obama can break the mould.

Merton's third cause was 'imperious immediacy of interest', that is to say a vested interest coupled to a short-term action.  Here longer-term consequences are often deliberately ignored - totally different to the genuine ignorance of the first cause.  As an example, consider the enforced adoption of spreadsheets, where the user has to enter the formulae themselves.

If you are ignorant of the appropriate algorithms and their purpose, the spreadsheet will just help you to arrive at the wrong answer more rapidly.  The time spent performing manual additions and long multiplications might well have allowed greater insight into the problem, and so resulted in you arriving at the correct answer.

Many corporations lack the infrastructure to help gather Critical Strategic Foresight, or fail to use their infrastructure correctly.  Similarly individuals need the mental 'infrastructure' to consider these, "OK.  What if ...?" questions before getting their sleeves rolled up and starting the task.

Critical Strategic Foresight is unlikely to arrive conveniently, just when you're looking for it.  Murphy's law says it will be after strategies and tactical plans have been formulated and signed off!  Because the pressure is now off, and the understanding is a lot more complete, the mind can wander laterally and those, "Oh my goodness!" moments start to happen.

One answer is to create a list of testing questions by which individuals and organisations can challenge and judge new ideas and the resulting Critical Strategic Foresight.  These question may well be of the "If, then how?" variety, or with 'how' replaced by any of the other five ways of starting an open question.  Without such an infrastructure, someone who is Critical Strategic Foresight savvy will more likely be seen as a Luddite than as an innovator.

This was noted by Merton as the fourth cause of 'unanticipated consequences', the Basic Values; in other words the very culture within which change is being sought risks stifling that change, or else its implementation will destroy the culture.

So how can Critical Strategic Foresight be cultivated?  Both individuals and organisations can adopt creative thinking methods like negative brainstorming and devil's advocacy, based on seeking out counter arguments and not shying away from, "What could go wrong if ...?" questions.  Such a culture implies that inconvenient and challenging questions will be welcomed at any time, and will be given fair consideration; an important thought when, as was noted earlier, Critical Strategic Foresight doesn't always arrive just when you ask for it.  The understanding needed for Critical Strategic Foresight to flourish can take time and experience.

New strategies and technologies can usually be explained in broad terms when required, but unintended consequences often arise from the detail.  Therefore strategies should be defined in detail, prior to their implementation, and the detail not left to be created as the project goes along.  Views of consequential outcomes should be sought from those with an in-depth understanding and years of experience - the sort of 'nit-picking Luddites' who actually welcome progress, but not change for change's sake.

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Why All Medallists Have Coaches

Like competing at sport, setting up and running your own business can be a great, but rewarding challenge.  But, when it comes to your business results, will you be glad just to have been selected to represent your country, or glad to have made it to the Olympic final, or is a medal the least you will be satisfied with?

If you were an athlete and not a business owner, how would you try to ensure that you at least won a medal?

It doesn't take much research to discover that all the great athletes were helped to achieve what they did by their coaches.  In fact Sir Steve, Sir Matthew, Dame Kelly, Dame Tanni, Sir Chris and the others simply couldn't have done it without their coaches.

Could the same be possible in business?  You bet it could!

Even the non-athletes among us know, I am sure, that sportsmen and women need to train for their event.  They need to incorporate a mixture of strength, fitness and stamina work, as well as skill, into their training regime.  How would they get on if they did this all themselves; unaided, unobserved and with no feedback?

I suspect that actually, at the highest level, they would make a pretty good fist of it for a few days, even weeks.  I am certain that self-motivation is no problem whatsoever for these elite stars.  Along the way they will have learned what mixture of exercises make up a top-class training programme, so they can plan their forthcoming schedule without assistance.  They will know what 'doing it right' feels like and be able to sense when they are starting to fall short of their best.  They will undoubtedly have the ability to 'shout at themselves' and not need the coach's voice in their ears.  But would they ever dream of dispensing with all coaching?  Would they ever!

Is the same true in business?  Do the Bannatynes, the Bransons, the Roddicks and the Sugars know how to plan and run a business, and make it hugely successful, without any outside help.  Of course they do, or did in the case of the late Dame Anita.  Does this mean business and sport are different?

In spite of this evidence, I actually believe they aren't that different.  I have talked about top class athletes and top flight entrepreneurs, but how did they get to the top in the first place?

If your school days were anything like mine, whatever your sporting achievements, until you were maybe ten years old you were unlikely to have had much input from a teacher, except to explain the rules of the game.  You probably didn't train either; you just 'played'.

But from then on, it is highly likely that someone was advising you on how you might do better.  And maybe around this time your world polarised into those who enjoyed and were good at sport, and those who'd rather do any anything else but games and PE.  The good got better and progressed through club and county level to become the international representatives we discussed earlier.

I think this model is exactly duplicated in business, in the early stages of this part of a business owner's career.  To start with some people just play at it, copying what the others do and discovering whether it really is as enjoyable as they thought it might be.  But then what?

Can the ones who find excitement and enjoyment in running their own business get better and bigger on their own?  My own research amongst Business Advisers is that the ones who make the biggest strides forward are the ones who have taken the decision to employ the services of a professional business coach.

Returning finally to the elite sporting personalities we looked at earlier, I said they could not have achieved what they did without the help of their coaches.  What I am equally sure is that the coaches could not have gone out there and won Olympic medals themselves, at least not at the time they were coaching their protégés to do so, even if they had been top performers themselves in the past.

So don't necessarily expect your business coach to be a better entrepreneur than you are trying to be.  It may just be that their skill is in helping others to succeed.  This skill might just be knowing all of the questions, and not necessarily knowing all of the answers.  Just like the sports coach, all they can really do is help their clients help themselves, and at this they are supremely skilful.

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The Most Important Thing To Get Right

I am sometimes asked what is the one most important thing to get right in Sales and Marketing.  Is it my logo, my website, my brochure?  Is it my database, my networking, my web presence?  Is it my negotiation skills, my contact management system, my objection handling?

In my experience, the one thing that stands out above all others - and this view is being continually reinforced - the one thing upon which all the others are built, is this:

You absolutely must be able to articulate clearly and succinctly what you do, who you do it for, and the good they get from it.

This is sometimes called an Elevator Pitch, and is often done poorly.  But really it is easy to do it well.

Other people must be able to recognise one of your ideal customers, either someone they know or maybe even themselves.  If you can't or don't provide them with a definition against which to make this judgement, how can you ever expect them to find anyone for you?  And you must be as specific as you can.  How can we pick just one or two if you say you do anything for anybody and you're diversifying?

You need to define your ideal customer in terms that require little or no initial interaction.  What I mean is, if you say your ideal customers are 'worried about their cash flow', I doubt anyone would discover this without talking to them.  Whilst this knowledge is important, and I will return to the thought in a moment, you need to communicate 'search criteria' that rely on information in the public domain.  So, working with 'accountancy practices of up to thirty partners', would fit the bill nicely.

Not all of your ideal customers will need your products or services every day of every year so, having identified examples of your ideal customer, these 'prospect seekers' need to be able to then recognise which have the sort of problem that you are an expert at fixing.  However, as in medicine, we often only see the symptoms and have to explore to identify the underlying disease.

You need to provide your prospectors with examples of the sorts of symptoms which, amongst your ideal customers, often point to problems you can fix.  At this stage they can start to suggest that they know someone who could relieve these symptoms by fixing the problem that's causing them.

Because you have given them examples, the prospectors are able to suggest that no longer suffering the pain that the problem is causing would be of considerable value.

Then, when they say to a contact of theirs, "You really need to talk to my friend John or Jenny about this; I'll get them to call you," you know you will be getting a high quality referral.

Knowing your ideal customers, the problems they are likely to be having, the pains they will suffering because of these problems, the comfort and value that will result from no longer having to endure these pains, and why yours is the best method (in the circumstances) for addressing the problem, you can start to construct your Elevator Pitch.

I should add here that this information is not only vital for preparing your response to "What do you do?"  It is the basis of all of your branding messages, however they are communicated.

I believe you actually need several elevator pitches: 60 seconds, 30 seconds, 1 breath, 1 word or phrase - all have their place.  And for the longer ones you may well need different versions depending on whether you are training your surrogate sales team - networking - or actually talking to a prospect - selling - yourself.

Practically you'll have to start long, then distil and refine.  You just won't get it right starting short and trying to expand.  You'll need to test and measure to see if your messages are coming across, and being received and understood.

One possible template for a longer elevator pitch is:

I work with (ideal customers) who (widely held problem) which means that (widely suffered pain).  I help them (pain relief) so that they (life without pain).

An alternative opening might be:

You know how (ideal customers) are always (widely held problem) which means that ......

Both are much better than:

I'm a (what it says on your business card)

Good luck!


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Determining Value-Based Fees for Software Projects - Part 4

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A couple of weeks later, Mark was really finding his feet with value-based pricing and sent me details of a conversation he'd had with a COO he'd formerly worked for.  Mark mentioned that he considered this person as a mentor, and that he values his feedback very much.  Mark was curious to discover my 'pricing-by-value' view on the responses he'd received.  Mark's words are in black, the COO's in red and mine are in blue.

1) Isn't the goal to get directly to the economic decision maker, and not some purchasing manager, HR rep, or other intermediary?

[the goal is to provide a Value Added Service, which results in a fee paid.... but you do not get to the VAS nor the fee unless you "work" the decision maker]

{Not sure that he's disagreeing with you here.  The ultimate goal is to provide VALUE, and get paid a profitable fee for doing so.  And the route to this goal is via Alan Weiss's "Economic Decision Maker".

I'm becoming more and more sceptical though about the idea of "value added" anything.  This just sounds to me too much like the deliverer can say what's of value, which of course they can't.  Only the recipient can decide if the offering is of value, to them, at this time.}

I tend to think of fairness letters as applicable to securities and commodities, not professional services.

[Fairness letters ARE used in financial transactions but it is an example of a consulting endeavor that is a gate to moving forward.....Environmental Consultants hold Clients hostage sometimes due to the fact that you cannot proceed without their consent.   Another example is certification groups (ISO 9000) that requires the use of a Consultant whether you are already doing it yourself or not.]

{I'm not really clear what a "Fairness Letter" is.  Wikipedia has no definition!  Elsewhere I find "A letter or opinion prepared by a financial advisor, pricing advisor or similarly qualified person opining on the fairness of the price paid".

In that case I would agree with you.  In the provision of professional services, if the Economic Decision Maker does not have the wit to be able to determine for themselves that the price is fair, they should not be in their position.  Businesses cannot afford the luxury of going to an outside, so-called expert, for their opinion on every price quoted.  The whole of commerce would break down!

I wonder why it's needed in securities and commodities either!  Is it not just a case of widespread CYA? - If you're not familiar with this abbreviation, it stands for "Cover Your Ass"!!}

If you're providing value to the Client, then why shouldn't you be compensated based on the Client's perception of the value of your contribution and not your time, regardless of some third party's notion of "fairness"?

[actually, typically the fee is directly proportional to the value..... 1) my fee is say $250/hr... the value someone receives from 1 hour of my time is worth 2.5 times the Consultant who is getting 100/hr....or I hope it is.... 2) Some Consultants (including me, which I did at *******) get equity along with their fee.   Lower fee for a piece of the action.  Others charge a fee as a percent of increase profit, turns, revenue, cost reductions, etc.   Fees do not have to be hourly.... in coding sometimes we used fixed price for components as an example]

{This guy should win prizes for shooting himself in the foot!  His fee is "directly proportional to value" yet is based on $250 per hour?  Not only that, he maintains he is 2½ times as valuable as someone else who charges $100 per hour?  And then "or I hope it is"?!!!!!  I rest my case.  The guy doesn't understand the first thing about value-based billing, and this illustrates it perfectly!

Receiving equity or a percentage is a recipe for payment not for, but after the results.  This means it is in the Consultant's interest to have a control on things until the equity or percentage is delivered.  This is either an ongoing project or a retainer environment.  In either case it needs to be charged for, so the original - not "lower" fee should prevail.  The Consultant should be telling the Client, "My fee is x, but if you want me to take equity or a percentage of the results, I'll be charging you extra for the privilege!}

2) The only one a Consultant should be worrying about staying in favor with is the economic buyer of his services - the one who can sign the check - no?

[You have to be careful with that one.... its a good idea to have exposure above your contact as you could find out that he is out of favor and my endorsing his idea you may be limiting your future in the account....... Like me with ********.... I was hired by him, but I had to tell *** and **** that ******** was the problem.]

{I think I'm with the COO on this.  The Economic Decision Maker might be your prime contact but you need to cultivate other relationships too.}

Expanding your role is about providing continually increasing value to the Client, not just showing up and assuming authority.  I am not sure that's what you were implying though.

[1) agree with expanding value creates expanded engagements...2) most Consultants actually shy away from "assuming authority" as it can run aftront(sic) of the employees and then you cannot take the "successes are mine and failures are yours" approach....ie... it either works, and if it doesnt' they did not implement it in the way you had recommended. 3) many Consultants I have worked with on the management side are all about increasing THEIR billing.. and focus too much on that.]

{As I said previously, I don't think you can provide value.  I think you can do things and achieve things which are valuable.  So, via subtleties of English, I think you will expand your role by demonstrating your capability to provide what is perceived to be valuable, and helping the Client to understand more of what will be of value to them and their business.  This certainly does not stem from merely "turning up".

I don't think "assuming authority" will work.  Even if the Client is timid, non-assertive, and lacking business acumen, will you not achieve greater buy-in (and become more irreplaceable) by allowing the world to see that the Client had a large, if not the greater share in making these achievements happen?

Who would want to take a "successes are mine and failures are yours" approach?  Again I feel a "successes are yours; failures are ours to both take responsibility for and to learn from" is a better policy.  If the ideas were not implemented correctly, this HAS to be the Consultant's fault!  I am confused with the COO's stance on his last point here.  Does he mean "billing" as the "lights on Broadway" type of billing or as the ability to invoice for fees?  Never mind, in either case I would contend that those Consultants should get educated about what delivering value and pricing accordingly means.}

3) I think of this as a self-esteem issue - I certainly suffer from this!

[Most Consultants are over confident and have a high degree of self worth....how else could you charge someone for telling them (many times) what they already know.......]   You have to be confidant stepping up to the plate.... even when you have to go research for the answers, but you exhibit integrity and confidence.... I think you would do well at this....]

{Let's assume that this naïve viewpoint is the COO's generalisation on all the poorly behaving Consultants.

My take is this.  1/. You have to be confident in your own abilities, and have sufficient integrity to admit when you don't know.  2/. It would be gross arrogance if you never doubted your own abilities.  3/. I believe every Consultant goes the through "Oh, my God.  I've got the assignment.  What shall I do?" moments.  4/. If the Client already knows something, telling them again isn't of value, so you shouldn't charge for it.  5/. Building a network of associates and strategic alliance partners helps.  Having the ability to say truthfully, "I don't know, but I know a man who will know" is a great comfort.  And leading on from this, the ability to say "Let's see what is the most pressing issue you face and then find an expert to work with you on that" is great too.  Knowing you can never unearth a problem you can't help the Client solve is a hugely comfortable place to be!}

Not sure I can relate to your case in point - perhaps if some CEO hired you to concoct some pleasant looking findings to satisfy his board of directors...not exactly ethical and not really the kind of work I'd want.

[Its all shades of grey..... only machine language is binary.... there will be times in management consulting where you have to work within the system to satisfy the parties even if you think a different method/tack would be better, but it might be to upsetting to the organization.... ]

{I agree with you Mark.  As soon as this becomes apparent, grab whatever fees you can, walk away and explain why you're never coming back.  Working this way even once will so stain your reputation you may never get rid of it.}

4) I don't think it's possible to be a very successful Consultant and have low self-esteem.  The potential Client will see it coming a mile away and will never trust you.  I myself am a natural introvert and often confuse self-esteem with arrogance...something I'm working on.

[Agree..... Humble confidence.... not arrogance and never lead with your chin...   You will be fine at this.... always listen and show patience...not necessarily my strong suit, but I learned.]

{I concur with the COO here.  Two things about confidence.  Firstly confidence comes with practise, not contemplation.  Get out there, try it, and learn from the experience.  Why do actors rehearse?  So it becomes second nature.  The ancient Greeks didn't think this way, at least not with the sciences.  They abhorred experiment.  For them contemplation and not observation could solve everything, and look where that left us.  Up to the time of Copernicus to get rid of a geo-centric universe!

Secondly, lack of confidence can often come from the little voice in your head, telling you either that you can't do it or what will go wrong, or what will happen when it does go wrong.  And it's hard to displace these "Mother Hens".  It's often easier to substitute rather than eliminate.  For example, I had one Client who was hesitant about everything.  We got it down to her parents warning her not to stand out from the crowd, and she couldn't get rid of this.  After I suggested replacing it with the thought that no-one would ever come to her shop unless she was different, she instantly was able to move forward.}

5) This comes from using a time-based billing model from accounting.  Many lawyers have abandoned the time-based billing in favor for value-based fees (i.e. contingency).  If you consider yourself a commodity offering, you will ultimately negotiate on an hourly fee, which becomes a race to the bottom and a lose-lose for both Client and Consultant.  You can certainly negotiate the fee - just negotiate the level of value proposed and have the Client choose Option 1, 2, or 3...a choice of "yeses" as Alan Weiss would say!

[actually more consulting is done on a T&M basis than on a structured fee..... Fixed Price for fixed work or results are hard from a contractual  standpoint.  Yes lawyers do it, but usually only after they have a certain book of business to support their operation.   As stated I do some things where I get a ½ to 1 percent fee on top of my hourly.  I also always work against an estimate (e.g. I think this will take about 80 hours) but in my line of work they are always adding and changing the scope... SOW's Statement of Work ie SCOPE is important in all assignments BUT, if you go the Fixed route they are tantamount.

Oh and if they want to hire someone for less... then OK... it's the same with the furniture I build..... you can find one for less, but it won't be the same......You don't really compete down to a lower common denominator........ that is not who you want to work for......]

{Even if more work is done as T&M, this doesn't make it better!  Why is "Fixed Price for fixed work or results" hard contractually?  You can define the scope of the project, the metrics which will allow anyone to say whether or not the goals have been achieved, the elapsed time and the fee.  What more do you need in order to draft a contract?

What does "only after they have a certain book of business to support their operation" mean?  Does it mean they build up enough experience to know what to charge every time?  Or does it mean they have built up enough cash reserves that if they lose money, they can ride it?  If the former, this is not value based at all!  It's one size fits all!  And they could be perpetually undercharging!

And if the latter, they are not worthy of the name 'businessman' if they continually trade at a loss!

I agree with the COO's idea of estimating his costs, but he doesn't 'cost' at the same rate as he 'charges'.  In implementing Value Based billing you need to know your walk-away point, but a gut feel is accurate enough.

"in my line of work they are always adding and changing the scope" just says the COO is not being tough enough in preventing 'scope creep'.  On a fixed scope, fixed fee project, if the changes are within the agreed scope, they get done.  If they aren't, that's a new, chargeable project.  The choice for the Client is then whether to call a temporary halt to the current project whilst the second is completed, or to continue with the original project until it is finished and then embark on the new one.

I believe the COO is correct in his assertion that only he can do what he does, in the way that he does it.  The Client may well try once to turn you into a commodity so they can enter you into a price-war.  Don't allow them to.  Remind them of your uniquenesses.  Why me?  Why now?  Why this way?

And finally, if it doesn't look a bargain investment to the Client and a hugely profitable reward for you, walk away!  No-one, not even a start-up can be that hard up for business that they'd sell their soul to the devil!}

Still more to come!

Determining Value-Based Fees for Software Projects - Part 2

Register now for my 'Pricing By Value' Workshop in Cambridge, England on September 29th.

The mystery correspondent was of course Florida-based Mark Richman of http://www.empiresoftware.net/

Mark went on to ask me:-

"While I understand the concept behind value-based fees, I'm still trying to wrap my head around how to apply them to what I consider highly commoditized services. That is not to say I devalue my own worth, but I do recognize that there is an upper bound to what someone is willing to pay for a service, regardless of ROI - price elasticity of demand.

"At what point am I delivering a valuable service, expertise, information, guidance, and coaching, and at what point am I simply laboring to produce a relatively undifferentiated good (i.e. a presentation website)? I tend to think I do much more of the latter, unfortunately. Certainly, I can rattle off a unique value proposition to a prospect, but many will have shopped around before they talk to me and already have an expectation of what they will pay.

"This brings me to my next hurdle. Assuming I have somehow navigated past the prospect's early push to hear a price quoted, I find that I get nervous asking for more money than I think is "fair" (whatever that means). Is it a lack of self esteem, or a sense of ethics run amok?"

I cover all of the dozen or so points he raised in my Workshop (and more!), so again, I replied to him in detail, tackling his points one at a time.

"what I consider highly commoditized services"

"It really doesn't matter what you consider! The client's perception is the only thing that counts!

"You are unique and provide a unique service, so it is only by your own lack of 'Sales Conversation' skill that a client could be allowed to retain that impression of "highly commoditized". If they do retain it, this just means you haven't done your selling job well enough!"

"not to say I devalue my own worth"

"It's not yours to devalue (although you could blow it completely!), and it's not your worth that matters! It's the client's perception of the worth of having their problem fixed that matters, coupled with your personal value to the client. This is where the 'Value Conversation' needs to be heading. As I said previously this can take quite a large chunk of your sales conversation, and mustn't be truncated."

"there is an upper bound to what someone is willing to pay for a service, regardless of ROI"

"There is an upper bound, but based almost exclusively on ROI! Having enabled the client to articulate for themselves the true value of having their problem fixed, your fee will be seen as an investment on which they expect that return.

"A ROI of 20 to 1 sounds mightily attractive! 10 to 1 is still pretty good. Many consultants say they'll make a client at least three times their fee, but I think this is not desperately attractive. Less than 3 to 1 is certainly not a brilliant investment, even though it does make money. We are trying here to get a reaction of "That's a bargain!", so go for a high ROI."

"price elasticity of demand"

"Re-read Alan Weiss's Value-Based Fees - particularly the 'Supply-and-demand illogic' section of chapter 2 (in my edition) on ''The lunacy of time-and-materials models'. Alan explains brilliantly why the economists' theories that apply to commodity markets don't apply to non-commodity markets such as you providing your services. "

"At what point am I delivering a valuable service etc"

"Easy! When the client believes you are!"

or "laboring to produce a relatively undifferentiated good"

"Easy again. Only when you allow them to think this way!"

"I tend to think I do much more of the latter"

"At the risk of sounding repetitive, it's not about what you think! It's about what the client perceives and believes."

"I can rattle off a unique value proposition to a prospect"

"Do I sound like Elvis Presley continually saying "one more time" to the band? The client is the one who determines value! You have to allow the client sufficient time to reach this conclusion (generally with your guidance via your questions, but certainly not putting words into their mouth) for themselves, so 'rattling off' is almost by definition not going to work. And your proposition comes almost at the end of the sales conversation - it's where that entire conversation has been heading all along - it's not even at the end of the value conversation. Re-read the rest of 'Value-Based Fees'!"

"already have an expectation of what they will pay"

"This is natural, but will be based on their perceived remedy to their perceived pain, turned into a commodity, and put out for the world to bid the lowest price for! If you hear "that's too expensive" this really translates as "I haven't understood enough of the value of having my problem fixed in this way to see this as a bargain investment in order to achieve that return."

"You need to get them to understand for themselves what is their fundamental problem; their 'underlying disease' that is causing the 'symptoms' or pains that they are experiencing. Once they understand, they can articulate it to themselves, and then to you, and then you can understand also!
A useful question is "What keeps you awake at nights?" I doubt the answer is lack of a website! Lack of profitable sales, maybe! You have to ask other value seeking questions first though."

"somehow navigated past the prospect's early push to hear a price quoted"

"Well done for identifying this one. Client questions about your daily rate are designed (even if subconsciously on the client's behalf) to identify you as a supplier of commodities, and thus be suitable material for forcing into a price war.

"There is only one way to get rid of the daily rate question and that is to say "I don't have one!" And mean it! If you're not charging for your time, why do you even need one in your head?

"It would be wrong to leave your answer there however. You need to continue along the lines of "I'm quite prepared to quote my fee, at the appropriate time, later, but at the moment I don't know enough about your issues to do so. Please can we start/return to talking about the problems that are bugging you right now?"

"I get nervous asking for more money than I think is "fair" (whatever that means)"

"Firstly you have to accept that backing winners at odds of 10 to 1, even 20 to 1, is more than 'fair'! Secondly, everyone gets nervous when they see how they've been undercharging in the past. [They've also been under-delighting, which is why they've been under-charging!]

"I know I was no exception, particularly in moving from "I'll invoice you at the end of the project" to "My standard terms are 50% before I start and 50% after four weeks". Stating that my fee was five or ten thousand pounds instead of the two thousand I would have asked previously was less of an issue for me, but all of us have different types of nervousness."

"Is it a lack of self esteem, or a sense of ethics run amok"

"Almost certainly it's a lack of self confidence! The good news is there are simple techniques for gaining confidence at this.

"As we've implied already, the toughest sell is to yourself. One technique that works for many people is to think of the highest fee you've ever been able to charge, multiply it by five, and then look in the mirror and tell the face you see there "My fee is x thousand dollars". Keep doing this until you can do it with a perfectly straight face and no hint of embarrassment.

"Confidence comes from practise, not further contemplation. If you can say it to yourself, you'll be fine in front of clients. And it gets easier every time.

"Do the value-based thing properly and effectively you're telling the client 'I know a horse that is absolutely guaranteed to win, but you can still place your bet at odds of 20 to 1.'"

I concluded by asking Mark, what is there to be embarrassed about in that?

More to come soon ...