Tomicide Solutions, Jul 2018

Can You Leave Your Notes Behind For Our Review?

By Tom "Bald Dog" Varjan


South African minister of basic education, Angie Motshekga has made a rather interesting announcement. She’s stated...

"Learners must take care of themselves and rest these holidays. I would advise them to not touch their books so they can rest their brains because studying too much causes brain cancer."

Apparently, she has read this interesting factoid on the Internet.

Maybe not everyone, but it seems some buyers of IT consulting services enthusiastically heed Ms. Motshekga’s advice.

When those buyers sit down with IT consultants to discuss projects, they don’t want to over-tax their brains, so they just sit their passively and watch IT sellers’ dog-and-pony PowerPoint presentations.

And when the meetings are over, they ask IT sellers to leave their slides and other detailed notes behind for review.

In fact, the full title of this article might as well be, "Can You Leave Your Meticulously Detailed Notes Behind For Our Review, So We Can Use It Against You To Coerce Our Current IT Provider Into Deeper Discounts And Other Concessions?"

I'm pretty certain that if you've been in business for a while, it's already happened to you, and if you're new, it will soon happen to you.

Most buyers obtain proposals from several IT providers and that’s just fair.

Where the dirty nature of the game lies is when buyers tell sellers that they will be competing against 10 other IT companies and they just to have duke it out.

The funny thing though is that buyers almost never tell sellers about the buying criteria and the exact buying process.

The contestants are expected to guess that part.

And at the end of presentations, buyers very often ask sellers to leave their presentation materials behind, so buyers can make better decisions.

No, you shouldn't leave anything behind. Your presentation materials are none of your buyer's business.

Since you know that buyers ask you to do presentations because you're compared to others, it's just plain irresponsibility not to be ready for the comparison.

It's All Started With The Wrong Perception

We've all heard the expression, "Perception is reality".

Yes, yes and no.

Perception is the viewer's reality of another person or object.

Bank robbers sleep with their stolen money under their pillows because their perception is that the world is out there to steal it from them. They perceive bank robbers in everyone.

It's false reality, but for them it's the one and only reality, so they behave accordingly.

And the reality is that the treatment you're getting from buyers is the result of how the words coming out of your company have positioned your firm.

We know from the Corporate Executive board that up to the 57% mark in the buying cycle, buyers are unwilling and unready to talk to sellers.

If they talk to you after that, it means your words have created enough trust to move forward to have a "date".

But the quality of that date and how buyers regard and treat you depends on what they've read about your firm before the 57% mark.

And in most cases, it's IT companies themselves that position themselves so poorly that instead of having value-driven conversations with senior executives in the boardroom, they have price-focused presentations to procurement agents, mid-level managers and supervisors either in the server room or in the staff kitchen.

In many cases, IT professionals feel more comfortable with presenting to mid-managers because they can talk techie stuff.

The problem is that techie stuff is dime a dozen and those mid-managers can't make buying decisions. They can give you an attentive audience, but they can't give you projects and money.

To get projects and money, you need to talk to boardroom dwellers, and instead of technology improvement (we give you faster servers), you have to talk to them about strategic level improvement.

And no matter how good your server room presentations are, there is no way mid-managers and supervisors can effectively communicate the benefits of your business to the boardroom dwellers. Yes, they try, make a pig's ear of it and your offer gets rejected.

And to avoid this kind of misperception...

Tell Buyers About Your Differentiating Factors

But not just any differentiation factors like "great client service", "amazing engineers". They are all subjective, hence can get debated.

You have to come up with objective differentiating factors.

The dynamic of your meetings with buyers must be similar to the dynamic of doctor-patient meetings.

The buyer has requested the meeting because you're the expert in an area in which she has a problem. This dynamic also means that you have to tell buyers how you work.

They have to follow your process because through years of tweaking, you know your process is very effective to discover...

The last point really means that every unachieved goal is a problem to be solved.

Just as doctors don't modify their diagnosis processes for each patient, you too should have a specific method to your madness and never deviate from it.

That includes, among others articulating what makes you different from other IT consultancies.

But there is a difference between differentiation and differentiation.

You can have both subjective and objective differentiation.

Subjective differentiation is a collection of platitudes like, "We have great client support" or "We have amazing techs". They are subjective, thus questionable.

What does great client support mean?

Objective differentiation is something that no one can question...

"Among our 37 people, we have, we have 6 technology Ph.D.s, 7 MBAs, 9 computer engineering master's degrees and 14 undergrad degrees, coupled with 697 years of combined experience on all five continents with 53 vendor certifications."
"During our 19 years of operation, we helped 812 clients and our technology has contributed to the generation of $6.2 billion of new revenue."

Granted, this approach works only if you deal with real buyers, but who else would you deal with?

If you deal with self-important HR- or training flunkies, they are likely to dismiss all this and want to see your resumes and college transcripts.

And if you deal with purchasing agents, they only want to see how low you're willing to go on your prices.

Warning: Dealing with self-important flunkies and/or purchasing agents can be harmful to your health. Stay away from them and when they try approach you use a long pole to keep them away from you.

So, instead of your detailed notes, what you can leave behind is your points of difference.

And here focus on objective differentiation.

Itemising Your Differentiation

In this section, we go through 13 objective differentiating Points. Yes, I know, they are harder, well, a helluva lot harder to define than flaky, subjective differentiating Points, but your time is well spent to do it.

Also, wherever you can, either supply evidence or have evidence available in case some buyers ask you to prove your point.

Differentiating Point #1: Work Speed

You can apply faster work speed in several areas.

One of your "faster" can be responsiveness to enquiries. You return phone calls and emails within a certain time window. You can say that during office hours, your people return phone calls within two hours and emails within 12 hours. You can also say that the more specifically callers outline the nature of their calls, the more suitable expert can call them back.

Most of your competitors don't want to "waste" money on non-tech staff, so their responses are likely to be slow.

Find out your industry's typical responsiveness and simply undercut it.

If you can say, "We respond 17% faster than industry average of XYZ hours", you're winning.

Differentiating Point #2: Predictable Costs

Instead of free estimates based on time, effort and materials, you can offer a fully inclusive price upfront. Your popularity will skyrocket simply because people like certainty and they are willing to pay for this certainty. So, now we're talking about paid discovery/scoping session.

If buyers demand free estimate, you can either get rid of them or give them your MEL (Minimum Engagement Level) number.

Give your prices with enough safety margin baked in, so you don't sacrifice your profit even if your projects get derailed a bit and drags on longer than you're anticipated.

Differentiating Point #3: Risk Mitigation

Service guarantee guarantees your work. Look if you can't stand behind the quality of your work, then why should your potential clients do so and finance your incompetence?

Even if something goes wrong, instead of demanding their money back, good clients ask you to finish the job properly.

They don't want their money back because a pile of green pieces of paper is not going to solve their technical problems. So, it's not the money per se. It's the sense of safety and reliability they pay for.

Clients need their systems not their money. They can't run their businesses on stacks of bank notes. They need the reliable IT infrastructure.

In general, service guarantee justifies 10-40% on the top of your normal price.

Crash-free guarantee tells your clients that new systems can take some time to "burn in" and during that time, there can be some unexpected mishaps. Well, and tell them how you plan to handle those mishaps.

Yes, a new system is like a new pair of shoes. If you go on a multi-day hike wearing a brand-new pair of boots, your feet are more doomed than a mouse at a cooking class for cats.

Price guarantee tells clients they only have to pay for what they have agreed to in advance. There are no surprise closes and no small prints.

In general, service guarantee justifies 5-10% on the top of your normal price.

Differentiating Point #4: Payment Terms

You may work with industries that are seasonal. In some months, they're flushed with cash and in some other months, they are skinned. Hitting them with one annual invoice can be a serious strain on their cash reserves.

So, you can offer monthly payments. And when you present it in your proposals, you offer your monthly payment terms at a certain price and offer a 10% value savings on full payment at the beginning of the "flush period" when the client has money.

And then you provide such a great service that clients can actually make more money as a result of working with you, so they have an incentive to stay with you.

But to do that, you have to set up and monitor that kind of revenue-metrics that are influenced by the state of your clients' IT system.

For instance, client or buyer responsiveness are technical dependent and we know that responsiveness can be linked to technology.

Differentiating Point #5: Easier To Work With

Some IT firms offer "done for you" type service. In most cases, they are order takers. They basically tell their clients, "Tell us what you want and get out of our way".

This approach often comes with a dollop of "holier than thou" attitude.

My experience is that clients love working with IT consultants in close collaboration.

So, instead of working FOR clients, work WITH them. Involve them in the work, and, many people think, this is sacrilege, expect them to provide tactical "pick and shovel" help.

Clients must hire you for what you know not for what you can manually do. And it's perfectly all right to expect clients to do semi-skilled labour, like moving boxes and unpacking equipment.

As I heard many years ago from Canadian real estate expert, Raymond Aaron, "Sinatra didn't move pianos." He played pianos but didn't move them around.

Make it easy to work with your firm, but don't become an errand boy for your clients. It can easily undermine your market position.

Many years ago, I helped a client to move his filing cabinet around in his office. It took about 15 minutes, but those 15 minutes destroyed our relationship. From then on, he tried to treat me as a general helper, so I came up with an excuse and walked away.

Differentiating Point #6: We Speak Business English

Emphasise that your techs have considerable business and financial background, so they can relate technical issues to boardroom-grade business value.

As a result, you can interact both with technophobes and technophiles.

Yes, some server room people may believe that you play some all-important high-and-mighty role, but in order to link your technical services to boardroom-grade indicators, it's a good idea to speak boardroom English.

And just because the server room folks have a problem with that, you still get invited to the boardroom and get hired by boardroom dwellers.

And if server room people don't like this scenario, they can just go and take a running jump at a bulldozer.

In your business savvy approach, start with high-level questions, asking clients how their businesses fit into the industry and where they are in the industry's pecking order (budget, premium, luxury).

Ask clients about revenue-generating functions and how technology fits into those functions. During this process, clients get a better understanding of the monetised value of your services.

For instance...

"XYZ study indicates that when a company converts from desktop CRM to cloud-based CRM, it can anticipate the following positive changes."

Then you outline the changes in some detail, including boardroom-level KPIs.

Ask lots of good questions and let your buyers establish your competence and credibility by your questions. Remember, good questions are always more valuable than smart answers.

Ask your questions such that you allow buyers to come to their own conclusions, so they can claim ownership of the solutions. Once they own it, they want to get it implemented.

And when you buyers talk bullshit, then respectfully push back.

Quality buyers love push-backs. With that, they realise that your IT experts are more than pretty faces on the premises but people who think with buyers. And this is how the best solutions are created.

Differentiating Point #7: Vertical Specialization

When buyers have a choice, they almost always hire specialists. They hire generalists when those generalists are borderline celebrities or when there are no specialists available.

One form of specialisation is specialising in a particular industry.

With that in mind, emphasise how many of your people used to work in your buyers' industry and in those industries' sub-industries either on a full-time- or on a contract basis. That can be a big plus.

Emphasise that your firm is a specialist in your buyers' industry, so your people are more familiar with typical industry problems, constraints and inner dynamics than the average bear.

Differentiating Point #8: Horizontal Specialization

The other form of specialisation is focusing on particular services within IT.

Doing backup and data recovery consulting for manufacturing companies between 50 and 250 employees is much more powerful doing IT consulting.

When you look at your services, which one is the most profitable?

In an Excel sheet, write down the list of your services in column A. Then in column B, write down gross sales from that service, column C => net sales, D => Gross profit both as $ and as % and the cost of rendering that specific service and net profit.

This breakdown gives you a pretty good picture of which services are worth keeping and with ones you'd better dump.

Yes, I know you may insist on running a "one-stop shop" type generalist firm, but you're better off running a "one-step shop" type specialist firm.

Kaspersky is world-renowned for its anti-virus software (me being one of their long-time users), but doesn't write apps, CRM or project management software.

And guess what? Salesforce is equally renowned as a CRM software developer but doesn't do antivirus.

No, you don't need to offer full range IT services.

Instead of being one mile wide and one inch deep, become one inch wide and one mile deep.

It's easier to gain some serious notoriety and command premium fees that way.

As the saying goes in marketing, the better you can articulate your buyers' problems, the more you get paid to solve them and the more highly you get respected for your expertise.

And you can do that with a lower headcount. Yes, it's idiotic to measure your firm's success based on how many people you employ.

Differentiating Point #9: Urgent Services

If you offer 24/7 services, then offer them really. Calling you on your mobile and waking you up in the middle of the night is NOT 24/7 service.

Imagine you have an emergency and call the ambulance. After a few rings, a sleepy voice responds: "Who the hell are you and what the hell do you want?

Would you appreciate how effectively the government uses your tax money? I doubt it.

What 24/7 service really means is that someone must be awake and ready to deal with clients' problems at the moment clients call in.

And this service requires premium pricing. You must also be diligent not to grant this service to unlimited number of clients or your responsiveness suffers and so does client satisfaction.

The other service is urgent services. Services that you render during normal office hours, but clients request you to keep working after hours. So, you may need a second or even third shift to work on the project from start to finish in one sitting.

Fine, but again, it requires premium pricing. And by premium, I don't mean the typical time and a half or double time overtime rate.

Working on a project this way is exponentially more valuable to clients, so they have to pay exponentially more for it.

Why?

Your people are used to set working hours during the day. When you ask them to work at night, you mess up their biological clocks.

For those folks, it can take a week or even more to recover for that one night shift and operate at full capacity again. And this lost productivity is what your clients must pay for.

Differentiating Point #10: Shared Worldview

If you come from your target market's industry, it's easy to have a shared philosophy.

I came into IT business development after 16 years in the high-tech industry as an engineer.

As a result, I have a similar philosophy as my clients because, on the other side of the negotiation table, I went through similar problems that they're going through today.

So, for them, it's easy to conclude that I can help them because I understand both the technical and the business aspects of the industry.

The next point is the metrics you use to track improvements.

You may be a practical metrics person but your client may be obsessed with vanity metrics. Many markets still measure SEO success by the number of hits their websites get.

When clients give me all sorts of vanity metrics, I often ask them to take a quick look at profit per employee.

In my view, profit per employee and tenure are the most meaningful indicators.

Profit per employee shows how successfully the firm sells its services and average employee tenure gives a good indication of the firm's culture and how well that culture can retain talents.

One warning though. When you calculate employee tenure, ignore 10-15% of employees with the longest and 10-15% with the shortest tenure.

Then compare this average employee tenure to the age of the company. And the closer the two numbers are, the better position your firm is in.

Differentiating Point #11: Offer Better Advice

Most of your competitors offer technology services because they erroneously believe that their clients are seeking technical advice, help and support.

But your clients use technology because it allows them to operate more effectively.

They don't use IT for IT's sake. They use IT because it gives them better business results, that is, making money, saving money, lowering costs and reducing risks.

IT is merely a means to an end. The sooner IT firms recognise this fact, the sooner they can start learning the ins and outs of getting paid more than a mere tech commodity.

So, emphasise that your firm focuses on clearly defined business objectives. It just uses technology to achieve those objectives.

This is a very strong differentiating factor.

Buyers know that as soon as they sit down with IT service providers, they immediately start talking about bits, bytes and other technology bits and bobs.

As a result, most IT firms are not regarded as business collaborators but merely technical labourers. That's why most IT contracts are not signed in the boardroom but in the server room. Well, or the staff kitchen.

The boardroom is already occupied by some other professionals and the company's senior executives discussing some other projects with strategic importance.

Differentiating Point #12: Unique Pricing Model

Most IT firms' pricing is a sort of pig in the poke.

They charge hourly rates, so buyers never know how much they eventually have to pay. Essentially, IT sellers ask for signed blank cheques.

And when they submit their invoices, clients get the screaming heebie-jeebies and want to strangle their trusted IT providers.

Hourly pricing has the habit of creating this kind of adversarial atmosphere.

And there is really one solution: Get shot of hourly pricing and learn value-based pricing.

The big advantage of value-pricing is that is 100% dictated by the value your buyers perceive in your services.

Value pricing also aligns your buyers' and your interests: To complete projects on time, on budget and on spec (that is, at the requested quality).

And since value is subjective, you can offer your services to buyers with the proverbial slashed carotid instead of paper cuts.

There are cases when buyers believe they have paper cuts but as you conduct value conversations with them, together you discover the real magnitude of the problem. And this is where the purse strings loosen up.

No, this is not upselling.

This is properly diagnosing and quantifying the cost of the problem.

Do you see now why tech solutions have no value until and unless you put them into a boardroom-level business context?

A faster server with better software is just a faster server with better software.

But it also allows business development people to better respond to prospects' and clients' requests, and they can better interact with each other.

And the better you can emphasise the business aspects of your solutions, the more you get paid and the more respectfully your clients treat you.

And when you value price, you can present your three solutions at three value levels and with three price points, so buyers can choose the one best for them.

In general, fixed pricing justifies 10-20% on the top of your normal price because of the risk you take. If you make a mistake and the project drags out, you still have to keep to your original price. You can't charge extra.

This is price certainty for clients and this is why you can add the extra 10-20%.

Differentiating Point #13: Unique Intellectual Property (IP)

This puppy is often overlooked, but it's vital.

After several years in business, you've most probably developed all sorts of processes that you apply to your clients. And this process can be pretty unique to your firm. You may or may not have trademarked them but that's irrelevant. It's still your IP.

The important part is that this IP must be documented.

The distinction I make is that intellectual capital is in one's head and intellectual property is documented. If you have a checklist for installing a network printer on a Windows 10-based network, that's intellectual your property. And you probably have several such lists.

Why is this important?

A client of yours calls you and asks you when you could come out to install a printer. And you say it's not necessary because you can email over a printer installation guide right away and anyone can install it. Or they have to wait a week until you can come out in person and do the installation.

First, clients don't want to wait for a week.

Second, clients appreciate that you offer a "right away" solution which allows them to have a working printer within the next 30 minutes, not in one week.

Now you may say clients expect you to do the work. No! Clients prefer to be involved in the work.

A few weeks ago, a skydiver acquaintance asked me if I could process a couple of pigs on his farm. His dad-in-law used to do it but he died last April and they haven't found a replacement butcher yet. Most butchers here in BC are either supermarket butchers or processing plant (dis)assembly line meat cutters. And they don't slaughter.

I am one of the few artisan custom butchers who slaughters as well.

So, I accepted the work and we processed of the piggies.

It's not that I did it. We did it. I fully involved the client and his family, and they fully enjoyed it. Using my processes, that is, IP, the client and his family did a big chunk of the work. Yes, I also enjoy teaching people how to do the work.

The craft is dying out, so the more people learn it the better.

So, do involve your clients in the work as much as you can. Highly involved (done WITH you) clients are much more loyal than passive (done FOR you) clients.

Conclusion

The buying-selling process is like a dance. One partner has to lead and the other to follow.

When buyers call you in to solve an IT problem, it's perfectly normal that it's you who leads the dance.

It means, it's you who set the process of diagnosing the problem and prescribing the solution.

Granted, you need your clients' key people to participate but you have to facilitate the event.

And the process starts with telling your clients that just as any good doctor, you have to perform a thorough diagnosis in order to prescribe the remedy.

Yes, you explain the method to your madness, but clients have to follow your method, not the other way around.

Oh, yes, and you should be paid for the diagnosis as well.

It's just not right when clients expect IT firms to perform the diagnosis for free and then charge only for the manual labour segment of the solution.

Don't even bother to make presentations. It's one-way communication.

Keep your work as interactive as you can by starting with an interactive diagnosis.

Oh, and when it comes to quantifying something, let your buyers do the calculations. You take the marker at the white board and your buyer takes the calculator.

The key is that it's the clients who have to arrive certain numbers. It's much more powerful than calculating the numbers yourself and then relaying them to your clients for consideration.

So, circling back to our original dilemma of what to leave behind after your first meetings with buyers.

If you've used the meeting well, you have a list of problems your buyers are facing coupled with a number of consequences and the cost of not handling those problems.

If possible, the numbers are broken down to daily cost, so buyers know how much it costs them not to act on your offer.

So, leave this summary of findings document behind with the problems, the consequences and their costs without mentioning solutions.

If this is not enough to spur buyers into action, then, most probably, the problem is something trivial and you wouldn't get paid decent money to solve it anyway.

As we mentioned it in an earlier section, focus on the proverbial bleeding necks, not papercuts.

You'll get paid better and will be happier than a rat with a golden tooth.

In the meantime, don't sell harder. Market smarter and your business will be better off for it.

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.