Tomicide Solutions, August 2012
10 Business Development Thoughts That Could Liberate Your Sales
By Tom "Bald Dog" Varjan
Synopsis
If you're in business, first and foremost, you're in the marketing business, and your marketing determines your success. Some experts say you're in the sales business.
Maybe.
Personally I believe that good marketing can reduce or even eliminate the need for selling as we know it.
If you want higher gross revenue, be a good seller and don't worry about marketing.
But if you want higher net profit per employee (the real measure of success), then be a good marketer.
With good marketing, high-calibre buyers come to you and ask you to accept them as new clients. But with good sales and poor or no marketing you still need a bunch of salespeople to chase after buyers... who desperately try to out-run and out-hide your salespeople. So, the exercise is pretty futile right from the start...
Podcast: MP3 Version
If you're in business, first and foremost, you're in the marketing business, and your marketing determines your success. Some experts say you're in the sales business.
Maybe.
Personally I believe that good marketing can reduce or even eliminate the need for selling as we know it.
If you want higher gross revenue, be a good seller and don't worry about marketing.
But if you want higher net profit per employee (the real measure of success), then be a good marketer.
As Peter Drucker put it many years ago...
"The purpose of marketing is to make selling superfluous."
With good marketing, high-calibre buyers come to you and ask you to accept them as new clients. But with good sales and poor or no marketing you still need a bunch of salespeople to chase after buyers... who desperately try to out-run and out-hide your salespeople. So, the exercise is pretty futile right from the start.
Let's see some of those thoughts...
If You Expect To Make A Profit, Then Work Your Venture As A Business
Many OT business owners look at their profits as the be all and end all, but they are just means for people to do what they really want to do. Just see how Bill Gates uses Microsoft to enable him to pursue the personal mission and vision for The Bill & Melinda Gates Foundation.
Many IT businesses operate as hobbies.
Why?
Because of weak or none-existent marketing. Just read what Peter Drucker wrote in The Practice of Management (1954)...
"Marketing is the distinguishing unique function of the business. A business is set apart from all other human organisations by its marketing activities. Any organisation that fulfills its purpose through marketing is a business, and any organisation where marketing is absent or incidental is not a business, and shouldn't be run as such."
For many IT companies, business is all about systematic screwdriver-wielding. That is, only the technical aspect of the business. What they fail to realise is that the more they emphasise the technical aspect of their solutions, the more they turn their solutions into lukewarm commodities.
Buyers are seeking business solutions NOT technical solutions.
Just think about the time when CRM started spreading. Companies bought it for tonnes of money, but salespeople refused to use it because no CRM company ever bothered to educate salespeople how to use CRM effectively.
Even today, many salespeople still resent CRM systems, although there is preponderance of evidence that CRM can make salespeople more productive and profitable. I guess, old habits die hard. Or as the German theoretical physicist and Nobel Prize winner (1918), Max Planck put it a few years ago...
"Science progresses funeral by funeral."
Interestingly, many IT professionals look down on marketing as a business function, but the same people expect to get paid every month. And they ever ask where the money is coming from.
They have to realise that their paycheques come from effective marketing. No marketing, no paycheque. That's all, folks.
Numbers Are Effects Not Causes
Many salespeople are convinced that if the numbers are fine, then the company is fine too. And they end up monitoring the wrong numbers. What they do is the equivalent of driving their cars forwards by staring in the rear view mirror. Yes, it may be doable, but it is still a rather miserable ordeal.
The reality is that by the time we see the number we usually track, it's too late and in most cases there is not a sausage we can do about it.
Instead of over-monitoring the numbers, pay attention to both the measurable and the non-measurable harbingers, the predictive indicators.
One measurable indicator is the number of new relationships initiated with buyers. And here I mean real economic buyers not purchasing agents. The other indicators can be the number of submitted proposals or the number of small "get acquainted" projects.
On the non-measurable side, we can have overall gut feeling about buyers or gut feeling about our own overall mental, emotional, spiritual and physical states. And by "spiritual" I don't mean religion.
In my experience, measurable indicators are created by non-measurable ingredients that can't be measured but can be judged and discerned. The problem is that while people in general are good at measuring things, only a few of them are good at judging things.
Nevertheless, when you have a choice, go with judgement not measurement.
Business Results Are The Reflection Of The Owner's State Of Mind
Conventional wisdom correlates business success with the amount of college and university diplomas and the number of years spent in classrooms listening to professors most of whom have never run businesses, but I think something is missing from that equation.
What's missing is the overall "mindset" of the company, which is a reflection of the owner's mindset. No, I'm not talking about the kind of unfounded blind faith the movie The Secret has taught the world, but rather healthy optimism with an eye on the potential too.
The other kind of mindset many business owners have is the kind of pervert mindset that having a business makes them bosses. Now they can have subordinates whom they can underpay, over-demand from and treat like shit.
As business owners, they are at the helm of their enterprises and are free to boss their indentured servants around. And the result is that the best people leave their companies and either go to the competition or they become the competition.
And now with social media, nasty bosses can be easily "exhibited" for public shame.
The Stronger Your Marketing Is, The Less Selling You Have To Do
Yes, I know that many IT professionals look down on marketing as something beneath themselves, but what is really marketing nowadays.
Yes, many experts say that marketing alone doesn't bring in new business, but I think it does.
Look, without marketing, you're condemned to peddle your stuff as a street vendor at a flea market. You have to turn yourself into a circus barker or worse... a used car or vacuum cleaner peddler.
Hard selling is about asking for the sale, regardless of whether or not buyers are ready to buy. The idea is to ram something down their throats even if they don't need it or want it. You try to sell them something because you need the money... right now.
That's not appealing but rather appalling.
Good marketing is all about having buyers ask you for the purchase when they are ready to buy.
Yes, be so good that buyers ask for your accepting them as new clients. And when they ask, then you request them to justify why the two of you would be a great fir working together.
This little action cements your engagements and makes sure that clients do what they are supposed to do to be successful. And if they don't ask you for the purchase, then move on. Don't sell. Wait until prospects buy. Huge difference.
For most vendor type companies, marketing is as loud and obnoxious as TV infomercials. But companies that operate or aspire to operate as sought-after industrial authorities, marketing is really education.
Some say that education-based marketing doesn't drive sales. It does, but not in a blatant and intelligence-insulting way.
This is why smart sellers that want to engage smart buyers patiently walk the road of education-based marketing.
If You Abuse Your Money, One Day It Starts Abusing You Too
If you abuse your money by discounting your fees and prices or neglecting to collect your receivables, then money will stay away from you. It's funny to say it, but money is pretty much like lovers.
If appreciated and treated well, they stay. If neglected and treated badly, they bugger off. The difference is that while many lovers with low self-esteem do stay in abusive relationships, money doesn't.
Money doesn't tolerate unappreciative and abusive relationships with its owners. Money put her hat on, gets on her horse and rides off into the sunset straight into someone else's bank account.
So, how do you demonstrate appreciation for money?
Well, based on what you invest it in. And money generated by businesses appreciates two forms of investment above all: Education and marketing. Education to learn new skills and marketing to put those new skills on the market for sale.
It's Not About You, But About Them
Business is about applying your expertise to create value for your clients... outside your business. Therefore you have to become nipple-piercingly good at what you do, and you have to sift, sort, screen and select your clients with surgical precision.
Why?
Because contrary to Karl Marx that value is objective and it is equal to the social labour accumulated in a product/service, value is subjective and it is in the perception of the person who receives that value.
And some people can't perceive value at all. Their intellectual firepower doesn't go beyond low prices. So, they have to be dumped before they can do any harm to your people and your company.
This is the only way to produce outstanding value and getting appreciated and paid for it. No matter how great you are, but if you offer your greatness to the wrong clients, then you're headed for disaster.
Oh, and have you observed that the most skinflint and most price-obsessed clients place the highest strain and demand on your people's time and sanity?
Just look at the graphs below...
The 80/20 rule worked well in the industrial age.
That is...
Good clients produce 80 / 20 = $4 per client.
Bad clients produce 20 / 80 = $0.25 per client.
Good clients out-produce bad ones 16-fold.
The 80/20 rule worked well in the industrial age, but for the 80/20 rule for the knowledge age is around 95/5.
That is...
Good clients produce 95 / 5 = $19 per client.
Bad clients produce 5 / 95 = $0.05 per client.
Good clients out-produce bad ones 380-fold.
Actually in some areas of high-tech, the ratio can be as high as 99.5/0.5.
The 80/20 rule for some areas of high-tech can be as high as 99.5/0.5
That is...
Good clients produce 995 / 5 = $199 per client.
Bad clients produce 5 / 995 = $0.005 per client.
Good clients out-produce bad ones 39,800-fold.
So, as you can see, the idea is not about having more clients, but about having better clients. There is no point in clogging up the shop with price-obsessed junk-calibre clients.
Don't Try To Turn Your Employees Into Entrepreneurs
Entrepreneurs are entrepreneurs because they have a high tolerance to risk and ambiguity. But they also want to earn more than employees, and to achieve that they don`t mind being paid for performance. They live without a safety net. If they don't produce, they starve.
And if the shit hits the fan, entrepreneurs have to go and face their creditors or go through public humiliation in their communities as they get dragged through the bankruptcy procedures.
Employees are employees because they have a low tolerance to risk and ambiguity. They are happy with less money than entrepreneurs, but want to get paid regardless of their employers` performance.
And if their employers go bankrupt, employees don their hats and walk over to the competition. Or in the worst case, they walk to a government office to start their unemployment benefits.
Then one day someone invented the idea of treating employees as entrepreneurs and the commission pay structure was born. The more revenue you generate for the company, the more the company pays you.
The problem is that the typical employee has no concept of esoteric things like revenue or profit. He has a concept of something concrete called the paycheque, because it has real money which he can scratch the window with.
For most employees, revenue and profit are far-fetched woo-woo concepts, and they can't relate to them. We also know now from the tonnes of research that in the knowledge world arena, like IT, the best people don't work for money. Instead of being motivated from the outside, those people are inspired from the inside.
Yes, money matters, but mainly as in being underpaid.
So, if you have employees, give them the best working conditions, so they can thrive as employees and amaze you and your clients with great work.
The Pareto rule applies to employees too. A great employee can be 10 plus times more effective than good employees, and fortunately you don't have to pay them 10 plus-times more.
If you Don't Focus On Getting Paid, Then No One Else Will
I spent June and July in Hungary visiting my parents, my brother and some close friends and relatives. One day I had an interesting conversation with a business owner.
His company provides pretty vital technical services to manufacturing companies. Let's say, he gets a project on 10 February. Then the company, using its own cash, buys all the required raw materials. Then the company completes the project on 5 June. Then the finance department bills the client on 1 July, and the client has to pay by 1 October.
Can you see the problem? The seller essentially finances the buyer throughout the project plus three more months. With every new project, the company digs deeper into its own pocket in order to finance new clients.
Clients have no financial commitment to their projects, so they can cancel projects without no reason.
And when I suggested that they could collect 50% upfront, he said no one would pay that. I asked how they paid their doctor when his wife was pregnant He said they paid in advance. Then he quickly added that doctors can do that but he couldn't.
Well, it seems to me that lack of self-esteem is really the biggest business problem. Oh, well.
When you get hired, get 50% of your fee upfront. Or get at least 25% and keep working your way up. I hope you've already ditched the lunatic hourly rate, and have moved on to more rewarding territories.
Self-Investment Is The Best Investment
When hard times hit, what do business owners cut first?
Exactly. Marketing and professional development.
And they do that despite having learnt in business school that marketing and education are the two best forms of investment business owners can make.
So, what do those business owners do? Instead of marketing, they institute pushy "used car type" selling using an army of commission-crazed peddlers.
And as far as education goes, they tell their people to advance their skills on their own dimes and in their own times.
They say they don't want to invest in people in case they leave the company. Verasage founder, Ron Baker's great question to that idiocy is...
"But what if they stay under-skilled and stay with the company?"
Yes, Ron has a way of making people think.
In my experience it's better to hire people with great character and then build their skills than hiring shady characters with perfect skills. Yes, there are people with good character and good skills, but they are as rare as strawberries in Greenland.
Don't Let Your Plan B Overshadow Your Plan A
Yes, we all have heard stories of heroism, like Cortez when he ordered his ships to be burnt, but there must be something in that story that motivational demagogs deliberately keep quiet about.
Speakers say Cortes burnt his ships (plan B) while invading the Aztec Empire to prevent his people from going back.
There is a little detail motivational speakers fail to mention...
By the time Cortes decided to burn his ships, he had a massive mutiny on his hands, and most of his men wanted to desert to Cuba. Why? Because his men had realised that the whole expedition was about advancing Cortez's personal wealth and his status of feared warmonger.
Nice example to inspire businesspeople.
Although it does apply, because many business owners look at their own employees as the enemy that has to be tamed and broken, so they can be overworked and underpaid , but they are so scared of their bosses and of losing their jobs that the next morning they come back for more abuse.
Anyway...
Some people say that if you have a strong plan A then don't waste your resources on plan B. I think it depends on the risk. In 30 plus years of skydiving, I've never met jumpers who ditched their plan B, that is, their emergency parachutes, so they can "better" focus on their main chutes.
They know it takes time and effort to keep their emergency chutes in airworthy condition, and that gives them less time to focus on their main chutes (plan A) and jumping, but they do it anyway.
And after having had my fair share of main parachute malfunctions, I rather split my attention between my main chute and my emergency chute. I know, I know. I've never claimed to be a brave guy. I'm just a coward who loves skydiving.
Another area that would never give up plan B is the military.
And there are people who obsess over their B plans and neglect their A plans. That's equally idiotic. I suppose, some people live in constant emergency mode, so assuming that plan A is a dud and working on plan B for them is the best thing in the world after sex... on some days.
Summary
We know that your sales revenue is an effect, influenced by many factors. Some factors influence it more, some less.
In my experience, the biggest influencers are your marketing, your way of treating and compensating your people and your overall perception of the world around you.
Probably the weakest influencer is how hard and aggressively your people sell. You can have an army-sized sales force on straight commission (business owners erroneously believe they are free to employ), cold-calling an knocking on doors all day, at the end of the day, your net profit per employee is likely to remain pretty dismal.
The world is sick and tired of pushy salespeople who can outhustle even some of the most aggressive drug pushers.
To liberate your sales, you'd better optimise the peripheral factors that contribute to higher net profits. Let's remember that higher gross revenue doesn't necessarily mean higher net profits too.
The abundant presence of revenues may well come hand in hand with a dismally low level or the echoing absence of profits.
Renowned advisor to high-end financial planners, Bill Bachrach mentioned it at one of his teleseminars a few years ago that..
"Selling is what you have to do if you don't know how to build trust."
I think, instead of selling harder, IT companies should focus on positioning themselves better, so their target markets can form notions in their heads that if they need IT help, they'd better go to those companies.
What do you think?
Disclaimer
In case you've got that notion, I can tell you that I'm not against selling as a business function, especially because in the books, revenues are called sales.
What I'm against is traditional, manipulative sales approaches.
Then what is sales anyhow?
Dan Sullivan, The Strategic Coach has defined it so well...
"Getting someone intellectually engaged in a future result that's good for them, and getting them to emotionally commit to take action to achieve that result."
Far, far the best definition I've ever heard.
Come and let's discuss this newsletter issue on my blog...
Attribution: "This article was written by Tom "Bald Dog" Varjan who helps privately held information technology companies to develop high leverage client acquisition systems and business development teams in order to sell their products and services to premium clients at premium fees and prices. Visit Tom's website at http://www.varjan.com.
