How do you price for services.

How do you price for services.

Feb 9, 2017 | Customers, Marketing

A common question from all those in consulting, and one I ask myself regularly, as it becomes really easy to under-price in order to get the job.

From time to time in the past I have done jobs for various bodies that I believe in, pro bono. I always thought it was my way of making a contribution, and that the effort was understood and appreciated.

Not so. In most people’s minds, things are worth what they pay, so a free consulting is worth exactly nothing, particularly if the recommendations are challenging and uncomfortable to implement. It is then very easy to just walk away as there is no skin in the game.

So, how do you go about setting your price?

Determine your hourly rate. Generally you can get a handle on the amounts that are the ‘going rate’ in the market, not just for your service, but for the range of services a business may need. For example, book-keeping is around $60/hour, a virtual CFO will be around $160/hour and a partner in a large accounting firm $400 plus. If you are selling accounting services, at least that gives you a context. More qualitative services like marketing have a similar range from the kid who can run your Facebook account for you, (not the copywriting, that should cost way more than a base rate) to the virtual  marketing manager with all  the skills of implementation at $160, to the widely experienced guru who will be $400 plus. Most shudder when that number is quoted, but why would a highly qualified accountant who looks in the rear vision mirror most of the time be worth more than a highly qualified marketing and strategic thinker who is looking forward, to the things that will sustain the success of your business?

Estimate the hours of a project. This always involves breaking a project down into its component parts, and making a judgement about the time each will take. The complication is always ensuring that the goal posts do not move. Agreeing the exact scope of the work up front is essential, and always hard, but scope creep adds enormously to the risks you face, and is present in almost every project I have ever done.

Provide the quote. Pretty obviously a multiplication of the rate by the hours, in most cases, perhaps plus a bit for scope creep and complications you did not anticipate. These are some of the considerations that play into the quote process:

  • A fixed price will always be appreciated by the client, as it removes risk, so long as there are also guarantees of performance in place. A fixed price also enables budgeting, which is usually very welcome.
  • Will the job lead to ongoing work? Often a key question in providing a quote, particularly for small firm like mine where a lot of time is spent prospecting. A flow of work that generates reliable revenue is enormously valuable as a means to keep the beast fed.
  • Who will be doing the work? Often the system is that the really important and highly compensated partner or rain maker sales person does the selling and negotiation, then hands the job over to the gophers, whose time gets charged at the high rate. Clients are not stupid, they understand this process, and have differing attitudes to it, usually depending on the confidence the gophers create in the first meeting. In my case, I do all the work, bits where some specialist advice is needed, I provide some referrals, and my clients make the choice. I do not clip the ticket for the referral, unless I am involved in the project management, and then the added cost is absolutely transparent.

Actively manage and communicate the project progress. Managing expectations is a key success necessity, and to do this communication is essential. Usually about the time you are tired of the communication is about the time that it is sinking in. Mutually agreed KPI’s are important, they act as milestones, but often the qualitative understanding of progress being made is as, or more important than, the pre agreed KPI’s.

Tracking your time is a key activity, you need to know how you are going compared to your expectations, and while this is not for the clients sake, it is vital for yours and the long term profitability of your business. There are many tools around to track time, pick one that suits you, even if it is a simple note in a diary.

Know who your ideal client is. Maybe not the name, but the characteristics they display, the market they are in, the problems they face to which you have a unique set of solutions and relevant experience. Having this piece of thinking done will enable polite removal of tyre kickers and those who are not really ideally suited to benefit from the experience and knowledge you have.

‘Embrace’ your pricing. This may be the hardest part of the equation for most. Charge what you are really worth, name the number with confidence. Usually for services that is hard, and is based on the outcomes, not the cost. An expensive consultant that gets results is far better value than a cheap one that does not. At some point, the question of what success means to your potential clients business comes into play, as does the ability to pay.

It is inevitable  that you will not get every job, and that you will need to keep a straight face as potential clients over-act a response your prices. You will also have to believe in yourself to the point where you can look people in the eye as you deliver the price and they over-react, and you need to be a good negotiator. Most people respond positively to a high price delivered with clarity and certainty about the outcomes that will be delivered. The first person, who has to be convinced that you are worth the price, is you. The second one is easier.

Guarantee an outcome. This takes a level of confidence that is pretty rare to be able to build as there are simply so many variables at play. However, if you are sure that by employing your services you can guarantee an outcome, you can charge almost anything you like up to that outcome, and most will see it as money well spent. Few will walk away from swapping 10 cents for  20. There is a lot of services marketing that involves an implied outcome, justifying a high price, but the explicit guarantee of success is not something I see much.

Leave it to them. This is a risky strategy, but one I use a bit on short term projects such as a workshop, where the investment of time is understood, there is a clear problem to be addressed that is right in your ‘hitting zone’, but they do not really know you. Giving them a ‘list price’ with the undertaking that you will leave it to them to assess the value of the time to them, and tell you the invoice amount. It removes risk from them, and underscores your own confidence in your ability to deliver value.

Your best marketing tool. We all know that satisfied, even delighted clients are the best advertising you can have. Referral business is the best business, and the easiest to get, as happy clients refer you to their networks as someone who really delivers value. When that value is delivered at a high price, so much the better.

As a final thought. Increasingly in a complicated world, we value simplicity in all things, and the response to your prices will be enhanced by simplicity.

Cartoon credit: Scott Adams and his alter ego Dilbert.

When the cheapest quote is not the best price.

When the cheapest quote is not the best price.

Jan 17, 2017 | Customers, Sales

A quote carries the implication of a low price, only price, little room for the value that may be delivered, and that your ‘nose’ is only just out of the water.

What would happen if you  called it an offer for service?

Perhaps it is just a semantic difference, but it may also bring into better focus the value being offered irrespective of price.

Many companies I work with operate on the basis of quoting for jobs, and those seeking quotes are often doing so in the expectation of taking the lowest price.

This is good if you are buying paper, or some basic commodity, but buying something of value, that is mixed up with some expected level of expertise and service, is an absolute shocker.

One of my clients provides a specialised engineering service that has stringent regulatory requirements covering safety and engineering integrity. One of their biggest long term customers, the local arm of a multinational,  has recently moved their procurement function away from the domestic business unit to  a centralised offshore global procurement system based almost entirely on price.

The choice facing them was to compete on an uneven global playing field on price, and have their existing thin margins further eroded, or walk away and utilise the capacity and skills elsewhere.

A difficult choice, particularly against a background of uneven and difficult to forecast cash inflow was made, but after 6 months, they are  way better off, and their former customer is struggling with trying to manage a complicated plant with offshore contractors who quoted the lowest price to get the jobs and are intent on doing as little as possible to get the money.

The lowest quote is rarely the best total  price, and it is easy to drown when there is no room for error.

 

How do you build a truly successful sales foundation

How do you build a truly successful sales foundation

Nov 28, 2016 | Customers, Sales

Selling is a tough gig, but it is one that every business has to master or fail.

The days of waiting for the next customer to walk through the door and place an order are over. These days you have to be out there hunting for new customers at the same time you are building relationships with existing customers to optimise your repeat purchase and share of wallet metrics.

So how do you go about this?

There are a few common practises of truly successful sales people that I have seen over my long career. These practises form what I call a ‘foundation’ for successful sales activity.

Always be positive.

When was the last time you bought anything from someone who clearly did not care if you bought or not, who had a take it or leave it attitude?

People like to buy from enthusiastic and helpful people, so being ‘up’ all day, every day, is vital. The sales leadership plays a huge role in the development of this sort of positive and proactive culture.

See yourself through the customers eyes.

When the sales effort is just all about the numbers, sales people tend to focus on making the sale now in order to make those numbers. Customers do not really care if you make your numbers or not, they care only about the value they can derive from buying something from you. Seeing yourself in this way is an unfortunately rare skill, but those who have it sell multiples of those who do not. However, luckily it is a skill that can be learnt.

Manage time proactively.

It is so easy to waste time, not to maximise the productivity of that most precious of resources. In selling, this approach demands that you plan your day and sales approaches, anticipate the needs of customers, and plan the conversations to focus on the value your solution delivers to them.

Treat your prospects and customers time as  being more important than yours, as to them, that is the way it is.

Balance your activities such that there is a flow of leads that are in various stages of conversion so you have a steady flow, which is always more productive than a flood/drought situation.

You only get one chance to make a first impression. When you meet someone, they generally make their minds up in the first few seconds about whether you are someone they would like to engage with, or would rather move on. Making that good first impression is absolutely vital to having any chance of building a relationship.

Listen, then listen some more.

As the old saying goes, ‘god gave us two ears and one mouth for a reason’. The best sales people I have met are always great listeners, they keep conversation going, steering it by asking key questions at key times based on the feedback they are getting from the other person.

Follow up regularly but sympathetically.  Continuous follow up is a key skill, but there is a line between following up in a friendly and sympathetic and stalking.

Model your behaviour on the masters.

Joe Girard is seen as one of the best, if not the best salesman ever. Taking lessons from the masters is always a good idea, those who both practise what they preach and have profited from the practise. The best sales book I have ever seen is now decades old, “Spin Selling’ by Neil Rackham, but the same rules still apply.

As a final point, from my own experience running sales and marketing in FMCG, one of the most common mistakes I have seen is businesses treating sales as a training ground for other functions. Every trainee, particularly marketing and management trainees have to ‘do their time in sales‘. This is a huge mistake, when sales success is so important to survival, it makes sense to only have the best representing you and your products, and if they become the highest paid people in the organisation, great!

Cartoon credit www.tedgoff.com

 

11 rules to ensure customers love you

11 rules to ensure customers love you

Nov 8, 2016 | Customers

Customers and potential customers always remember how their needs and expectations were managed through the sales process. It is all part of the experience of doing business.

However, In my experience, B2B businesses are often poor at effectively managing these pre-sale customer touch points. Many seem to think that their widgets are the best in the world, and customers should be grateful they supply them, at the very least, they should be prepared to respect that our life is not easy.

Repeat to yourself: “Customers do not care about my problems, only theirs” in the mirror every morning.

Following are 11 simple rules, evolved out of the cock-ups I have seen over many years.

# Customer communications should always be acknowledged, and a customer should certainly never have to send anything twice, and worse still, to different people.

# Following the above, when a customer says something to one person, it should be heard by the whole company.

# A customers time is their most valuable resource, never, ever, ever, waste it

# Sweat the minutia. Even a tiny mistake in the paperwork, or packaging, can bring undone lots of good work elsewhere, so be a zealot for the detail.

# Do not expect the customer to play any role in your QA. A product failure is your complete failure, not just a mild annoyance easily remedied.

# Customers should never have to ask for a progress report, they should be available on an ongoing basis.

# Let potential customers set their own pace through the sales process. While it is often a delicate balance between closing a sale and letting it slip away through lack of expected attention, few like to be pushed.

# Share best practice that emerges amongst all your customers. Helping to make them better in their markets is in everyone’s interests.

# Customers love to be loved, show gratitude and respect at all times,

# Never moan about how hard you had to work to deliver their product, they do not care, you just sound like a spoilt child.

# Over deliver what you promised, no fanfare, no hype, just unexpected value.

 

Finally, the old adage that the customer is always right is rubbish.

However,  strategically important customers, the ones you really want for the long haul, the ones that make you a better supplier, they are always right.

 

6 Questions that keep business owners awake at night

6 Questions that keep business owners awake at night

Oct 24, 2016 | Customers, Management

Every business is different, but the foundations of every business are very similar. Answering these 6 seemingly simple questions should expose any weaknesses in the foundations of your business.

  • Why should customers buy from me rather than my competitors? If you cannot answer this question from the perspective of your customers, is it any wonder you are awake? When your product is the same as everyone else’s, price is the only discriminator. So you need to find a combination of a market niche of some kind and a value proposition that your product delivers. The combination is sales fuel. Be different distinctive, remarkable.
  • How do potential customers find me? Most marketers ask themselves, how do I find new customers, but the question is better asked as how do new customers find me, reverse engineer the journey a potential new customer goes through in their journey to find a product then insert yourself into the process. Again, another false assumption made by marketers is that the poor customer, when they see the ad, or read the social feed,  will rush out to buy the product. Nonsense. Even the hottest of prospect has a process they go through that ends up at a point in time when they are ready to buy, and usually the marketer has little ability to influence them at that time, consumers make up their own minds, particularly now as they have access to all the information they need. Customers do not need marketers to give them the necessary information in the way they used to in the past. To be successful, you must have  a process that brings in a consistent flow of good leads that can be converted into sales in a predictable manner.
  • How am I spending my time? Time is the one non- renewable resource we all have, and it is limited. Every person on earth has the same  1,440 minutes available to them every day, it is how we use them that counts. Reviewing the expenditure of this time against your personal, professional  and commercial objectives is a precondition to success in any of the three areas. Remember the old urgent but not important, important buy not urgent equation.
  • How is what I am doing adding value? Adding value to someone, even if it is yourself when reading a book is what life is about.  Are you expending enough effort during the time you spend on various activities, or are you just coasting. My daughter was an elite gymnast, one of the best few in the country, in an unforgiving sport. Part of what became her modus operandi is the capacity to concentrate with absolute intensity for periods, then relax, stretch and go again. I watched her while studying for her several degrees, her concentration would be absolute for 15 minutes, followed by 30 seconds of a lift of her head, stretch, then another 15 minutes, and this would go for 2 or three hours at a stretch then she would walk around, read a book, and really relax for a while before moving into the next thing.
  • Are my stakeholders aligned? This question is usually limited to employees, but these days, you also have to consider contractors, financiers and suppliers. These latter stakeholders are as important as employees, and harder to align simply because you do not hold the power of ”employment’ over them, you usually need them more than they need you.
  • How is my cash?  Cash is business lifeblood, run out and you are dead. Make sure you do not run out, by forecasting the flow of your cash and managing operations appropriately.

When you can answer all these questions easily, you should be able to sleep well at night.

Things I do not do to make money from blogging

Things I do not do to make money from blogging

Sep 26, 2016 | Customers, Strategy

StrategyAudit has been going now for quite a long time, almost 1,500 posts to date, averaging between 2 & 3 a week. Every month there are  around 1,000 unique visitors, who consume on average 1.8 posts each visit.

By some standards these are pretty modest numbers, but at least I am reasonably consistent and persistent.

I am asked from time to time how much money I make from the effort, and most are surprised at the answer:

Nada. Zilch. Nothing.

There are so many blogs out there that have no purpose other than to squeeze a bob, I am reluctant to add another. Besides, my purpose is to capture, organise and record my mostly random musings on various  matters of interest, and to make my living providing insight and advice to my clients, not flog stuff to random visitors led to the posts by PPC ads.

It makes me a better confidant and consultant to my clients, as well as sharing a bit of the love around.

I have however, thought about it, and been very tempted from time to time. I thought about it again over the past weekend, and decided against it, again, but in the process, assembled a list of ways I thought I could ‘monetise’ the effort, should I decide to do so, at some point.

Affiliate marketing.

This requires that you either put an ad on your page for the affiliate product, or put in a link that sends a visitor to the sales page directly, such as to the Amazon site. There are many variations on the theme, and there are many products available to sell as an affiliate. Most responsible bloggers restrict their affiliate efforts to products that their specific niche may be interested in. Were I to do it, the sorts of products might be business books and courses, website hosting, and various tools such as autoresponders, and CRM software that automate parts of the digital marketing  ecosystem.

Affiliate marketing is the most common and biggest money spinner for most bloggers. The two biggest affiliate sites are Clickbank and Amazon Associates, but there are many others.  Before you venture into it, consider the sorts of things that you might sell that are consistent with your niche, and that your audience might welcome being able to get from you. Generally it also comes with some level of implied endorsement, so caution is warranted.

Google AdSense. 

Google makes it very easy for you. All you have to do is sign up, they will stick ads on your site, and give you a fee for every click from your site. For a small blogger like me, the amount is pretty small, and Google controls which ads get placed on your site. When you work hard to service a niche, risking them being alienated by ads for the flimsy promise of a few dollars does not make much sense to me.

Sponsored posts and reviews.

Some bloggers get paid to write a post, or review of a sponsors product, presumably favourable, which is the point. There are many books and writers that I am happy to endorse, but I have never taken a buck to do so, as that would compromise my right to absolute independence.  Similarly, paid guest posts are a great way to build a ‘list’ trading on the readership of others. This certainly does work, and I have guest posted a few times on sites relevant to ‘my patch’ but never been paid. (it is also true that nobody has offered to pay me, but don’t tell anyone)

Paid directories.

The double sided nature of the web means that assembling links and content that others might like to use is a service that can be sold. It is easy enough to use a WordPress plugin to enable such a service, but then to my mind if you are to make any useful money from it, marketing the service has to become the focus of the blog. Not interested.

Create a product and flog it.

This is an extremely useful strategy, but contrary to all the hype from those seeking to profit from your efforts by teaching you how, is it very difficult. The 1400 plus StrategyAudit posts give me a significant well to dig into, and clearly I have done a lot of writing work to get there, but it is still not easy, as my several efforts to collate my musings into still unpublished books will attest.

There are many options, give away e-books as lead magnets,  e-books for sale on Amazon and others, hard cover books and guides, courses, membership ‘clubs’, the list goes on, all designed to generate so called ‘passive income’ a really attractive prospect.  All however take effort to create, curate, and market the content on an ongoing basis. One day perhaps.

 

Be an expert.

This is the one thing I do set out to do. By writing and publishing those sometimes random thoughts, I hope to demonstrate rather than just talk about the expertise and experience I have gathered over 40 years of commercial life, and just life itself. The ‘urgers’ around tell me I am just trading time for money, without the option of scaling, and that is true, but it is also comfortable. Perhaps that is the problem, I am genuinely setting out to help others, not just myself into their pockets.

 

Let me know what you think, am I mad??