Harder Or Smarter? Art Or Science?

The Sales Director's number one priority
How can you measure the effectiveness of your sales team?  What should you measure?  How important is it that you measure it?  I guess the answers are mostly, "Not sure", "Not sure" and "Very"!  And although the second might be more specific, are the specifics quoted the right ones?

A survey of Sales Directors in 2008 showed 'measuring sales team effectiveness' to be their number two priority, which seems to justify my claim of 'very' as the third answer.  So what was their number one priority?
That was 'increasing revenue' which possibly implies a disconnection between sales and marketing as 'increasing gross profits' would have been mine!

But coming back to measuring the effectiveness of the overall sales function, we need to consider whether working harder or smarter is the better strategy.  On top of this we need to decide whether sales is an art or a science.

What areas and functions may be easiest to measure and then improve?

How can you measure the effectiveness of your sales team?  What should you measure?  How important is it that you measure it?

Sales is an art, and not a science
Unsurprisingly, the general opinion is that smarter is better than harder.  The expression 'busy fools' came up quite a lot, apparently.  Also we need to recognise that sales is an art, and not a science, as things that work once may not work every time when repeated.  But having said that, sales is a highly 'teachable' art, where practitioners get better with practice, and where coached and mentored practice is more effective than unsupervised repetition.

This leads on to the idea that there is no single 'magic pill' that will cure all ills.  Smarter will mean making smaller improvements across many areas, so what are the easiest for the Sales Manager or Sales Director to measure and then positively influence?

Lead Generation
This is essentially a Marketing activity, so the sales team shouldn't be being asked to do it all.  But neither should their performance be judged acceptable if they do none of it, and recognise that when they do so they will be wearing their 'marketing' hat!

In generating leads, the emphasis must be on quality rather than sheer quantity.  There must be better, earlier filtering of 'no hopers' and 'time wasters', with self-disqualification being particularly effective.  Marketing have a big responsibility not to attract rubbish in the first place!  The Marketing function should also be providing all who wear a 'marketing hat' with one or two simple differentiator/qualifier questions to further eliminate, at the time of first contact, those who will waste valuable resources.

Sales is a highly 'teachable' art.  Practitioners get better with practice.  Coached and mentored practice is more effective than unsupervised repetition.

Background Research
When following up a sales lead, before first human contact, there is a lot that can be done to research the prospect and thus colour the form of the response.  The internet provides a wealth of free information and a lot more at very moderate cost.  This is an insignificant investment when compared to the time and effort wasted on enquiry follow-ups that should have been seen as hopeless from the start.  Therefore it is a crime not to make use of it.

The sales team can be given simple, efficient tools to access this information, and be motivated to do so.  The lead generating function could even do this for them and supply the results with the lead.

Qualify and Prioritise
This continues the theme of the first two points.  If you're going to lose, lose early!  Don't waste time on no-hopers.  Unsurprisingly (but not always commonly seen) weeding out a list before you start working on it will improve your conversion ratio!  Qualification should become a habit.

These thoughts apply too when following up a lead.  Building a relationship, building rapport and trust, and getting commitments at every step is in itself a filtering process.

When following up a sales lead, research the prospect.  This is an insignificant investment compared to time wasted on no hopers.

Cross-Sell and Up-Sell
This should be a 'no brainer' but is it always thus?  Getting people to buy more is one of the only three ways of growing sales, gross profits and your business, so again it should be a habit, shouldn't it?

Oddly enough, this appears to be more of a problem in businesses with large product ranges.  It is reported that product training doesn't seem to be as effective as you might imagine, but I could find no information on how well the training was constructed or delivered!  Most effective is the sharing of what works.  So many internal sales meetings seem to focus on what went wrong, and skim over what went right!  The balance should be the other way round, but never lose sight of the fact that one size doesn't fit all.  The answer is to adapt and adopt, test and measure.

Get More From Existing Customers
I won't even bother with the cliché!  Suffice it to say that Account Planning and regular communication is a good idea, but don't plan for planning's sake.  Only do it if, and only do it in a way that, you can demonstrate it is helping.  Despite the cliché, you need to have a balance between first time and repeat business, and you should keep this balance under review.

Many internal sales meetings seem to focus on what went wrong, and skim over what went right!  The balance should be the other way round

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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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Why is a Salesman Like a Sportsman?

Continuing with a previous thread of the similarities and differences between Sport and Sales, there are several obvious common themes.

• About competition and 'performance'
• Results oriented
• Have to get it 'right on the night'
• Underperformance is highly visible
• Operating under pressure
• Past and potential performance are merely indicators
• Preparation is vital
• Preparation is no guarantee of a good performance
• Complacency is a killer, e.g.
  • Underestimating the competition
  • Overestimating the competition!
  • Skimping on preparation
  • Ignoring the need to monitor and assess developments in your field

However, the approaches to training seem vastly different.
Excuse the gap.  Blogspot doesn't seem to handle tables perfectly!

Sports Professionals	Sales Professionals
Train constantly	Train occasionally, if at all - Maybe one or two days per year
Work on all different aspects of their game	Rarely address more than one or two aspects
Some training is under guidance, some is on their own	What training there is will often be self-motivated and individually organised
The Coach continually monitors performance and operates a 'continuous improvement' regime	Managers monitor performance less often, and frequently wait for a crisis before offering assistance
Coaches also develop individual training programmes for each competitor in their charge	Whole team only ever goes on the same 'one size fits all' course
Huge use of role-play in practising for their event	Apart from any that is part of a training course, there is a notable lack of role-play - You're in at the deep end, doing it for real!

Can you imagine this Sales scenario operating in professional competitive sport?  Yet we have to assume that salespeople also want to perform to their best, and that their best is at a high level - otherwise why haven't they changed to a different career?

The Sales Manager and Sales Director have to view their roles as 'Coaches'.  In professional football, for example, if the team is consistently performing badly, it is recognised that the results are the ultimate responsibility of the Manager.  If the results don't come, it will be the Manager who loses his job before too many of the players lose theirs!

If the salespeople model themselves on any particular sport, they need to be aware of the circumstances that prevail in that sport.  For example, in Formula 1 mid-season testing has been banned since 2009, but not because it delivers no benefit.  Far from it!  It has been banned purely in order to level the playing field for the less affluent teams.

In both scenarios, the team have to be trained and they have to have the opportunity in a 'safe environment' to try putting into practice what they have learned.  Further observation and suggestions for improvement must be effectively continuous.  A sports Coach will monitor their protégés in action, in competition as well as in training, because performance under pressure has to be analysed and shortcomings acted upon.  Sales needs to be similar.  In both spheres there has to be room for new ideas, new techniques, new training regimes and new approaches.

Those responsible for sales team training should ask themselves, "Could the team apply all they've been taught anyway?"  In a sporting context you'd be hard pressed to answer anything except 'of course'.  But has the sales trainer taken the time to understand the company's customers and markets?  Their problems and circumstances?  Have they observed the sales team in action, under pressure?  This type of trainer would not be cheap, and it would mean investing a large amount in your sales team.  But aren't you expecting them to be as professional at their jobs as any top professional sports star is at theirs?

Apparently, around a third of sales people change jobs each year, so does this tempt 'management' not to invest in their development?  I doubt the figure is as high in professional football, despite the lively transfer market.
Do football club Managers feel it's not worth developing their players because they'll all have moved on in a few years?  By not investing in those staff who do leave, you'll be failing to invest in those who'd like to stay, and they'll up and leave too because they want to be developed!

Many sports which operate in a 'club' environment make use of senior players to help with the development of juniors, and sales teams need to do the same.  Neglecting the accumulated in-house wisdom would be a grave error, so analyse why your top performers are at the top.  Help them to do so if they can't put it into words themselves.  Get them involved in the training and coaching of the whole team.

If you have any responsibility for the results of a team - even a team of one - don't just tick the box which says 'we've done training'!  Take a leaf out of the sports Coaches' book.  Olympic medals aren't available for selling, but if they were, wouldn't it be nice to think that your team would be among the medallists?

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Changes In Buying Attitudes

21st century Sales and Marketing is about solutions, win-win outcomes and lifetime relationships.  It is about rapport, understanding and value.  It is about co-operation, appreciation and service.

We have to be careful that our behaviour and language do not turn the experience into confrontation, win-lose and one hit sales.  And the situation is more or less identical across most sectors.  I even talk to my friends the undertaker and the wedding planner about how to get repeat business!

Much as it was advocated in some quarters in the past, I'm not certain the 'wham, bang, thank you' style was ever hugely productive; and it is almost certainly going to be ineffective with today's more sophisticated buyers.  So what is it that is making buyers more sophisticated?

The answer lies in communication and information - in short, it lies in the internet.  'Googling' what it is they want gives them access to remarkable amounts of information from more suppliers than ever before.  In the past their decision making was far less informed, but now they will know a lot more before you ever get to talk to them.

There is a risk, however, that this increased product knowledge will become merged in the buyer's mind with price!  Buyers may well reject initial quotes out of hand, even from favoured suppliers.  They will try to treat your product or service as a commodity.  Buyers will be thinking that, if they can save a few pennies, they will do so.  If your product or service isn't a commodity, don't let them believe it is!  It has never been more necessary to understand their fundamental problems, the circumstances in which those problems exist, and to propose solutions that reflect why you are uniquely placed to help solve them.

It is also vital to understand the customer's decision making process - one of many 'circumstances' - and this may well have changed recently.  Companies are becoming more risk-averse than ever; decisions are being referred to and made by committees; and no-one wants to take personal responsibility for anything.  People are becoming terrified of being held accountable.  But you can, and should, be offering certainty - but this should also carry a price premium.

Technology is not all bad news though.  It can give access to more information about your competitors' offerings; it can make internal sharing and discussion of information easier; but it can also make it simpler for you to by-pass 'gatekeepers'.

Increased buyer sophistication is also leading to the increasing popularity of referrals.  Networks, customers, unconverted prospects, suppliers, social acquaintances and many other contacts can be approached for referrals, and should be!  It might be as simple as giving you the name of a key decision maker, but it all helps.

Most customers are seen as loyal and most want to be, but as supplier you should never take them for granted.  It is the service with which you deliver your product (or service) that counts.  Keep a customer ecstatic and they won't be tempted away, even by a cheaper rival.  It remains true that people buy from people they know, like and trust.  It is the value that the buyer derives from the purchase that matters.  The more salespeople understand what value means to the buyer in a given situation, the more they can help the buyer.  So make sure the buyers know why you are asking all these probing questions.

But what if yours is a commodity?  How can you compete against, say, cheap imports from the Far East?  The answer is for the sales team to enable their customers, and thus themselves, to fully understand the fundamental problems, the circumstances in which these problems exist, and the way in which the buyer's own performance will be judged.  In this way it becomes apparent what 'total package' is required, and the customer can be helped to see the full value of receiving it.

Key pointers for future behaviour of your sales and marketing team.

• More customer communication and contact
• More 'business knowledge' - Not just product knowledge
• Being more available
• Reducing bureaucracy
• Less 'pitching by quotation'
• More discussion and agreement face-to-face
• Better 'keep in touch' systems
• More and better induction and ongoing training
• Build more rapport and better relationships
• Understand how buyers want to buy
• Understand 'problems and circumstances'
• Don't make sales presentations - Don't dictate
• Be beneficially different
• Give buyers choices

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Recruit And Train Your Sales Team

One of your reasons for attending a Networking meeting should be to recruit and train members of your surrogate sales team.  You are lucky if you can sell to someone in the room; you need to have them and their address books selling for you.  Pretty obviously they'll have no idea how to do this and no motivation to try, until you have told them.

Coupled with another of your reasons for attending - the ability to meet and get to know strangers - this means that 'recruitment' will be on your agenda.  Please be careful!  Don't try to rush into 'induction training' too early, and don't neglect further training for existing team members.  People who already know you, what you do and who you do it for, can be re-invigorated by some pertinent Continuing Professional Development (CPD).

Assuming you've broken the ice, established some rapport and are starting to enjoy each other's company, there is some pretty fundamental stuff you need to communicate, and then be sure has been received, understood and stored.

You can also use these same 'headings' when someone is recruiting and training you into their surrogate sales team.  If you don't understand these things about them and their business, you won't be an effective member of their team, so don't be afraid of letting them know you haven't quite got the full picture.  They will thank you for letting them help you be a better ambassador for their organisation, and they might just get better at explaining themselves in the future.  You will need to know:

• How to identify their Ideal Customers, using only public domain information - e.g. 10 to 40 person accountancy practices within 30 miles of Cambridge
• What 'symptoms' to look out for when you encounter one - e.g. Suffering from cash-flow problems
• How to check these really are symptoms of a 'disease' they can cure - e.g. They can only fix some of these personally: Low sales? Unprofitable sales? Excessive debtor days? High overheads? Inefficient staff and/or procedures?
• How to explain how wonderful life would be without these symptoms
• How to indirectly establish enough credibility for them, to allow contact

Neither of you is trying to get the other to sell their product or service for them!  What what both of you want the other to do is gain permission to broker an introduction, and then do so.

The sales training you do with your team on these occasions can be similar to training a 'regular', employed sales team.

• Some members of the team will be performing better than others, so study and analyse what they do, and share the ideas with the rest of the team
• Make study and analysis a continual activity, not a one-off fait accompli
• Best practice has to constantly evolve - something new might make the best even better
• Best practice may need to adapt rapidly to sudden changes in the market
• Don't neglect the 'tried and tested' techniques that new recruits can adopt, without fear of your (management's) disapproval
• Ask the entire team for ideas - "What's working for you right now?"

Again the best could get even better.  Modelling the best is just a starting point, a benchmark, a springboard, so accept ideas from anywhere.

Just as with a 'regular' team, you need to encourage communication within the team and with 'management'.  Encourage discussion of difficulties and have systems in place for team members to debate specific issues amongst themselves as well as with you.

As well as understanding prospects' problems and circumstances, all the team must be able to access the information which allows them to understand your problems and your circumstances.  By this I mean that they need to know the questions you (management) will ask as part of monitoring their performance, so they will have asked their own questions of the prospect and have answers ready for you.  They will be able to monitor their own performance against these well-publicised and understood rules too.  Bi-directional feedback will be of great help in resolving any bottlenecks.

For your surrogate team, out there prospecting on your behalf, processes and later developments of them will only work if the team 'buy into' them.  Your surrogate team need to feel listened to, the processes need to make sense, and they need to be extremely simple to follow.

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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!

Sales Myths And Folklore

Research has shown that some of the preconceptions about sales folk are in fact untrue.  Apparently salespeople are not 'only interested in deals', 'only motivated by money', 'lazy', or 'mercenary'.  What has emerged from the surveys is that salespeople are 'influential', 'hardworking', and 'passionate about their contribution to the business'.

On the other hand some of the generalisations that salespeople themselves like to believe, have been shown to be well founded.  For example, over 70% of salespeople are men, who are likely to be paid more and probably have a more senior position than their female counterparts.  Unsurprisingly there is a variation in the figures from industry to industry and from one region to another.

Over 50% of salespeople never planned a career in sales and barely 20% of salesladies look on sales as a lifetime career, compared to almost half of the salesmen.  However, the ladies felt far more positive about the way their careers had progressed in recent years, compared to the men.

Salespeople are proud to be in sales, and 95% enjoy working in the profession.  Of the 5% who say they don't, a large number are in IT and Telecommunications where earnings are generally highest.  The sector with the highest 'enjoyment factor' is Business to Business with 98%.

Salespeople tend to judge their own work primarily by performance against targets, but this maybe because that is what others measure them by.  With advances in technology being applied to the sales process, face-to-face selling is still reckoned to be the most effective way to secure business.  Perhaps surprisingly, sales divisions were reckoned to have the most influence in over 60% of companies, with accounts/finance at 20% and marketing at 11%.  But then the researchers were surveying sales people!

Unfortunately almost two-thirds of sales people do not feel well-managed, with 'laissez-faire' and 'distant' criticisms coming to the fore, rather than 'aggressive' or 'dictatorial'.  Almost as many claimed they could fulfil their line manager's role more effectively than the incumbent.  Amongst the managers of this group specifically, 'aggressive' and 'dictatorial' did dominate.

For the sales managers, long hours, long weeks, short holidays, working whilst on holiday, and taking insufficient exercise all loomed large.  These managers stated that their biggest motivator was winning the respect of their teams.

At a higher level, the sales directors still work long hours but not long weeks.  Far more than the managers, the directors were applying their own skills to their CVs and other career related activities.  Somewhat bizarrely, the directors and the non-managerial salespeople do seem to take plenty of exercise.  Looking at other aspects of lifestyle, most salespeople eat healthy lunches, with less than 10% resorting to burgers, chips and pies.  One in eight claimed never to eat lunch.

Rather worryingly, one third of salespeople had received no sales training at all in the previous twelve months, and only 10% had received more than 5 days.  Amazingly not even half had taken it upon themselves to read a self-development book, and a quarter said they would not be interested in a free newsletter dedicated to sales improvement*.  Once again it was in the Business to Business sector where the greatest proportion reckoned they actually had received adequate training.

The researchers concluded that:

• Sales is getting tougher
• Salespeople's needs are more complex than just money
• Salespeople are hardworking
• Sales needs more women
• Salespeople enjoy their work and are proud of what they do
• New talent needs to be better nurtured and developed
• Salespeople want to improve their sales skills

*There's lots more advice like this in my regular bulletin.
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Recognising Buying Signals

In our society we're not very good at saying either, "Great!  I'd really like to buy this from you, NOW, PLEEEEEASE!" or, "It's probably OK but not for me!  I don't want it, I don't need it, I doubt if I ever will, and if I did I wouldn't buy it from you, certainly not on those terms!"

Unless of course, you're an Auctioneer, when people will either scratch their nose, pull their ear, wink, nod, wave their hand or a piece of paper, shout, even wave a numbered ping-pong bat at you.  Or else they'll keep still and quiet and do and say nothing.

You have to be 'tuned in', alert and looking out for the 'Buying Signals' that people use instead.  It is hugely important to spot and react appropriately to buying signals.  In fact it can be positively harmful to your business if you don't.

You should respond to a Buying Signal by making suggestions!  If the signal took the form of a question, answer it briefly, but move straight away into making suggestions.

These signals can be misinterpreted so you have to be careful.  The prospect may just be seeking clarification, but at least they are still 'playing ball' with you.  And you have to be aware of what it is they're signalling they're ready to buy!

You need to react immediately to Buying Signals.  These signals can and do go away as quickly as they appear.  If you don't change tack and respond to buying signals by making suggestions, and instead keep 'presenting', it's very likely that you'll talk yourself out of an order that was there for the taking.  Any information you give to a prospect after they've decided to buy from you begins to give them reasons to change their minds.

Then there are the 'Not-Buying Signals'.  You need to be even more alert for these as you don't want to waste your time chasing 'browsers'; you want to be chasing 'buyers' instead!  As you seek appointments or follow up enquiries, you need to sort out the buyers from the browsers, and then lavish your attention on the buyers.  You need easy wins, not hard fought victories (rare piece of military analogy!).

Let the very way in which you prospect help you weed out the non-buyers.  People look in trade directories because they need a tradesman, not to while away a rainy afternoon!  People who buy from suppliers of complementary services to your own need you to add value to their original purchase.  If you have a website and use pay-per-click advertising, choose keywords that are buying queries, not browsing queries!

Types of Buying Signal
Buying Signals can be verbal or non-verbal; they can be questions or they can be statements.  They might even be playing, "If .... then ...." with you.  The verbal signals fall into several categories.  In many cases they can be worded either way.  The most commonly met are the first two, but they are all important signals to be looked out for.

• Repeating a question that has already been fully answered, and generally acknowledging that it has been - "How much did you say it costs?" - Be aware that if it's said in shocked surprise and incredulity, it's a cue for more probing!


• Picturing themselves working with you - "I could see you on a Thursday" - "How often would we need to meet face to face?" - "We'll need to involve Janet"


• Asking for a sample that's not necessarily free - "Can I try it for a month and see if it works?" - "I'll need to see it in action"


• Making positive noises - "That sound really good" - "Who could say no to that?"


• Asking 'chicken' questions - "What will happen if it doesn't produce results?"


• Any statement or question about money - We don't need examples here.  Even if they say it's overpriced, to have got to the top of their priority stack, these comments or questions say they want to buy.


• Asking questions about details - "Which of my people will be directly involved?" - "What exactly will you be doing?"


• Any statement or question about timing - "When can we start?" - "It'll have to be next week" - "Can't we do it in four weeks instead of five?" - "I'm tied up until Thursday" - If this type of signal arrives as a question, you can legitimately avoid answering it by asking back, "When would be best for you?"


• Asking for your professional guidance or opinion - "What do you think would be best?" - "What would you do if you were me?"


• Asking a colleague who's in the room - "What do you think?" - They've decided but they just want confirmation that they're not being daft.


• Mentioning a negative experience with a previous supplier - "Everyone I've tried has been useless!" - These types of comment are actually cues for more probing


• Asking for references or for a personal contact with a satisfied client - Again no examples needed.  It's effectively a no-brainer!  Again they just want confirmation that they're not being daft.


• This leads us on to no-brainers of the 'sledgehammer' variety! - "What happens first/next?" - "Where do I sign?" - "We've looked at other suppliers and we like you best" - "Here's our Purchase Order" - Or they may start to negotiate - "Would you accept £4,000?"

Then there are the non-verbal signals

• Spending time concentrating on just one of your products


• Asking/looking for help


• Touching their wallet or its contents, or their chequebook - Literally or metaphorically


• Changes of body state - Relaxing, moving stance, gestures, skin tone, style of speech


• Getting out their pen - Literally or metaphorically

Types of Not-Buying Signal - Maybe it's time to move on

• Unwillingness to trade commitments - At least unwilling to make their own in return for yours


• Your calls, messages and e-mails go unanswered


• "I really like your suggestion but I need to ........ before we can go ahead"


• Avoiding eye contact when you meet


• "We'd really like you to help us but we just need a bit more time/have some other priorities to deal with first"


• 'Playing' with your product, or looking at many without ever concentrating on one


• Physically moving around a lot, quickly

So what should you do here?  There could be legitimate reasons outside your control, but largely there won't be.  We Brits are just hesitant about coming out with the truth!

You should confirm your interpretation - Ask further probing questions.  You can even ask, "Did we do something wrong?"  This can even be your voicemail, SMS or e-mail when earlier messages have gone unanswered.

Then either leave well alone or make some more enlightened suggestions.

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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 ...