How to really sell

By Bruce Firestone | Uncategorized

May 16
[Excerpt from Entrepreneurs Handbook II, Bruce M
Firestone

Learn By Doing book, 2013

Copyright Bruce M Firestone]

Chapter 5

Strategic Selling and Negotiating—Turn Selling Into Buying,

Negative Cost Selling

 

5.1 Introduction

 

The objectives
of this chapter include—

The power
of the brand—how marketing leads to greater brand recognition which leads to
greater trust which leads to sales.

‘Intricate’
your clients—create a business ecosystem and secure your place in it on a
sustainable basis for the long term.

Solution
selling—learn how to ‘sit on the same side of the table as your clients’ and
provide solutions, not problems, for them.

Negative
cost selling—understand your clients’ businesses almost as well as they do.
Demonstrate your value proposition by showing your clients (using a
spreadsheet) how your product or service will either lower their costs or raise
their revenues (or do both) by more than the cost of your services so that they
are, in effect, experiencing a negative cost. That is, you can show your
clients ‘how you will pay them to hire you!’

5.2 The Power of
the Brand

 

Most
people don’t understand why branding is important—it might be a personal brand
(i.e., yourself) or a company brand you are trying to build—whatever it is,
branding is important for one over-arching reason,

People like to buy from people they like and
trust,
” Prof Bruce, Ottawa,
Canada.

Or put
another way, “Have you ever bought
anything from someone you didn’t like or trust?
” The answer is probably
“No” or if it is “Yes” then you only did it once and never again.

You build
your brand (or in the case of an individual, your reputation, which is your
personal brand) because it engenders
trust. Trust is the most important thing in business and probably in life. I
can easily convince my students of this simply by asking them a question: “What if your girlfriend (or boyfriend) was
fooling around behind your back, what kind of relationship would that be?

You can see their eyes go back and forth as they recall a situation they may
have experienced—then they understand.

What a
well respected brand creates is the opportunity
to sell successfully. Here is how it works:

1.       You work hard (for years) to establish a reputation for
good work, high ethical standards and trustworthiness.

2.       Trust creates an environment for
you where clients will send you more and more of their work.

3.       Trust creates an environment
where your clients will refer other clients to you.

4.       Trust gives you breathing room
when you do make a mistake—people will cut you a lot of slack even then because
they trust you.

5.       Trust creates a personal brand for you individually,
independent of your firm.

6.       If you change firms, many of your
clients will follow you because they trust you and have confidence in you.

7.       Trust creates a brand and a brand
creates a marketing opportunity and you can turn that market into sales or as
my wife, Dawn likes to call it ‘IGA money’, money you can touch, feel and spend.

Here is the process in a diagrammatic format:

image

A good
example of this process at work is the marketing that Clarica Life Insurance
(now a Sunlife Financial member) did when they first came on the scene. For
example, a man is seen in a restaurant waiting for someone to come out of one
of the W/Cs because it isn’t clear to him which is the men’s and which is the
women’s. The ID signs are ambiguous. When finally someone does exit, the person
is so androgynous that the poor guy still can’t figure out which is which.
Fortunately, a Clarica agent is waiting in the wings to clarify the situation.
A whole series of television ads were done using this theme and a sense of
humor and they made an impact on the marketplace.  But why did Clarica invest tens of millions of
dollars in a marketing campaign like that? It is instructive to find out why.

First,
let me ask you another question. How many of you have wanted to get up off the
couch after watching an insurance commercial and place a call to an insurance
agent to buy some life insurance?
Right. Zero.

There
isn’t even a call-to-action at the end of these Clarica commercials; selling
life insurance is not like the type of selling that Vince (aka Billy Mays) uses
for ShamWow! products. “Call now.
Operators are standing by to take your order at 1-800-555-5555 and if you call
right now, we’ll give you an extra set for FREE!
” doesn’t work for most
products and services.

So why
did Clarica run these commercials? If you look at the diagram above, Clarica
was marketing by way of a marketing process to build their reputation and brand. A good reputation and solid brand created trust in Clarica in the minds of the
public. So then, when a life insurance salesperson sits down with John and
Sally Smith in their living room to sell
them life insurance, John might say: “Oh,
I have heard of you!
” John and Sally already trust the salesperson before
their first meeting ever takes place.

Right off
the bat, they trust Clarica a heck of a lot more than they trust, say, a
representative from the Pirate Insurance Company of Kinakuta (a fictional country featured in Neal Stephenson’s novel,
Cryptonomicon). So if you are
thinking about trusting the future of your family to either someone
representing Clarica or the Pirate Insurance Company (who you have never heard
of before and who hasn’t spent a ton of money creating their brand and a
reputation), you are probably going to go with Clarica.

Note that
Clarica doesn’t sell a thing through their marketing; they have established a separate sales process to do that (i.e.,
having thousands of life insurance agents out there, making meetings and
actually doing the selling.) If you meet anyone whose biz card reads, say, ‘VP
of Marketing and Sales’, say hello to someone who doesn’t have a clue as to
what their job really is.

So a
sale, any sale, actually gets completed because of trust—the client trusts you
and, therefore, they are willing to buy from you. That’s the real secret to
successful selling: creating trust. Again remember, people like to buy from
people they like and trust.

One last
time, here’s the process—

Marketing –> Builds Brand –> Brand Builds Trust –> Trust Creates Opportunity to Sell –> Sales Provides More Resources for Marketing

5.3 Ethics and
Branding

 

Let me
start with ethics. There is nothing more important for you and your career than
your reputation. When I was just starting out in business in 1982, a wealthy
lawyer by the name of Kent Plumley (he made a lot of his money as an early
stage investor in Mitel and later in Newbridge) told me, “Bruce, the number one thing you have to remember is: protect your
reputation.

I thought
that was easy for Kent
to say, given that he was sitting on millions. But as I grew older I realized
he was right. Do you know why?

When I
was starting out, one of the real estate lawyers who helped me also helped
herself. We noticed that whenever we were closing on a property, another
developer always seemed to be in the same area, sniffing around. It wasn’t long
before we figured out there was a leak in the law office we were using at the
time and, with the help of the senior partner, we set about trying to prove it.
Unfortunately, it turned out to be the case. It was a devastating blow to the
firm and the lawyer involved was summarily dismissed. She was never a
significant player after that in the real estate business in Ottawa.

I don’t
care what city you are in (a small city like Ottawa,
a mega city like NYC or a city like Buenos
 Aires, the Paris of South America). Every city is
controlled by a small number of business and political leaders. In Ottawa, the number of real
movers in tech or real estate or any other major economic engine probably
numbers no more than 600. In NYC, it’s more but probably not more than 2,500.
So it’s a small number really.

What that
means is that if you muck up your reputation, you probably have to move. Better
to keep it in the first place, right?

5.4 ‘Intricate’
Your Clients

 

You all
know the one about the Ford Motor Car Accountant who sat on their BOD? At every
BOD meeting, he kept pressing the Board to shutter factory after factory. That
was his entire contribution to the debate on going at the time (circa the
1980s). Finally, one of the other Board members told him, “Imagine how much money Ford could save if we closed every plant?

It’s
thinking like this that has led the Big Three North American car producers to
the edge of the abyss and it’s also GM Chairman, Ed Whitacre has sacked just
about every senior GM manager including their most recent CEO. Big Ed needs new
people with new ideas who can turn GM around.

In today’s
world, you need to do more for your clients than tell them the obvious. I can’t
believe how many accountants add little value to their clients’ businesses. If
he or she tells me that if next year you increase revenues by x% and reduce
your costs by y%, you’ll make more money next year than you did this year. Gee,
I had to pay $350 an hour to hear that? It reminds me of what one Manager said
to his star player when the Atlanta Braves were perennial losers and the player
came in to ask for a raise. The Manager said, “I reckon we could’ve finished last without you.

If you
want loyal clients, clients who send you work year in year out, you’ll have to
better than this: you have to make yourself indispensable. As my friend, the
late Elliot Richardson, former Attorney General of the United States, said when
we were trying to Bring Back the Senators, “Bruce,
first we’ll intricate the NHL. Then we’ll get the franchise.

(In
Elliot’s honour, I added his word to UrbanDictionary.com:

http://www.urbandictionary.com/define.php?term=intricate+)

How do
you do this? One of the ways you intricate your clients is simply by the
passage of time. If for example, it’s legal or accounting work you are doing
for a client, the fact that you have their entire history is a huge advantage
for you. If your client is buying real property, mortgaging it, doing a merger
or acquisition, starting a new division, whatever, the fact that you have their
files is very important.

But I
can’t believe how many law firms and accounting firms don’t harness the data to
make themselves indispensable*.

(* The
data can be as simple as remembering and
filing
your clients’ clients and suppliers’ contact information. Recently,
a client of mine complained to me that every time he need his lawyer’s
assistant to do something for him, he needed to give the legal secretary the
telephone numbers, fax numbers and email addresses over and over again. This is
ridiculous. If you are going to be a ‘deal maker’ type of lawyer or accountant,
then you need to be able to talk to the clients and suppliers of your client.

If, say,
you are trying to get a real estate transaction closed for a client, you may
need to talk to your client’s Banker, Surveyor, Environmental Consultant (for,
say, a Phase 1 Environmental Assessment), Insurance Broker (for an insurance
binder), Title Insurer, Mortgage Broker, Appraiser and a half dozen other
suppliers to your client as well as your client’s client (perhaps the Seller,
the Buyer or Investors). I can’t tell you how many lawyers just sit and wait to
be told what to do instead of taking the initiative to contact on behalf of
their client all the stakeholders involved in a closing. And then they or their
legal assistants can’t find or remember their contact info including email
addresses, web sites, fax numbers, telephone numbers (not just at work but cell
numbers and even home numbers too), snail mail addresses, etc. Your clients
will thank you and become more loyal to you if you relieve them of a lot of
this burden and they won’t mind paying you and your staff extra because paying
you to do these things let’s them concentrate on growing their businesses while
you focus on getting deals completed for them. They won’t want to move to a new
law firm or accounting firm for a lot of reasons, one of which is that they
will need to train a whole new crew to become familiar with their business’
ecosystem.)

I tell my
wife that in my consulting practice, my true J.O.B. description is that I am a
file clerk. She laughs (thanks, Dawn) but it’s true. My clients are generally
hopeless at keeping their files straight so they are always coming to me.
Simple but true. You can do it too. I put a huge amount of effort into
capturing data electronically; I must PDF a few thousand documents every year
for clients and I can get their information much faster than they can.
Information is power. (I also make sure I capture the data on multiple backups
too BTW.)

Before I get to the Three Laws of Power Selling, I thought I should
restate for you the three most important things that every new startup and
freshly minted entrepreneur has to worry about first. The three most important
things you need to focus on above all others are: Sales, Sales and Sales.

It turns out that most entrepreneurs are blessed with cleverness,
ambition, flexibility, initiative, the ability to work in teams, curiosity,
creativity, fear of failure, willing to take responsibility, leadership, energy
and willingness to work hard; they have lots of ideas, some good and some bad.

But if you can’t sell, you’re toast. I have often heard CEOs of
large, successful corporations and Presidents of fast growing SMEEs (Small and
Medium Sized Enterprises) say: ‘Ah, now that things are going so well (i.e.,
sales are rolling in rather nicely), I can stand back and work on the business
instead of in the business.’ This is completely wrong; as soon as a CEO
delegates wholly the responsibility to his or her Vice President of Sales, the
business starts to go down hill.

When Lou Gerstner stepped in to the CEO role at IBM in the early
1990s (a time of great crisis for IBM), he took a very active role in sales.
Within a few days of taking the reins, he wanted to see a list of IBM’s top 300
customers. Why? Because he wanted to visit each and every one of them.

Sure you want to spend some time working on the business but you have
to working in the business too and you have to be involved in sales you have to
be in the sales loop otherwise you have abrogated your basic responsibilities
to your company’s stakeholders including your customers. I mean there are times
when your customers don’t want to talk to another sales engineer; they need to
talk directly to you, Ms. CEO or Mr. CEO. And this way you disintermediate all
the layers of bureaucracy; you get the real story and you then are in a
position to create new sales channels and new sales opportunities that only the
CEO or President can champion at the end of the day.

I thought it was weird circa 1995 to 2001 that all of a sudden
entrepreneurs and their financiers started thinking that they needed financing
first and sales second (or third or sometimes not at all). I have always taught
that if you have revenues, you will get financing and not the other way around.
Have you ever heard of a business folding where their sales are booming? Don’t
think so.

They might change CEOs for one reason or another but if you have
great sales, your company is going to be around for a long time.

So, quick, what is the entrepreneur’s first and foremost challenge?
Sales, Sales and Sales.

Getting sales is not easy. There is always competition and it’s hard
to find customers.

Some of my students tell me that their ‘pixie dust’ in their business
model is that there isn’t any competition for their (great!) new idea. This is
actually quite funny there are two reasons why there might not be any
competition. One is that it is a bad idea. Two is that it is a good idea that
no one else has thought about before (unlikely but possible). However, in the
second case, if it is a good idea, you absolutely will have competition. Check
out how long it took for competitors for Viagra to appear. (I am not saying
Viagra is a good idea, never having tried it myself, but it sure is a money
maker.)

If your idea is a good one, you will create your own competition. So
it’s a tough old world out there and your competitors don’t want you to succeed
but, guess what, your customers and your future customers do.

They want you to be successful because they need your product or
service. They don’t want you to go out of business. They are your greatest
allies.

So making a connection with them (this is called marketing) is really
crucial and you have to be able to make these connections cheaply and
effectively (this is called Guerrilla Marketing substituting advertising and
promotion brains for money).

But Guerrilla Marketing is something I deal with elsewhere; here
let’s assume that you have made the connection with a potential client. How do
you make your selling proposition irresistible? Well, you do it by first
applying Firestone’s Three Laws of Power Selling.

 

 

5.5 The Three Laws of Power Selling

 

Here below are Firestone’s Three Laws of Power Selling. First, I’ll
iterate them and, second, I’ll give some examples that will seek to illustrate
how the Three Laws of Power Selling actually work. Most people read these types
of things and they nod wisely but really have no idea how to apply these
how-to-guides to their situation. I have found that people learn best from RL
(Real Life) examples.

Firestone’s Three Laws of Power Selling are—

• Law No. 1: SITTING ON THE SAME SIDE OF THE TABLE

Thou shalt get on the same side of the table as thine customer or
client.

• Law No. 2: SOLUTION SELLING

Thou art selling a solution to a client problem or opportunity.

• Law No. 3: NEGATIVE COST SELLING/NEGATIVE COST MAREKTING

Thou shalt demonstrate that thy solution is a negative cost for thine
customer that thy customer’s or client’s costs decreaseth or thy customer’s or
client’s revenues increaseth or both.

Thou shalt find persons who be willing to pay thou to market thine
wares or services

Law 1 Some Examples of SITTING ON THE SAME SIDE OF THE TABLE

When I was doing some consulting work with GradeAStudent.com (started
by four, really smart, former students of mine), I told them that if they
adopted Law No. 1, they could greatly increase the amount of hardware and
software they sell.

Their main business is at-home computer service fixing your PC
on-site: installing software, getting rid of viruses, making your network to
run, etc., etc. But clients naturally trust them to help them buy hardware and
software too.

I told them that instead of trying to sell their customers stuff;
they should put their suppliers on the other side of the table. So basically a
GradeAStudent.com techie would say to a customer: I can get you XYZ virus scan
software from Acme Corp. for 200 bucks and it does everything, including block
spy ware and ad ware and pop ups, as well. Or I can get you something cheaper
from Pirate Software Co. for $99 it scans for viruses but doesn’t block pop
ups, etc.

Now the GradeAStudent.com techie is taking on the role of trusted
advisor, a consultant to his customer, if you will he is on the same side of
the table as the client. The suppliers are on the other side. If the client
doesn’t like any of the options, the techie can then say: Look, maybe I can get
you a better price from Acme or Pirate or maybe I can find something that will
suit you better from someone else.

In either event, the client isn’t saying ‘no’ to GradeAStudent.com
and they aren’t ‘buying’ from GradeAStudent.com they are buying ‘through’
GradeAStudent.com and from GradeAStudent.com’s suppliers. The question of
GradeAStudent.com’s margin and markup on the sale isn’t likely to come up at
all; it will be the suppliers who will most likely take heat if the pricing is
too high or the offer doesn’t have all the features (or has too many of them)
that the client wants. GradeAStudent.com can back away from any solution with
no loss of face. This kind of ‘non-selling’, selling is extremely powerful.

Another client of mine, a web developer at EnvisionOnline.ca, was
asking how he might apply Law 1 to his business. I thought about it a bit and
came up with this example for him. He has already designed a web site for a
Home Heating and Air Conditioning Company (HHAC, not their real name). I told
EnvisionOnline.ca: Why not turn HHAC into a quote machine instead of a seller
of AC units or furnaces? The idea would be for HHAC to consult with their
clients, get on the ‘same side of the table’ and spec two or three different
solutions for them. Again, HHAC clients would (hopefully) tend to see HHAC’s
suppliers as the entities they are negotiating with, not HHAC.

Maybe EnvisionOnline.ca could create an opportunity for itself to get
some recurring revenues by optimizing HHAC’s web site for maximum search engine
traffic and perfecting an online quote system for HHAC. EnvisionOnline.ca could
operate the site for HHAC. Today, what once were product companies like IBM
want to be more like service companies and get more of their revenues from
consulting for clients or operating things for their clients. It makes sense
these types of revenues can be more predictable and they obviously can lead to
more product sales too. IBM has been very successful at this: operating huge
data centers and other back office operations for major global companies. They
now get a huge portion of their revenues from services. And when these back
office operations need new equipment, you can be sure that IBM supplies a lot
of that as well.

But service companies also want to be more like product companies.
Selling products has its own appeal you make a thing once and you resell it
over and over again.

EnvisionOnline.ca develops products (web sites) with many, many of
the components being repeatedly reused. By operating client web sites
(consistent with the Three Laws of Power Selling, of course), EnvisionOnline.ca
can be more of a service company with more predictable revenues perhaps.

Now another important feature of the Three Laws of Power Selling is
to make sure that you are applying the Three Laws to not only your sales to
your clients and customers but also thinking through how they might or should
be applying the Three Laws to their efforts to sell to their clients. Huh?

Now one could carry this on down the food chain indefinitely but I
think applying the Three Laws to two generations of the business-land ecology
is enough to think about at any one time.

So let’s go back to Law 1 and see if we can find an example where we
can apply this type of thinking. How about the case of Brymark.com, a seller of
promotional items. One of their sales people, Dale (not his real name) is a
keen golfer and he wants to sell promo items to Golf Pros but everywhere he
goes, he hears the same story they don’t have the budget for it.

Now Golf Pros do a lot of teaching (their bread and butter) and Dale
notices that a lot of those keen students are lawyers. Dale realizes that
lawyers (at least in Canada) are usually in tough trying to find ways to market
and sell to new clients Canadian lawyers tend to do less of those late night
television ads than their US counterparts who don’t seem to mind a direct pitch
like say: Have you recently been injured in an accident? Do you need someone to
represent you and take your side?

So maybe Dale can solve the problem this way: he will sell the promo
items to the Golf Pro but he will get one of Golf Pro’s legal clients to pay.
This is how it works: he chooses a promo item that appeals to both of them the
Golf pro and the Law Firm, say, mouse pads. He brands the mouse pads with both
the Golf Pro’s information and the Law Firm’s pitch too.

Now the Law Firm gives out free mouse pads to its clients, many of whom
are probable golfers, and the Golf Pro gives out the mouse pads to his clients,
many of whom are probably in the market for legal services. By thinking about
how the Golf Pro’s clients sell (or market) to their clients, Dale has made a
sale and created a new marketing channel for both the Golf Pro (who gets the
Law Firm to distribute his marketing info to their clients) and the Law Firm
(who gets the Golf Pro to distribute their marketing info to his clients).

This is called co-branding and can work with more than two parties as
well. For example, promo items for a high end men’s shoe store might work well
with an upscale jeweler and a high performance auto dealership.

This kind of selling is more difficult to do because it involves a
minimum of three parties: you, the sales person, and at least two co-branders.
Anytime, you need three approvals to get a project off the ground, well, that’s
tougher to get than a two party agreement. Obviously, the degree of difficulty
goes up as you bring in more co-branders. Having said this, by making it more
difficult for himself, Dale is also making it harder for his competition to
duplicate too. And in the promo business, which is absolutely cutthroat at the
best of times, that’s not a bad thing.

I really like how the Ottawa 04 International Animation Festival sold
to one of their key sponsors (Electronic Arts, EA). Usually, these sponsorships
are pretty boring put up a banner, hand out some brochures, demonstrate the
products or service. Most sponsors get involved with good works out of guilt
and don’t leverage their sponsorship dollars very well, if at all.

But the Festival had clearly thought about some of EA’s challenges,
like the fact that one of EA’s biggest problems (circa 2004) is how to recruit
top notch talent. By getting on the same side of the table as EA, the Festival
thought about who EA is selling to; they need to sell to (i.e., recruit):
software engineers, animators and computer graphics artists. And those just
happen to be the kind of people who might come/be attracted to an International
Animation Festival.

So EA brought their recruiting machine to town.

So the Festival was not only thinking about how they could sell to
their customer (EA) but how their customer (EA) could sell to their customers
(software engineers, et al). You can only see solutions like this when you are
sitting on the same side of the table as your client and looking at their
problems the same way they do. This leads us to Law No. 2.

Law 2 Some Examples of SOLUTION SELLING

Law No. 2 involves ‘solution selling’. I am always amazed at how many
sales people make a sales call on a prospective client knowing next to nothing
(or sometimes absolutely nothing) about the potential client’s organization and
its problems and challenges. It’s hard to sell a solution when you don’t know
the problem.

Solution selling is all about knowing a client’s business and
business model in incredible detail so that your product or service addresses,
in a very direct way, at least one of their key issues.

Solution selling often involves self-financing offerings, where the
money the client needs to have in order to pay you for your services or
products doesn’t actually come from them but from their clients; i.e., your
client’s clients.

I worked with one NPO (Not for Profit) outfit and we devised and
entire program for them that cost them $100,000+/- to implement but generated
more than $600,000 in net funds from event participation and sponsorship. They
never had to reach into their (short) pockets for a dime.

Furniture sellers and auto dealers do this all the time they provide
attractive financing deals (OAC, On Approved Credit) like those don’t pay a
cent events until some point in the future or by providing you with 100%
financing at super low interest rates.

I have been involved in mergers and acquisitions where the acquiring
company ends up with more cash after buying the other business than they had
before. These are called ‘accretive’ financing deals they can be cash accretive
or earnings accretive or both. This is another, more complex form of solution
selling.

Another way to look at it is, if I am asked to help sell a company,
one of the first things I might do is to try to find a way to provide the
acquiring company with the financing to do it so they don’t have to reach into
their jeans for any money at all.

In one transaction I am familiar with, the acquiring company bought a
franchise for $30m, half down in cash and half paid at $5m per year for three
years. (The numbers have been changed to protect the identity of the acquiring
company).

They then entered into a long term lease for a facility and received
a leasing inducement in the amount of $20m in cash from their Landlord. They
also put in place a credit facility with their Bank for 50% of the value of
their new franchise.

If you do the numbers, they put up $15m in cash to get into this
business but received back (from the leasing inducement and the credit
facility) a total of $35m so they had $20m more in cash after buying the
franchise than before. Nice work if you can get it.

Accretive deals like this are much easier to do when you are a large
company with a top credit rating and explains to some degree why the rich get
richer and the rest of us, don’t

Real Estate transactions can often be like this too. It’s a form of
Bootstrap Capital.

How can you acquire real estate with no money down? I get asked this
all the time. In reality, you usually can’t do this; it’s more like acquire
real estate with little money down. But it can be done. For those of you who
are curious about this, you can read an example of how Betty and Phil (not
their real names) acquired residential rentals with very little money down.

One of my former students started his residential construction
business with no money down by finding a willing landowner to play along with
him. He optioned a piece of land for almost nothing ($500), put his sign up,
put a trailer on site and he pre-sold 10 units from plans. With the deposits he
received from Purchasers, terms he got from his suppliers and with the
co-operation of the landowner, he was able to profitably build more than ten
single family homes in his first year.

The landowner and his suppliers got paid out of the closings. He had
zero bank financing and practically zero cash when he started out but he did
have one thing credibility. And that can take you a long way.

There are other ways people acquire real estate with no money down.
For example, they might be speculators who intend to flip the land for a profit
before they actually acquire it. Or they could buy land or buildings that are
undervalued.

The latter was especially popular in the real estate go-go years of
the 1980s. Another way of looking at it is they are over-leveraging the
acquisition.

Basically, it works like this: buy an undervalued property; add some
value by doing a lipstick (i.e., superficial) renovation or raising rents; get
it reappraised at a higher valuation; mortgage the property for more than you
paid for it.

5.6 Solution Selling/Measuring the ROI for a Potential Client of a
Promotional Products Company, AcePromotions.com

Let’s look at an example of solution selling where a promotional
products company (AcePromotions.com) has decided that they need to be more than
just product pushers. The sales manager for AcePromotions.com is writing to one
of her sales people about approaching Tom Smith Toyota (TST) using a new
approach for promotional products. This is what she writes—

Hi Guy, why don’t we try something like this with the Smith Toyota
people? Call your contact over there and try to up sell them on this new
solution selling thing we are trying. Let me know how it goes. Btw, take the
lap top with you and the attached spreadsheet. I am sure that they will like
the new approach. Here it is:

1. Let’s suppose that TST agrees to buy 10,000 windshield scrapers
from us for $4 each or $40,000.

2. The scarpers say something amusing and informative about TST with
a tel. #, web address, RL address on them.

3. TST also says that anyone who brings their scraper in to show them
that they have one before, say, June 30th is automatically entered into a
contest to win a free lease on a car for a cost to TST of $300 per month say or
$3,600 for the year.

4. They are also entitled to a $250 cash rebate from TST on every new
car sold before June 30th just by showing up their scrapers.

5. TST pays AcePromotions.com another $6,000 and AcePromotions.com
hires students to go around to selected gas stations, collision repair places,
car washes and give them out free.

6. We will already have pre-sold these non traditional outlets on
this delivery option. They get the scarpers for free and can use it in their
promotional efforts too.

7. We then gives selected gas stations, collision repair places and
car washes the option to co-brand the scrapers and let’s assume that 50% of
them choose to do so at an additional fee of $2.00 per scraper. Note that
AcePromotions.com is selling half the scarpers for $6.00 and yet the
distribution outlets are getting scarpers for half price. TST is happy too
because they are getting their message into the hands of consumers who are not
yet TST customers.

8. There is an advertising budget of $8,000 to support the new
campaign paid by TST and managed by AcePromotions.com with TST’s ad agency.

image

 

9. To see how you measure ROI, see attached spreadsheet.

10. In this model, TST has to sell 14 new vehicles and 7 new leases
in five months to have benefits that are 33% higher than costs.

11. You can play with the spreadsheet numbers and vary all of the
inputs.

12. You should sit down with TST with this spreadsheet and go through
it with them; they will know the variables better than we do.

13. Then we will track the program with the TST people over five
months.

14. This is the level of detail we need to do for every proposed
solution selling opportunity.

15. It is very engaging for our clients too; they really enjoy this
type of involvement and will fool around with our spreadsheet model till the
cows come home.

16. Also, most clients like TST get the fact that that there are
other indirect results of a program like this; they will get a ton more sales
after the five month period is over that are never actually measured. People
like me don’t enter contests or take freebies but I would keep a TST scraper
for a long time and when it is time to buy a new car, why there it will be as a
reminder about what a good outfit TST is and how I should consider buying a Toyota anyway.

17. Note that: a. AcePromotions.com’s sales are much higher than if
we just sold promotional products, b. we will have created a host of new
selling opportunities (in the distribution channel; i.e., selling co-branded
promotional products to the collision repair, gas station and car wash industry
an selling them their own promotional products and delivery solutions) and c.
our margins are much better too.

18. Furthermore, AcePromotions.com is more likely to make this sale
because: a. we are providing a total solution, b. we are targeting the
potential clients (future car buyers) of our client (TST) rather than our
client, c. we are measuring ROI for our client.

Good luck, Sally

Measuring Tom Smith Toyota
(TST) ROI

Costs

Scrapers $4

10,000 $40,000 PRO

Delivery Solution $6,000 DEL

Car Lease Prize $300

12 $3,600 PRZ

Cash Rebate $250 REB

Advertising Budget to Promote Program $8,000 ADS

Benefits

Average Profit per Car Sold $3,000 APC

Average Profit per Car Leased $2,000 APL

Average Profit per Car Serviced $1,200 APS

How many additional cars does TST have to sell to have benefits
greater than costs?

Solve this set of equations by iteration 1.333 MAR (Margin of
benefits over costs)

[APC * n1 + APL * n2 + APS * n] –
MAR * [PRO + DEL + PRZ + ADS + REB * n] = 0

n1 + n2 = n

n1 = additional new cars sold

n2 = additional new cars leased

assume:

n1 = 2 * n2 2

n1 = 0.666667

n2 = 0.333333

Number of new cars and leased cars such that benefits are 50% greater
than costs

try n = 22 $954

Therefore, TST has to sell in the five months before June 30th

new cars 14.66667

leased cars 7.333333

5.7 Law 3, Examples of NEGATIVE COST SELLING/NEGATIVE COST MAREKTING

Negative cost marketing is really two things one is being able to
show a client (and really show it using a spreadsheet) that by hiring you or by
buying your product, their costs will go down or their revenues will go up or
both. We are going to call this negative cost selling here.

Two is to find people who will pay you to market your products or services.
We’ll call this negative cost marketing and, somewhat surprisingly, it can be
quite common and would be more commonplace if people (read marketing
professionals) were willing to think more in these terms to begin with.

The obvious example of this is what pro sports teams do. It seems
incredible to me that people will gladly buy overpriced merchandise and walk
around as unpaid billboards for their favorite sports teams. I mean in the
Great Depression of the 1930s, some poor suckers got paid (wretchedly) to
become walking billboard and shills for local businesses. Now we do it for
free; in fact, we pay sports teams to do it for them.

Of course, it isn’t just sports teams that are in this space; Calvin
Klein Jeans, Roots and other assorted brand name manufacturers long ago figured
that people would pay to buy your stuff with your name and brand on the outside
of their clothes. What’s with that anyway?

There are many other ways to induce people to market your stuff for
you. One of my former students owns a beautiful, hand crafted wooden gondola
that he charters out all summer. Then he pays to put it in storage for the
winter. I suggested to him that he contact some of the large commercial office
or commercial retail landlords in his area and see if they want to put his boat
on display in one of their atria.

After all, his boat is an artifact a unique (in Ottawa) piece of artwork really. And while
they won’t pay him to put his boat in their atrium, at least they won’t charge
him to do it (we hope). So he ‘saves’ three times over he doesn’t pay to store
the boat; he doesn’t have to pay for the space in the atrium and the free
display he gets all winter to huge numbers of office workers or mall customers
is a heck of a marketing tool for him. Let’s put it this way, if he doesn’t try
something like this, his best marketing tool (his boat) sits hidden under cover
for six months of winter.

Now let’s turn to negative cost selling. To do this, you have to know
how your customer’s business (model) actually works. Study your client it pays
off, big time.

I go through one example of re-engineering a business model for a
friend of mine (Bill Farley, not his real name), who is in the media training
business. We tweaked his business model to help his business out of a slump and
we made it consistent with the Firestone’s Three Laws of Power Selling, of
course. In my view, the latter is the cause of the former. You can read more
about Bill’s Media Training Business Model Revamp and I won’t repeat it here.

Another friend of mine, Anthony (sorry but not his real name either)
owns his own mail order house and part of his business model is to create his
own customers through negative cost selling. I think he does it more because he
is bored with the normal course of business than because he needs more clients.
He finds that sometimes he can create more interesting solutions for potential
clients than they can for themselves and, happily, more interesting work for
himself. He sees it as a kind of challenge.

Anthony has recently gotten into the lumpy mail business today Canada
Post and the USPS allow people to send all kinds of weirdly shaped objects
through the mail. They had to adjust their business models too or face near
oblivion.

So Anthony came up with the idea of helping a summer camp for
distressed children raise money by using his bulk mail service. But he just
didn’t go to them with a proposal of give me $15,000 and I’ll mail out
thousands of solicitation letters. I mean how many of these does everyone see
in a year anyway? And where do most of them end up? File 13.

No, he pitched them on sending a select group of CEOs and senior
Managers (from a good quality mailing list he had) a lumpy mail piece
containing a skipping stone and an invitation to a CEO stone skipping challenge
event. Over 90% of these lumpy mail packages got opened and the response rates
were in the stratosphere.

Everyone can skip a stone and everyone has childhood memories of time
spent by the water on a perfect summer’s day.

He even got a Toronto
quarry to provide the stones and sponsor the mail out too. Now that’s solution
selling.

I like even better the example of Peter Patafie, owner of Patafies
Inc., who started his packing and moving supplies business and in five years,
built a $15m a year business from nothing with nothing.

Peter noticed how all the sales persons for moving companies in the
Ottawa area were supplying their customers with packing supplies by first
taking delivery of cardboard boxes, wardrobe boxes, bubble wrap, tape, tape
dispensers, wrapping paper, what have you, in their warehouses and then the
sale person would hump the stuff over to their clients homes in their vehicles.
Peter saw OPPORTUNITY.

He thought that a better use of the sales person’s time was selling
more moves (better for them since they are mostly on commission and better for
the moving company obviously) rather than delivering boxes to people packing up
for their moves. So Peter pitched every moving company this way: he would sell
them packing supplies but his people would deliver them to their customers.

It was a simple idea but brilliant. Today, 98% of the movers in
Ottawa are supplied by Patafie’s Inc. Peter got all Three Laws of Power Selling
in one fell swoop: 1) he is sitting on the same side of the table as his
customer (where his customer’s customer becomes his customer), 2) he is
‘solution selling’ (by making his customer’s sales people more productive) and
3) he is a negative cost too (since his customer’s customers are paying for the
packing and moving supplies).

In essence, the moving company gets money for nothing they mark up
Peter’s packing and moving supplies, sell them to their clients, Peter delivers
the stuff, they never see it, they get the money (less Peter’s share) but
haven’t done any more work and, in fact, have unleashed their sales people to
sell more moves.

A few years later, Peter noticed something else by visiting his
clients. (What a novel concept, wouldn’t email have done as well? Don’t think
so.) They each had a zillion used boxes lying around. Boxes that Peter had sold
his clients’ clients; after their moves, somehow they ended up back in the
movers warehouses.

So Peter asked them what they did with the used boxes. They paid to
have a recycler take them away. So Peter offered to buy the old boxes from them
(another negative cost!) They might have thought Peter a bit foolish but they
indulged him. Sure, you can buy our discarded cardboard, they said.

But Peter had noticed that plenty of people were scrounging old boxes
from grocery stores, hardware stores, liquor stores, wherever. People who
didn’t want to buy new boxes. So Peter started selling used boxes and he turned
that into a thriving million dollar plus retail business in less than two
years. Think about it Peter sells new boxes, later he buys them back at a
fraction of the price and then resells them again at a substantial markup.

Peter has created his own clients seeded the fields and reaped the
harvest, if you will. He created a new revenue stream and a recurring revenue
stream for himself, both critical components to having a great business. And he
made the connection with new customers efficiently and effectively by first
visiting all the moving companies in the area, which is feasible for one person
to do since there aren’t that many of them. And later, he created a mass market
for recycled boxes by niche radio advertising.

At the beginning of this paper, I made the point that if you have to
knock yourself out to make a connection with potential customers at huge cost
in terms of time or money or both, your business won’t be sustainable and it
will fail. So remember: finding, getting and keeping customers have to be
(relatively) cheap and easy to do in order for your business to have a chance
at success.

5.8 More about the Three Laws

 

Really, Firestone’s Three Laws of Power Selling are woefully
inadequate to by themselves create a truly powerful sales organization; there’s
a lot more to it than my Three Laws, for sure. At its very essence, power
selling is about becoming more creative, thinking a lot about your customer
(and your customer’s customers’) needs. It’s about hard work. It’s about
lateral thinking. It’s about seeing opportunities. It’s about knowing how the
world works. It’s about training your whole team and I mean everyone including
your receptionist and your accounting staff too to be power sellers.

Your accounting team is a great source of leads; why not reverse sell
to people you buy from (aka, your suppliers). When I was with the Ottawa
Senators, I didn’t like to buy from anyone who wasn’t already a season ticket
holder or prepared to become one; I think we should expect people to buy from
us if we are buying from them, provided it makes sense.

And nothing is worse (and this has happened to me a lot) than calling
a tech company or calling a real estate company or any type of business and
getting a receptionist who knows nothing about the company she or he works for.
How is it possible for a receptionist not to know what real estate projects a
company has on the go or what new products the firm just released with great
fanfare at a tech trade show? And don’t blame the receptionist it’s
management’s and ownership’s fault if they have untrained and uniformed
employees running around.

In pro sports, they know how important it is to be prepared. They say
that if you develop good habits in practices, it will carry over to games when
the results really mean something, like whether you get to keep your job or get
cut. In any competent military, they are fanatical about training and preparation
because it saves their lives. You want to be a power seller? Then you and your
entire organization need to be trained and prepared you need to do your
homework and you need to learn how to be a power seller and then you need to
practice it again and again because you will get better at it. You can train
yourself to be more creative if you are alive to that possibility.

At the end of the day, people like to buy from people they like so
you can’t neglect the human factor. My late father, Professor O.J. Firestone,
told me if I wanted to get a deal done then it had to be face to face. I
thought he was being a bit old fashioned but in this time of widespread email
abuse and voicemail hell, I think his advice is even truer today than it was
when he said it to me, in 1982.

Postscript: Recently, I took a course in real estate given by a fine
teacher, Mr. Wayne Hancock of Oshawa
and he added an important caveat. He said: ‘Selling is control.’ I instantly
recognized what he meant. First of all, you always want to be the one who
volunteers to write up the agreement. The pen gives you control. Second of all,
most clients will behave irrationally at some point between negotiating the
deal and closing it; it really doesn’t matter if they are seller or buyers
there are always some kinds of second thoughts going on: either buyer’s remorse
or seller’s remorse is trying to take over their minds. So deals tend to fall
apart. If you have control over your own emotions and you have some influence
with your clients, you can often put Humpty Dumpty together again by asking
them simple questions, like, what is the alternative?

5.9 Cold Calling and Successful Selling

The three most important things in business are Sales, Sales, Sales.
Cold calling is part of sales but try to turn them into warm calls by—

1. Before you lift up the phone, think about whom you are calling.
Know something about their business, go to their web site and have a ‘solution’
in mind this let’s you start a conversation with the prospect rather than
making a sales pitch.

2. Even if the prospect doesn’t like your idea, they might still like
you your creativity and initiative and the fact that you bothered to make the
effort to do some research on them before you called. People like to buy from
people they like.

3. If you do this and if you make 50 calls, you should get 10 (20%)
F2F meetings.

4. Out of 10 F2F meetings, you should get 4 (40%) sales orders.

5. If your annual quota is $1m in sales and your average order size
is $5k, you need 200 orders for the year or 4 per week.

6. That means you need to make 50 calls each and every week to meet
your goals.

In summary then, we have—

• Have a conversation starter an idea of a ‘solution’ for them
(‘selling is telling’*) have a success story to tell them about someone in a
similar industry or situation

• Talk about what their competitors are doing and what they are not
doing that gets their competitive instincts going

• Do NOT sound like a salesperson (i.e. like you are reading a
scripted message)

• Learn something about the prospect before you make the call

• Be nice to every receptionist (she/he can/cannot put you through to
the right contact)

• Always introduce yourself

• Verify facts ‘Who is the decision maker’?

• Always have a call to action ask for the deal and have a paper
ready that they can sign

• When you hear ‘yes’ stop talking, thank them for the deal, get a
signature and then leave

• Always be courteous even when you get a ‘no’

• Remember ‘yes’ is the best answer but ‘no’ is the second best
answer

• ‘No’ is better than a ‘maybe’ since ‘maybe’ just wastes everyone’s
time

• A call to action gets you a ‘yes’ or a ‘no’ don’t be afraid to ask
for the deal

• If you get a ‘maybe’ tell the prospect you are going to treat that
as a ‘no’; they will either change their mind or at least you will have
resolved the situation

• Selling is best done F2F; second best is by telephone; third best
is by email fax and snail mail do not even rate

• Schedule appointments by saying I am going to be in your area on
such and such a date (book two to four weeks in advance)

• Do NOT call to confirm appointments it gives people a chance to
cancel on you

• If people are really rude, look at it as an opportunity to call
them back in six weeks or so they may feel some remorse and you get the appointment
and sale anyway

• Keep an up-to-date data base telephone numbers and email addresses
especially

• Always thank people for their time in writing

• Always volunteer to write up the notes of a meeting or the
agreement he/she who controls the pen, controls the deal

• Sometimes use a marketing survey to get in the door

• Ask a lot of questions and listen carefully people like to talk
about themselves and their companies; when you listen, opportunity will present
itself

• When people say send me some info, make sure they really want it
and it’s just not a way to get you off the phone

• If they say they are not interested, ask if you can follow up in a
few months and then do

• Silence is a weapon sometimes just by being quiet, they will answer
their own objections and talk themselves into a deal

• DV x Q = $, Differentiated Value times Quantity equals Dollars**;
what this means is you have to talk to your prospects about your differentiated
value what makes you different and better

“In order to be irreplaceable, one must
always be different,” Coco Chanel

• If call is not going well, ask to be included in the next
opportunity: Can you include me on the bidders list next time you order? Get an
email address and follow up

• Use the six degrees of separation to find someone you know who
knows them but don’t rely on third party introductions go after it yourself;
use them as references and sources of testimonials

• Always practice bottom up selling start with a peer-to-peer
relationship before you get the Presidents of the two companies involved; they
should only basically get involved to bless a deal

• Always try for at least a two year deal if every sale you make is
one-off, every year you are like a baseball player, you start over at 000 home
runs. If you do multi year deals, your sales are guaranteed to increase year
over year and increase much faster than if every deal is a one year deal.

5.10 The Two Step Process—You Only Need to Meet with a Client Twice
to get a Deal

Step 0: Study the biz and come up with a case study that is relevant
and tells an interesting story. Call the prospect and start a conversation.

Step 1: Meet with the prospect face-to-face this is a discovery
meeting but a discussion is taking place about the case study you are
using/suggesting and determining its relevance to their requirements. You are
determining their budget and other factors in this meeting.

Step 2: You make a final presentation, ask for the deal and get a
signature or not.

Strategic Selling

See if you can do some strategic selling. Strategic selling is where
the cost to your client of buying from you is negative. This is the easiest
type of sale to make.

For example, a client buys something from you but you have already
lined up someone to buy those products or services from them, you have
guaranteed them a win, basically. See for example: http://www. old.dramatispersonae.org/NegativeCostMarketingArchitectFirm.htm

5.11 Sales People are Entrepreneurs

 

A. Every sales person is really running his or her own business.

B. More sales = more income for you.

C. Your cost side is you.

D. The great thing is you don’t have to worry about all those other
kinds of things like paying to keep the heat on; you just concentrate on your
own business, selling more

E. You are (mostly) your own boss.

F. Create your own PWS (Personal Web Site). Put your bio on it, a
picture of you (even on the Internet, people like to see whom they are dealing
with), other interesting material you have created/written (e.g., any case
studies you have written), testimonials about you given to you by your clients,
your contact co-ordinates, etc.

G. You need to be an expert in selling obviously but also an expert
in marketing yourself.
H. Remember that the harder/smarter you work, the luckier you get.

Sales are the teeth of the business. Sales people are valuable to
every business and even in difficult economic times, they are rarely laid off.
When a JOB opens up in the Marketing Department, one typically sees dozens or
even hundreds of candidates, all equally well dressed and well presented.
Marketing types mostly make $30 to $50k. Sales people make $80 to $100k+.

But people are afraid of sales. They think selling is selling stuff
to people who don’t want it when in reality, real selling is providing timely
solutions to real problems clients are experiencing. Successful selling is a
rush and it is very creative. It also involves a lot of marketing especially if
you view your sales JOB as your own business and a big part of your JOB is
marketing – yourself.

5.12 Tips on How to Negotiate and Sell Plus a few Lessons from Neuro
Linguistic Programming, NLP

I am not sure which is the
single most important thing for an entrepreneur to do but probably the two most
important are—

1. SELL, SELL, SELL.

2. CHECK, CHECK, CHECK.

You cannot really be a
successful entrepreneur unless you can sell and negotiate effectively.

Obviously, you have to be able
to sell to get launch clients, clients and customers. But you also need to be
able to sell your ideas to: suppliers (to give you supplier credit, for
example), above average employees (to come to work with you), bankers (to lend
you money or even these days just to let you open an account), shareholders
(who co-invest with you), partners (who are also co-investing with you often in
the form of sweat equity), media (to get earned media exposure for your new
enterprise), directors (for sound corporate governance), government approval
agencies (licensing requirements) and just about everyone else you come into
contact with.

My late father, Professor of
Economics at the University
of Ottawa, Dr. O. J.
Firestone also told me that you have to check, check and check again. There are
no ‘fire and forget’ missiles in business; you have to make sure that stuff gets
done.

But whether SELL, SELL, SELL
is number one or CHECK, CHECK, CHECK is number one does not really matter:
successful entrepreneurs and intrapreneurs do both, all the time.

Now one effective way to
improve your sales skills is to do more of it. Like just about everything else
humans do, they get better, a lot better, with practice. As Ben Affleck in the
film, Boiler Room, said: “ABC!” Always be Closing.

One of the salespeople at the
Ottawa Senators Hockey Club when I was there was Darren McCarthy. He came from
selling at the Brick and, let me tell you, you have to be able to sell to
survive at the Brick. He was one of the most determined salespeople I have ever
met: if he ever ran out of leads, he would open the Yellow Pages and ‘dial for
dollars’. If he went to visit a business, he might try to sell them a $100,000
(per year) suite and a $250,000 in-ice ad but if he could not get that, he
would come out of there with something, even a 12-pack of tickets for $600!
ABC.

Now I like selling, I enjoy
it. Darren did too. You are usually better at something if you like it. Also,
it helps to sell what you love.

There are three possible
answers to a question: YES, NO or MAYBE. A ‘YES’ is better than a ‘NO’ but a
‘NO’ is way better than a ‘MAYBE’. MAYBES waste your time and your clients’
time too. If someone gives me a ‘MAYBE’, I tell them I will treat that as a
‘NO’. Sometimes (actually quite often) they say, well, “I don’t want to say
NO.” So say ‘YES!’

When you hear a ‘YES’, whip
out the contract (always bring that with you) and ask them to sign it (never be
afraid to ask for the deal!). Then thank them and get out of there. After you
hear a ‘YES’, the only thing you can do by sticking around for more talk is
muck up the deal. So get their signature on the order and make like a tree and
leave.

“Selling is telling,” Mark
Gencher from Brymark told me once. He is right: selling is about providing
timely information to the right person at the right time. Remember, selling is
where the money is (sales people get paid multiples of what most marketing
people get paid) and they almost never get laid off.

If you get a ‘NO’, so what?
Don’t worry about it: you will just have more time for your next client.

What are some of the things
you can do to get ready to sell?

Well, for one, be prepared. I
never make a cold call. I always know something about the organization I am
about to approach. The Internet makes that pretty easy these days.

Practice too. Do not wing it.

I also use some of the skills
taught by neuro linguistic programmers. Now these techniques are quite powerful
and you should never use them inappropriately: like trying to get someone to go
on a date with you who does not want to or forcing someone into buying something
they cannot really afford. So always be ethical and protect your reputation.

But here are a few tips. Some
of them are somewhat contradictory. Do not worry about that. Entrepreneurs
constantly deal in an environment where they have incomplete information and
ambiguity is abundant.

1.       Develop your BATNA (Best Alternative to a Negotiated Agreement) before
negotiations commence—if you can live
without a deal, you are in a better position to negotiate successfully.

2.       Sit with your back to the window—light up the other party’s face so you can
clearly see their emotional state.

3.      
Get on the same side of the table as they are on (not
literally). If for example, you are trying to sell computer equipment, talk
about different solutions and different vendors as if they were on the other
side of the table and you are in effect providing them with consulting
services… Tell them if they do not like any of the alternatives, you will work with them to find one that works for
them.

4.       Calibrate the other party.

5.       Read lateral eye movements.

6.       Read body language—measure their enthusiasm or lack thereof. More than half
of all human communication is via body language, viz:

7.       Listen to tonality.

8.       Synchronize breathing.

9.       Mirror body movements—leaning forward, leaning back, arms folded in front…

10.    Empathize with
other party’s feelings.

11.    Ask questions without first making assumptions.

12.    Don’t bet against yourself—don’t improve your offer until they counter.

13.    Don’t be afraid to make first move—aim higher and show confidence that you know what you are talking about.

14.    Remember that pricing is an art not a
science. Jean-Baptiste Colbert, Minister of Finance to Louis XIV once
said, The art of taxation (a tax
is a price, Ed) consists in so plucking the
goose as to obtain the largest possible amount of feathers with the smallest
possible amount of hissing,
The quote may also have
involved obtaining the maximum number of
quills
(a valuable writing tool at the time, Ed) with the minimum amount of hissing.

15.    Try to agree on simple things first—build momentum.

16.    Provide evidence supporting your positions.

17.    KISS—keep
it simple.

18.    If negotiations halt, leave two or three talking points behind—not ten, no one can focus on
more than a handful of reasons…

19.    Don’t fill in the gaps, sometimes silence is best—make sure you do not talk all the time; listen carefully and pay attention
to body language and tonality.

20.    Remember to smile from time to time—what you
think and do counts. If you think positively, you are far more likely to
achieve your goals. Think only about what you want, not what you do not want.
The latter invites a negative result.

21.    When you hear yes, stop talking, thank them and leave—only thing that can happen
after getting to ‘yes’ is talking yourself or them out of a deal you just
agreed to.

22.    Always volunteer to write up the deal—s/he who wields the pen, has the
initiative.

23.    Resist strong emotions—s/he who loses her/his temper first, loses.

24.   
Be patient.

Negotiate hard on every point—someone once negotiated a long term office lease; he asked, “Give me a
nickel!” We thought nothing of it but a nickel was worth more than $50,000 over
the term of the lease so pay attention to details. Protect
your margins, every dime counts.

25.    Do not agree too quickly or
they will think they did not get a good deal.

26.    Really know your
product or service.

27.    Use negative cost selling—tell
them how they will make money by buying your product or service. Do a
spreadsheet from their POV not yours.

28.    Make sure you can demonstrate your value
proposition
in a compelling way in simple language in less than
two minutes.

29.    Remember, you are selling them a
solution to their problems
—this is called, naturally enough, solution
selling.

30.    Never take No for an answer—on the other hand, a No is better than a Maybe. If someone says Maybe
tell them you will take that as a No
and move on. Perhaps they will say, ‘I didn’t mean to say No.’ OK then, say Yes. The
best answer is ‘yes’; the second best answer is ‘no’; last best answer is
‘maybe’. Don’t get into ‘hoop’ treatment—where clients treat you like trained
poodles. They make you jump through hoops by telling you, ‘If only your product
had such and such a feature, I might buy it.’ You go back and redesign it. Then
they ask you to add or change something else, constantly raising the bar until
you can’t jump through the hoop.

31.    Set weekly or monthly goals—do not
think you can reach your sales goals for the year in the last month or quarter
of the year.

32.    Face your fear—do the
tough stuff and don’t take a No
personally.

33.    Before you say something, ask
a) Is it true? b) Is it an improvement on silence?
c)     Are you going to hurt someone by saying it?

35.    Never tear down a competitor, let
you’re the other party do that if they want to.

36.    If you are less successful than
you would like to be and want to know who is preventing you from being a
success: first look in the mirror.

37.    People like to buy from people they like and trust.

38.    Everyone in your organization is in sales—nothing is worse than when a
potential client contacts your organization and your own people don’t know much
about your products and services, especially your new products and services.

39.    Take every opportunity to sell.

40.    Don’t leave without making a
sale. If a salesperson for the Ottawa Senators can’t sell a suite, they’ll sell
four season tickets and a sign or maybe just a couple of season tickets…

41.    A sale is about providing timely information to the right client; not about
selling to people who don’t need or want your service or product.

42.    A sale is not marketing.

43.    Often clients will answer their own questions; so just listen.

44.    Use very opportunity to reverse sell—your Accounts Payable is a good
source of potential clients-even your accountants are in sales for you.
Example: if a plumber isn’t a Sens season ticker holder why is he or she your
plumber?

45.    Sales is all about action—don’t push on a string.

46.    Use the six degrees of separation to make contact with those you need to get in
touch with but don’t be afraid of just calling or showing up.

47.    Use a bottom up not a top down sales method. Nothing is worse than asking your
President/Coach/Mentor to call the other President to make a sale-then the line
employee/manager will do everything he or she can to torpedo it. Instead,
contact the line manager and when the time is right, your
President/Coach/Mentor to make a call or send an email to the other President
raising the profile of the opportunity and confirming the line manager’s wise
choice.

48.    Remember that you are not in the selling business at all—you are in the
helping-to-buy business. You are providing a solution to a client’s problem.

49.    Creativity counts.

‘I
hate selling
but
I love helping people buy
,’ Serence CEO Allan Wille.

Bad things happen to good
people and it is easy to blame others. No doubt others contributed to the
situation in some way. But mostly, if you are really honest with yourself, you
almost certainly had a hand in it.

“I claim my own power
and accept responsibility for my own life,” a quote from the book Chakra
Meditation by Swami Saradananda, Duncan Baird Publishers, London, 2008.

Stop feeling sorry for
yourself and get out there and make things happen. There is a better person
inside you and, when you listen to him or her, good things tend to happen. It
is when you substitute the judgment of others for your own, bad things may
happen. Not selling enough? Do not blame the market or lousy clients, find new,
better clients, change your niche, improve your selling skills, get more
education, add more differentiated value, change industries, whatever it takes.

Bad things happen to good
people and it is easy to blame others. No doubt others contributed to the
situation in some way. But mostly, if you are really honest with yourself, you
almost certainly had a hand in it. Stop feeling sorry for yourself and get out
there and make things happen. There is a better person inside you and, when you
listen to him or her, good things tend to happen. It is when you substitute the
judgment of others for your own, bad things may happen. Not selling enough? Do
not blame the market or lousy clients, find new, better clients, change your niche,
improve your selling skills, get more education, add more differentiated value,
change industries, whatever it takes.

Here is a cheat sheet on NLP
that will give you the basics for interpreting eye movements. Top poker players
do this all the time: they calibrate their opponents (James Bond played by
Daniel Craig in the 2006 film release of Casino Royale does this to Le
Chiffre); they do not play their cards, per se, they play their opponents.

NLP Cheat Sheet

When people make rational
decisions, they use their prefrontal cortex to do so. But if people think they
are being treated unfairly, the primitive part of the brain (the anterior
insula) lights up similar to when they smell a skunk or see a horrific sight.
So if someone does not like you or trust you or feels abused by you, they will
not make rational decisions. Their raw emotions overwhelm their rational
faculties. So if you do not establish rapport, you cannot sell. People will act
against their own best interests if the primordial brain is activated so trust
is a key component of selling.

Also, people make decisions
more based on their fear of losses than their perception of gains. That is why,
in the prisoners dilemma, the police always separate the co-accused. If neither
confesses, they will both spend four years in jail: total jail time for the two
prisoners is therefore eight years. If one confesses and the other does not,
the confessed criminal spends two years less a day and the holdout spends ten
years in jail: total jail time 12 years. If they both confess, they each get
six years: total jail time is again 12 years. Obviously, the optimal solution
is for neither to confess but remember, the fear of loss (lost freedom) is
weightier than their perception of gain (optimal jail time), so there is rush
to see who can confess first and get the two year less a day sentence.

So in terms of selling, you
need to not only address the upside of any deal, but show how your client’s
downside is covered. What is the worst that can happen? I do this all the time
in getting people to make Offers to buy land or office buildings or what have
you. In the real estate industry, we almost always put in a series of
conditions that allow the Buyer to opt out if he or she finds something that is
not what they expected during their due diligence process. I tell them that all
they will have lost is some time and whatever the cost is for the due diligence
they have just completed.

5.12 What Entrepreneurs can Learn from Yoda

 

It turns
out that Yoda and the Jedi Knights can teach entrepreneurs quite a bit. No,
they can’t teach us to ‘use the force’ to pry money out of reluctant bankers or
VCs or ‘convince’ customers to buy more of our products and services. But read
this exchange below between Yoda and Luke Sywalker and think for a minute what
an entrepreneur should see in it.

Here is
the setting: Luke is visiting Yoda to master Jedi techniques but he longs to
cut short his learning so he can get off planet and save his friends who are
(or soon will be) in trouble with the Empire but his x-wing fighter has become
stuck in the marsh. Yoda has told Luke to use the force to raise the fighter
from the muck but Luke has complained that it is “too big”.

“OK, I’ll
give it a try,” says Luke.

“Do, or
do not. There is no ‘try’,” Master Yoda responds.

So Luke
does give it a try. He manages to move the fighter a bit but ultimately, he
fails.

Then as
Luke is walking away in disgust and despair that he will never leave the
Planet, Yoda raise the X-wing fighter and gently deposits it next to Luke.

“I don’t
believe it!” says Luke.

“That is
why you fail,” Yoda says with a look of disappointment in his erstwhile
promising protégé.

I think
there are two main lessons we as entrepreneurs can learn from this:

1.       If you don’t believe you will
succeed, you won’t.

2.       No one in the world cares how
hard you try in business—not
your banker, your investors, your suppliers, your customers, your shareholders,
your employees—they only care if you succeed.

If you
ask an elite athlete, say a gymnast, how they prepare for a major match, they
almost all will tell you that they visualize their routines and they visualize themselves winning
the competition too. They do this over and over and, finally, they go out there
to perform, sometimes in front of an audience of thousands and a television
audience of millions.

The
champions just do this better than anyone else and they can ‘bring it’ on the
crucial day of the match. That is, they can call up peak performance at the
right time. Entrepreneurs need to be able to perform at a high level every day
over extended periods of time.

That is a
necessary condition but not a sufficient condition for success. The other part
is that they have to perform every day with a belief in their own inevitable
success—when things are darkest, they must still be able to pull everyone
around them forward with absolute belief.

Have you
ever tried to sell someone something you didn’t believe in yourself? Right, it
is impossible unless you are a con artist. Those people rely on others’ greed
and gullibility. Entrepreneurs can never do that—they need to create a
sustainable business based on relationships with suppliers, financiers,
customers, in fact, a whole business eco system that is long term and based on
mutual respect, trust and even friendship. “People like to buy from people they like and trust.”

Lastly,
if you want to have a short, pleasant
annual meeting with your banker, show a profit every year. They won’t care that
you made 100s of phone calls to prospective clients; they won’t care how hard
you tried to sell to them successfully or how close you came to raising your
‘x-wing fighter’. All they are going to care about is how much money you made.

There are
no excuses in the life of an entrepreneur—do, or do not; there is no ‘try’.

 

 

5.13 Yet More Tips on How to Become a Top Salesperson

 

Whether you believe you can,
or whether you believe you can’t, you’re absolutely right
,” Henry Ford.

I often get asked what is the surest way to increase sales; people
are looking for a magic bullet.

I actually believe there is a ‘magic marketing button’: a button that
an enterprise can push that makes the phone ring or the website traffic counter
turn. But sales is almost always a long, tough slog. Even mighty IBM, which
sells more than $85 billion worth of products and services a year, sells to one
client at a time.

You will note that I differentiate between sales and marketing.
Marketing is a process that builds your brand, creates trust and opens the door
for sales. Sales is a separate process that harvests leads generated by
marketing. If you can not efficiently connect your enterprise with potential
clients and customers through a cost-effective marketing process, your
enterprise is doomed. But also if your sales process is flawed and you are not
turning enough of those leads into receivables and revenues you are kaput.

Here is a laundry list of things you can do to improve your selling
success:

1.    Selling is the teeth end
of a business (as opposed to the tail end).

2.    There are dozens of JOBS
in sales for every one in marketing.

3.    When downsizing hits, they
never lay off the sales dept; they lay off marketing though.

4.    A salesperson is really
his own or her own boss.

5.    You should treat your
company as if it was a supplier to your own sales business; they do things for
you like keeping the lights on, running the office infrastructure, providing
services to you such as accounting, invoicing, phones, Internet and so forth;
imagine how great it is that you never have to worry about back office
functions, inventory and production—you just go out there and sell.

6.    A salesperson should try
to get at least part of his/her compensation in the form of commission
income—so there is no upper limit to your earnings.

7.    Sales can be and should be
a very creative biz.

8.    Every salesperson should
have their own biz model.

9.    You should develop your
own brand and an independent list of contacts that you maintain separate from
your company, in case you leave.

10.   A salesperson should try
to be an independent contractor instead of an employee—for tax optimization as
well as increased independence.

11.   The best place to look for
new biz is from your existing client list.

12.   Get close to the customer
early and often.

13.   Be in the solution selling
business.

14.   Get on the same side of
the table as your client—become a trusted advisor. Give them options like: ‘you
can buy Product A or B from Supplier X or Y’. If they don’t like either then
they are saying ‘no’ to the products and suppliers, not to you.

15.   Help your clients sell
their products and services—find them customers and they will never forget you.
If they sell more, you’ll sell more as well (to them), right?

16.   Be alert to ‘bundling’
opportunities—getting your clients to resell products and services from other
clients of yours so they can realize near infinite margins by marking up these
products and services. This is a double win for you: you’re helping some of
your clients become resellers and others to sell more by developing new sales
channels for them. Seeing potential relationships amongst your client base can
also lead to co-marketing and co-branding opportunities where they share, for
example, advertising costs or promo product costs. So when one firm gives out a
promotional product, say, they are promoting a second or third company in their
‘watershed’. If you help your clients sell more, you will sell more. (See
above.) Also think about whether you could add more products and services (from
outsiders) to your own offerings/become a reseller yourself with higher margins
to boot. Remember you ‘own’ a sales or distribution channel that you have
developed yourself over a period of years and at great effort; what else can
you push through this channel?

17.   Find other ways to promote
your clients—for example, nominate them for an award and, again, they’ll never
forget you.

18.   Develop a compelling sales
and value proposition—be able to show how by purchasing your products and
services, the client will see either a decrease in their costs, an increase in
their revenues or some combination of both that is much greater than the cost
of your products and services; i.e., buying from you is a negative cost for
them.

19.   Turn selling into buying.
(Please refer to the postscript at the bottom of this blog post for more on
this important subject.)

I am the world’s worst
salesman, therefore, I must make it easy for people to buy
,” Discount
Retailer F. W. Woolworth.

20.   Set monthly goals and
achieve them but don’t over plan—be open to new opportunities as they arise.

21.   Digitize all information
and be able to find it on your computer—become a master file clerk so you can
control the information flow: from order to delivery and beyond!

22.   Always volunteer to write
up the deal.

23.   He/she who holds the pen,
wields the power.

24.   When you don’t feel like
going to work, go anyway. Showing up is half the battle—it takes years to
develop a great business. Never get too high or too low.

25.   If you get in financial
trouble, ask your clients for help.

You can stand me up at the
gates of hell but I won’t back down. No I won’t back down
,” Tom Petty

26.   Ask for referrals and for
testimonials. Put them on your personal website.

27.   Make every presentation a
conversation rather than a 1-way speech. ‘Selling is telling’: get good at
story telling. Be spell binding!

28.   Sometimes the best answer
to a client objection is silence—let them answer their own question.

29.   Ask for the deal!

30.   Never take ‘no’ for an
answer.

31.   But a ‘no’ is better than
a ‘maybe’. Obviously, ‘yes’ is best.

32.   Remember, he/she who has
the gold, rules.

33.   You are never too busy to
return a sales call.

34.   Under promise and over
deliver.

35.   Keep the great clients,
dump the rest.

36.   ABC, Always Be Closing.

37.   Execute—great ideas are
nice but you have to be able to pay attention to detail. Check, check, check
everything.

38.   Learn some NLP, Neuro
Linguistic Programming so you can be ‘sympatico’ with your clients.

39.   Develop your niche and
then be great at it.

40.   Show some appreciation to
your clients.

41.   When a client is saying
‘yes’, get your deal signed and then leave (politely).

42.   Don’t forget the
contracts!

43.   Keep in touch with
clients.

Selling isn’t about taking
advantage of people, it is about communicating and informing them
,” Mark
Cuban, Owner, Dallas Mavericks.

44.   Put your clients in touch
with each other so they can do business together too.

45.   Keep track of all your
client contacts and all of your clients’ clients (and clients’ suppliers)
contacts so you become an invaluable part of their ecosystem.

46.   Make a daily list of
goals.

47.   Write a blog.

48.   Get a Twitter account.

49.   Be on Facebook and
Linkedin.

50.   Develop a few of your own
websites.

51.   Have an up to date CV.
Send potential clients a link to your online CV so they know who they are
dealing with before you even meet with them. Send clients a link to a blog post
you wrote that is relevant and helpful to them. Ask them to follow you on
Twitter and elsewhere!

52.   Put some videos up on
YouTube.

53.   Control your costs and
keep overheads down.

54.   Do some homework on new
customers before you make any sales presentations or even contact them and
always practice your presentations in advance.

55.   Remember face to face is
still the best way to sell. Second best is telephone. Email and social media
are a distant third and fourth.

56.   Develop a newsletter.

57.   Work with people and
clients that have a good heart and that you can trust.

58.   Protect your reputation.

59.   Do some volunteer work.

60.   Speak at conferences and
address groups when you are asked.

61.   Be up to date with tech
and the Internet and all the web 2.0 tools and cloud tools you can get—many for
free.

62.   Never drink and think. Get
some regular exercise; it’s about lifetime fitness not peak fitness. Find
something you like to do and that you can keep doing for decades.

63.   Be positive and surround
yourself with positive people.

64.   Learn from your
competitors.

65.   Develop leverage for
yourself—hire an assistant.

66.   Embrace co-opetition: you
focus on your core competencies/refer the rest to others.

67.   Always tell the truth—the
smart truth.

68.   Set your prices
carefully—pricing is an art.

69.   If something isn’t
working, change it or dump it.

70.   The world is a tough
competitive place but the harder you work, the luckier you’ll get.

71.   Find a ‘magic marketing
button’—something that when you push it, your phone rings. If you can’t acquire
new clients in a cost effective way, you’re sunk.

72.   Follow the fastest (least
effort) route to revenue.

73.   Pursue only those goals
that are consistent with your overall objectives.

74.   Park your ego at the
door—don’t get mad at clients and don’t do anything that you’ll later regret.
Resist the Seven Deadly Sins and you’ll do better in every facet of your life.
Plus show some humility. Never put anything in an email (or anywhere else) that
you would not want on the front page of your local newspaper.

75.   Get and follow your
mentor’s advice.

76.   If appropriate, follow a
global mandate from the get go—Canada
is too small a market to be the primary focus. Not only should you go after
every geography, you also want to go after every vertical.

77.   Network with
everyone—peers, subordinates, suppliers, customers, superiors, competitors.

78.   Create positive outcomes
out of each meeting and keep them short: one hour or less.

79.   Become a great
communicator in person and in writing—remember practice, practice, practice
makes you better at these things.

80.   The three most important
things to remember are: SELL, SELL, SELL.

 

 

 

5.14 Need More
Sales?
Then How about Nominating a Client for an
Award/Or Finding Out What the Clients of your Clients Want

 

Any sales organization worth
its salt should be looking for ways to grow closer to their client base. I
don’t care what anyone has told you about the reason why people actually buy
stuff—I can tell you that people like to buy from people they like and … trust.

Now if you like and admire
your clients in turn, it occurred to me, why not nominate one (or more) of them
for an Award. In this town (Ottawa, Canada), there are lots of awards given out
every year—OBJ gives out their 40 Under 40 Awards and Exploriem.org (where full
disclosure requires that I tell you that I am their ED) gives out 10 Bootstrap
Awards every year. Then there are the OCRI Awards, the Ottawa Tourism Awards,
CEO of the Year, Ottawa Chamber of Commerce Awards, Indo Canada Chamber of
Commerce Awards, Consumer Choice Awards, Capital Educator’s Awards (one of
which I won in 2002), Governor General’s Awards for the Performing Arts, Ottawa
Sports Awards, IEEE Canada Awards, United Way Ottawa’s Community Builder of the
Year Awards, OCHBA Awards and many, many more.

Now part of your sales job is
to think not only about your clients but also about your clients’ clients. You
and they are part of a business ecosystem. Now what do your clients’ clients
want? They want to like and trust your client just as much as you do. How can
you increase their trust level? Well, it can’t hurt if your client is an award
winning business or person, right?

Who would you rather buy from?
Someone who was nominated for and won the award for, say, OBJ (Ottawa Business
Journal) CEO of the Year or Joe Schmoe?

So when you are thinking about
your organization and your clients’ organizations as part of an ecosystem, you
should do everything you can to help your clients increase their sales because
that’s the surest way to increase your sales. Fast growing customers mean
faster growth for you. The surest path to faster sales for your clients is to
improve the level of trust that their clients have for them. Winning awards can
be part of that equation. Even nominating them will draw you closer together.

Now let’s look at the other
side of your business model—your supply side. Readers of this Handbook already
know that I believe that your AP (Accounts Payable) should be a source of
clients for you—i.e., people should buy from people they sell to. When I was
with the Sens (NHL team the Ottawa Senators) I used to ask if the plumber who
came to fix the w/c or the painter who redid one of our offices was also a
season ticket holder. If not, I would ask, “Why not?”

Reverse selling means that
your Comptroller is (or should be) part of your sales team; i.e., your AP is a
great source of leads.

But it also means that your
suppliers should be working hard to find ways to make you more successful
(including nominating you for an Award of some kind as long as it is deserved
and authentic). If they are not a real part of your ‘team’, you need new
suppliers who really care, one way or the other, about you.

To an extent that might
surprise you, fuller understanding of your business model as well as
identifying and exploiting relationships amongst the many players in your
ecosystem, can only be discovered.

There are many things in the
launch of a new enterprise or in its execution that cannot be planned in advance. You must be
open to serendipity and opportunity wherever it may appear and you must apply
your mind and body to their discovery.

This adventure will be greatly
helped along by asking the right questions (like: “What do your clients’
clients want?”) and waiting for either your conscious mind or subconscious to
provide the answers. Of course, all your answers might well come from the
outside– they are there in the ‘ether’ just waiting for you to discover them.

This is also why you can’t
just talk about what you are going to do. You have to launch your new venture
because so much of what you will actually do is made up as you go along.

It’s also one of the things
that so frustrates people who do business with entrepreneurs (or, Heaven help
them, are married to them.) Bankers, investors, lawyers, accountants,
consultants, funders, marketers and suppliers do not really like change and
often think that altering course is a sign that the entrepreneur doesn’t know
what s/he is doing. In fact, fast pivoting where called for is one of the
greatest strengths of an entrepreneurial company.

5.15 Negative Cost Selling, Jeff Hunt and
the Ottawa 67s

 

Negative cost selling is one of the most powerful sales tools I have
yet to discover. It really just means that you understand the revenue model of
your customers or clients—i.e., how by buying your product or service, your client
can make more money or reduce costs or both. Why you would ever go into a sales
presentation without this in your tool box, I don’t understand.

If you are trying to win a listing from an investor to help him or
her sell their investment property, you have to be able to show them what their
returns look like if they use your services. I wrote about this elsewhere, viz:
Looking Back—Using the IRR to Measure Real Estate Returns for a Seller. See: http://www.eqjournalblog.com/?p=274.

Jeff Hunt has understood the concept for a long time and his success
with Canadian Major Junior Hockey team, the Ottawa 67s, is a fine example of a master
marketer at work.

One of his early initiatives when he became the new owner of the team
was to devise a new way of responding to the 500+ charity and community
requests the team received each year for assistance. Instead of turning down
95% of them, he accepted nearly all of their requests. If someone was looking,
for example, to raise $500 for their minor hockey team to go to a tournament,
he might let them have 100 game tickets at around $5 each that they could
resell for, say, $10. If you have 12 sets of parents, that is only around 4
tickets sold per person. This is eminently achievable for committed parents. If
Jeff has 500 such requests, this represents a new marketing channel which gets
rid of 50,000 tickets per season for him and generates $250,000 in marginal
revenue for the Club and the same amount for charities and community groups…

Jeff clearly understood the revenue model of his clients, which
turned out to be charities and community groups not hockey fans, per se.

Well he has done it again. Jeff is offering two season tickets and
one suite-night to eligible corporations for the upcoming 2009/10 hockey season
for $1,000. The neat thing is that for this investment, the corporation also
gets a raffle ticket in a draw to choose a new name for Ottawa’s Civic Centre, where the 67s play.

If you are a SMEE in Ottawa,
you could have the Civic Centre renamed after your firm for a year if your name
is drawn. Jeff expects to sell 30 to 100 entries and raise up to $100,000*.
Imagine if you are, say, national DVD club, Zip.ca, which is based in Ottawa, and you want to raise your profile in Ottawa. Instead of paying
naming rights fees of hundreds of thousands of dollars per annum (for example,
Labatt pays $550,000 per year for the naming rights of the building where the
London Knights play, the John Labatt Centre), you could buy the rights to the
Civic Centre for an expected value of ($1,000/1%) or $100,000 of which you only
have to cough up one thousand dollars in cash.

(* You have to hand it to Jeff for his creativity. Apparently, the
City of Ottawa
and the 67s have been trying to sell the naming rights for the Civic Centre
since 2000 with no results. Selling suites, signage, sponsorship and naming
rights allows team owners to offer regular seats at (somewhat more reasonable)
prices. For Junior teams, these revenues are often the difference between
success and failure, profit and loss, continued existence or a sale and move to
another city. Private operators have to produce results—the Bell Sensplex, a
four-pad arena complex in Ottawa operated by Senators Sports and Entertainment
in a P3 arrangement with the City of Ottawa, does over $700,000 a year in
sponsorship and signage. Compare that to around $10,000 per year for a typical
city-owned and managed arena. The $690,000 difference would have to be funded
from the public purse if the City managed the place itself. It would be like
voting for an unnecessary property tax hike.)

By buying $550,000 worth of marketing exposure with a cash
expenditure of just $1,000, you are building the value of your brand and the
trust that goes with that. Beyond that, I would imagine there will be a lot of
earned media (basically, free coverage in all media) from such a novel and
shrewd marketing strategy.

Now, of course, you have to have the sales capacity already built so
that you can benefit from increased coverage, brand awareness, trust and
demand. Otherwise, you can damage your brand if you win and then can’t perform
or produce.

5.16 Negative Cost
Labour (And Low Cost Finance)

 

Sometimes,
you can turn a cost into a negative cost. A former architecture student of
mine, Dominique Tonetti and her husband, Frank Dutton, are managing to do that
on their new project, Solisterra in Québec.

Dominique
and Frank are building wonderful straw bale structures on a 150 acre property
they own in West Québec. The lands are
beautiful—abundant wildlife, several lakes plus a huge variety of trees.

They are
going to build off-grid cottages on their lands that will be rented by the week
to people who want to de-stress and live a simpler life. (Where do I sign up?)
Some of the things they are working on include: straw bale construction, solar
electricity, solar heating (for hot water (which I really like)), solar ovens
and green roofs.

At Work
Building Solisterra

 

They are
determined to retain ownership of their property, not go into a mountain of
debt (and thus run the not insignificant risk that the bank or finance company
will one day own the cottages and the lands) and yet produce seven or eight
cottages and a rec hall and a retreat to compete with the best in Eastern
Ontario or West Québec. How will they do that?

First,
they turned down ruinous interest rates from some predatory financiers who were
going to advance construction funds. Not only were their interest rates
punishing, they also required large fees—fees when they originate the loans,
fees when they provide a draw, even fees when you pay the thing off with a
permanent mortgage. And on top of that, Dom and Frank would have to pay legal
fees and appraisal fees. Every time they want a draw, they would have to beg
the appraiser to come out, then beg him or her for a decent appraisal, then beg
the loan company and lawyer for a draw that was enough to pay all the darned
fees plus their costs of construction less the 10% holdback.

A friend
of mine (another former student, Matt Nesrallah, who runs his own financial
advisor shop at Primerica) told me that the most powerful force in economics is
compound interest. This is not a new idea but it needs to be said again here.
If your repayments to a Bank or a credit card company or the IRS or CRA
compounds at a high rate of interest, you’re doomed.

So
Dominique and Frank decided to:

a)       build the homes themselves thus
reducing the cost of construction;

b)      build only one unit at a time
thus reducing their cash requirements further;

c)       take a low interest rate mortgage
on their existing home to fund what out of pocket costs they do have;

d)      lastly, Dominique has offered to
train and teach people straw bale construction.

In
effect, she is running a school and can charge people for coming out and
working on her project. They learn design from Dom, they learn construction
techniques, they work with their hands which can be therapeutic, they work in a
lovely setting with great people, they have fun, they feel like they are a part
of something bigger than themselves and they gladly pay for the privilege.

THIS IS
NEGATIVE COST LABOUR.

Now how
about that?

Here is a
comment from Dominique—

Bruce,

It is a
good story, it makes us sound more business savvy than we feel, but it is
indeed how we operate. A small correction however, Solisterra is 350
acres, 150 of which is the two lakes. The workshops go beyond straw bale
construction. Since we needed extra arms and many people wanted to learn how to
build their own dream homes, we discovered that we could “sell”
knowledge of: a) timber framing (which is very easy to build when you know
how), b) masonry ovens, as well as c) installation of solar electric
systems.

For next
year’s unit, we are putting together a 10 workshop package (some people really
want to know every step from the foundation up) in a one price deal. The
great thing for us is that people become much handier by participating in our
workshops…

I almost
feel guilty charging them when they become very useful…but not quite! I have
to remind myself that knowledge has a price. I learned all these construction
techniques the hard way. I had to perform many tests before I could write specs
(with a good conscience) to accompany my plans on previous projects.

Thank you
for thinking of us for this story.

Dominique

5.17 Negative Cost
PR

 

I spend a
lot of my time devising with my consulting clients, students and those that I
mentor, value propositions that involve negative costs.

That
means that when someone buys a product or service from you, you can demonstrate
(usually using a spreadsheet) how that the purchase price of the goods or
services they are buying from you represent a negative cost to their business
or to them.

If you
truly understand your clients or customer’s businesses or personal needs, you
should be able to demonstrate in a very clear and concise way how this happens
to be true.

A small
not-for-profit is demonstrating how this can work outside the sphere of
sales—in PR, for example.

They are
using an online eBay- based auction to not only raise needed funds for their
organization but to create national and international awareness of their
mission.

Their
costs break down this way—

a.       Unique URL and website design:
$3,000;

b.       Cost of acquiring goods and
services for auction from sponsors and celebrities: ZERO (they are donated);

c.       
Cost
of hiring a part time PR specialist to arrange for media releases and
interviews: $2,500;

d.       Cost of hiring a social media
expert: $2,000;

e.       Cost for live event to close
auction, food and beverage: ZERO (it is sponsored);

f.       
Cost
for live event to close auction, hall: ZERO (it is donated);

g.       Cost for tech equipment and
lighting for event: $1,800;

h.       Cost for event producer: $1,700;

i.       
Contingencies:
$2,500.

So the
total cost of the event is around $13,500 and they expect to raise $90,000
which is about right—if you run a charity or a NGO or a not-for-profit, you
should aim for this type of efficiency—your cost of funds should be about 15%.
Of course, we all hear about stories where charities are getting less than 50%
from their fundraisers. This should be unacceptable.

But
here’s the neat thing about this: this organization will get an incredible
national and international boost to their image form earned media (media
interviews) and social media chatter and its cost will be negative—a negative
$76,500 to be precise.

5.18 Negative Cost
Selling—It’s Everywhere, Satellite Communications Company Personal Tracking

 

I ran
into a friend of mine the other day—he works for a large, international
satellite communications company. I never know where he is going to be—he
travels to all the world’s hot spots—Afghanistan
and Iraq
included.

He is an
engineer who can talk the language of business; he understands that he needs to
make a compelling case to a potential client before they will invest with his
firm. He knows how to explain his company’s value proposition and, perhaps more
surprising, he can sell using the concept of negative costs.

One of
the hottest products offered by the firm today is their personal tracking
devices that executives can port with them wherever they go. These devices, not
much bigger than a PDA, report via satellite the whereabouts of the
individual—they track him or her in real time.

If she or
he goes out of a pre-defined travel path (similar to a flight plan for an aircraft)
by more than a certain preset distance, alarms go off.

Companies
equip their executives with this type of tracking device to improve their
personal safety and meet their duty-of-care obligation to these staff members.

If they
can convince major re-insurers through field experience that these devices
lower the risks of kidnapping, they should be able to lower insurance rates,
possibly enough to more than pay for the costs of these devices and their
operation as well.

If you
can explain your value proposition by saying that not only are you saving lives
but also doing so in a way that doesn’t just lower client costs but actually
reduces their costs below zero (i.e., a negative cost results) that is a
powerful combination and a strong selling proposition.

5.19 More Negative Cost
Selling—The Best Of Kanata:
How to Explain to your Clients that by Buying your Product or Service, It will
be a Negative Cost to Them

 

My friend, Richard Rutkowski, a former City of Kanata Councillor is
an intriguing person—very sure of himself, a good marketer, a good promoter and
a sure handed politician (now a successful REALTOR with his own Brokerage.)

I asked Richard a few years ago if he did something else beyond being
a REALTOR and, sure enough, he hauls out this cute little magazine called The
Best of Kanata. Now this is really low tech—essentially, local businesses
advertise in it, so that is one revenue stream for Richard.

It costs about $600 for a half page and there are lots of pages.
Then, people buy these books for 20 bucks and in the back of the magazine,
there is a ‘member’s card’ about the size of a credit card, which entitles them
to 10% off at all stores and services featured in the book.

When I did a Google search at that time, there was no mention of it.
So, Richard hadn’t even bothered with a web site.

Well, this is a pretty simple business and local businesses advertise
in it like crazy because they like Richard and it works for them and it is
relatively inexpensive.

Richard sold around 5,000 copies of the book each year, so you can
figure out for yourself the economics pretty easily.

The business model has more depth to it than it might first appear.
Revenues are generated from advertisers and book purchasers. But it turns out
that Richard’s clients are also his suppliers and his suppliers are also his
clients.

Advertisers supply ads, which form the content of the book. Plus they
supply the 10% off cards that drive sales to the public. But interestingly, the
advertisers also stock the books for sale to members of the public. If you
place a half page ad in the book for, say, $350, and you sell the book for $20
of which you get to keep $10, you only need to sell 35 books before your ad
costs you nothing.

Think about the compelling value proposition that Richard can present
to a single customer—you can buy an ad for a negative cost if you can sell more
than 35 books.

In this way, his clients form one of his top sales channels. Another
sales channel consists of local charities and other good causes. The Kanata Food
Cupboard, for example, sells each book for 20 bucks and they get to keep 15.
Minor hockey teams use it too—to raise funds for hockey tournaments, for
example.

The cost to start the Best of Kanata was negative—Richard was able to
pre-sell enough advertising so that the cost of printing the first book was
more than offset by deposits from advertisers. They gave Richard 50% of the
cost of their ads upfront because they trust Richard and because they want
Richard to succeed since it’s in their best interests that he does.

The value proposition to the retail customer may also involve
negative costs. Let’s say you go into a sports store in Kanata to buy your daughter a $800 snow
board. You go to the cash to pay up and the clerk tells you: “Why don’t you buy
the BOK for $20?” “No thanks,” you say, “I am spending enough already on
Brandi!” “What I meant to say is that if you buy the BOK, you get a 10%
discount on whatever you buy here and in any other store in Kanata, starting right now.” “If I understand
you correctly, if I give you 20 bucks for this Book, you’ll give me $80 off the
snowboard?” “That’s right, you give me $20 and I give you $80 so the Book costs
you a -$60 and the membership card will work for you until the end of the
year…”

Selling a book for a negative cost should be pretty easy even for the
most sales-technique challenged clerk.

These kinds of value propositions are not exploited nearly often
enough because owners and managers don’t usually spend enough time really
understanding their own businesses from their client’s point of view.

I have thought that there is a big, scalable business in this
model—how about the Best of Dartmouth, Best of Mississauga, Best of Saskatoon,
Best of Manhattan!

I think creating businesses via entrepreneurship should aim to
provide an individual with more value than if he or she just had a J.O.B. but
maybe there is a more subtle message here.

Perhaps, we should each have one micro business that we hang onto for
life; that never gets shared with anyone, no partners, never is pledged to a
Bank for a loan and, thus, something that we can fall back on in troubled
times.

It would be pretty cool if every man, woman and child on the planet
each had a Personal Business (PB) that stayed with us throughout our lives and,
if things get messed up, well, we have (as my father would say): a fallback
position or an iron reserve. My father lived through two World Wars and he
really understood the need for both.

A PB4L does not include things like the guy who tells you: “I can
show you how to make a million! Just send me ONE dollar, and I will tell you
how.” And, of course, the answer is: “Get a million fools to each send you a
dollar to tell them how…”

They have to be real businesses. One way to find inspiration I think
would be to go get a copy (from your library) of the Encyclopedia Britannica
and look for crafts from the 1930s. Say, for example, making high end paper for
socialites and important persons who want acid-free paper to preserve their
writings. Who knows what you might find there.

5.20 Negative Cost Selling and the Pro Sports Team

 

During one season, the Ottawa Senators were having some trouble
filling their building after years of sell-outs and near sellouts. The causes?
Well, the performance of the team (missing the playoffs the previous season and
being swept in the first round the year before by the Pens) is obviously a
factor. The downturn in the national economy and US
economy as well as relentless bad news on CNN also had an effect even though
the Ottawa
economy itself is isolated in part by the large presence of the national
government here. Another factor influencing attendance is the on-going issue of
civil servants not being able to accept complimentary tickets—the concern is
that they might be unduly influenced by such largesse.

As a result, the Ottawa
market (of 1.2 million people in Ottawa-Gatineau and 1.7 million within 60
minutes drive time of Scotiabank
 Place) is actually quite a bit smaller than the
numbers would suggest because you can deduct more than 100,000 people employed
in government.

Having said all this, only one team can win the Stanley Cup each year
and if Ottawa
were to win it on a pro rata basis, the team would only be a winner once every
30 years. Meanwhile, you still have to fill your building.

How do you do that? Negative cost selling can help.

Most pro teams sell their tickets on the basis of it being some type
of beauty contest. “Look at our great players!” “How about our beautiful
building!” “Did you know you can escape our parking lot in just 25 minutes!”
“What a great logo we have and our merchandise, my, my!”

Or they try to guilt or bully you into buying a ticket: “If you don’t
buy a ticket, the team will move!” “What kind of a person are you, don’t you
have any civic pride?”

But remember, negative cost selling is about understanding your
clients business almost as well as they do. Actually, what you want is to
understand that and your clients’ clients’ business almost as well as they do.
And you want to be able to put all of that down in black and white, preferably
in a spreadsheet that proves you can make money for your clients (by increasing
their revenues or reducing their costs or doing both such that higher revenues
and lower costs more than offset the cost of buying your product, in this case,
tickets, sponsorship, suites or signage…)

I did a sketch (see below) of some examples of negative cost selling
that the Sens (or any pro team) could use.

Negative Cost Selling to Potential Sens’ Clients

Let’s say Jay is a salesperson for the Sens and he is going to drop
in on the woman (Dilys) who sourced the mortgage for his home he bought last
year. This is a warm call—he already has a business relationship with Dilys and
her firm. In fact, this will be a form of reverse selling—why shouldn’t the
people you buy from buy from you?

The answer is NOT that they should buy from you because they sold to
you; the correct answer is that they should buy from you because you have a
compelling value proposition and you can demonstrate it. The fact that you
already have a relationship with them is a plus as is the fact that you know
and have learned a great deal about their business (and their clients too).
These factors help you get in the door but they don’t close the deal for
you—negative cost selling does that.

I show what a negative cost selling approach looks like below and I
also provide a link so you can download the spreadsheet. Based on this
analysis, Jay, would be able to say to Dilys—

a.       I want you to think about
investing in Sens tickets this year and next and making it an integral part of
your marketing program.

b.       Every homeowner that sources a
mortgage through you, is going to get a pair of tickets to a Sens game!

c.       
The
cost to you for two tickets to every regular season home game will be $55 less
a 15% discount since you are making a 2-year commitment. [Note: Jay really
wants at least a 2-year commitment. He knows that if he only gets a 1-year term
on this deal, he’ll forever be doomed to the role of a baseball player—he will
have to hit 40 homeruns each season and be subject to the ‘what have you done
for me lately’ syndrome from the team. Instead, getting 2-year commitment from
his clients (or longer if he can) means that Jay can really build a sustainable
business for the long term. And like all good salespeople, he thinks of his
sales efforts as his own business since he is earning a commission on top of
his salary. He views the team as one of his suppliers!]

d.       You are currently spending about
$2,945 per year on marketing—if you divert 40% of that to the Sens, your
marketing budget is going to increase by about $2,655 but here’s the good news.
If you get just two more clients per year, you’ll break even and most of my
other clients in this industry are finding that they are generating five or
more clients per annum.

e.       That means for an extra
investment of $2,655 in each of the next two years, you’ll make an additional
$6,695 per year or a total of $13,385.

f.       
Your
net cash gain will be nearly $8,075 over that period. This represents a ROI of
152% per annum—a lot better than what you get from your Bank these days on your
GICs (about 3.15% p.a.), wouldn’t you agree?

g.       I guess what I am basically
saying is that your cost to buy your Sens tickets is a negative $8,076.70. I am
essentially paying you to buy the tickets from me… [As a student of mine once
said: “I’ll pay you to hire me” when he used the negative cost selling
technique on a future employer.]

h.       In fact, I prepared a spreadsheet
for you to go over with me. Notice that I took the Brokerage’s share of your commissions
out before I calculated your rate or return. [This shows that Jay really gets
his clients’ businesses.]

i.       
Hey,
that reminds me: isn’t it true that if you do more than $10 million a year in
mortgage biz, you’ll get a volume bonus from Mortgage Alliance? Well then, it
looks like the investment in Sens tickets is just the ticket, so to
speak—you’re at $9 million right now and the spreadsheet shows you at $10.125
million at the end of the year so your actual ROI will be even higher and the
cost will be even more negative after you nab one of those year-end bonuses.
How about that.

j.        
You
just have to initial here, here and here, sign and date there.

k.       Thanks. See you soon.

l.       
Oh,
by the way, can I call you at the end of the season for a testimonial for my
personal website?

Sens and Mortgage Broker: Negative Cost Selling

 

 

Sens Tickets

41

regular season home games

Number of Tickets per Game

2

Total Number of Tickets

82

Cost per Ticket

$55

posted prices

Discount for two year commitment

15%

Actual Cost per Ticket

$     46.75

Annual Cost

$ 3,833.50
 

 

 

Typical Mortgage

$225,000

Typical Fee

$1,912.50

0.85%

Mortgage Agent Share

$1,338.75

70%

Number of Mortgage per Annum

40

$9,000,000

Mortgage Agent Revenues

$53,550.00

per annum

Mortgage Agent Current Marketing Budget

$2,945.25

6%

Percent of Current Marketing Budget Diverted to
 Sens

($1,178.10)

40.00%

New Marketing Budget including Sens

$5,600.65

Increase in Marketing Costs

$2,655.40

Number of New Mortgages Needed to Breakeven

1.98

Number of Actual New Mortgages Written

5

$10,125,000

Increased Revenues due to Investment in Sens -ve
 Cost Marketing Program

$6,693.75

 

 

ROI on Marginal Increase in Marketing Costs due
 to Investment in Sens (IRR)

152%

per annum

 

Cashflow Profile

 

 

0

($2,655.40)

1

$4,038.35

2

$6,693.75

$13,387.50

Cash Gain over Period

$8,076.70

 

 

Note: this example is for demonstration and
 learning purposes only.

 

There’s no reason why Jay can’t extend this analysis to all of his
clients. In fact, because he understands business modeling, he can take it one
step further (we call this 2-D or 3-D biz modeling).

Say, Jay drops in on a restaurant owner. Her name is Shelly. Shelly
has told him that the two weeks preceding Fathers’ Day have become more
important over the years, coming closer in volume to Mother’s Day bookings but
she would like to find a way to drive that volume higher. Jay knows that most
of Shelly’s clients during that time are women calling and making reservations.
Who are Shelly’s clients’ clients? During that period, they are, of course,
men. What do men want? Well, a lot of men like pro sports. So Jay sells Shelly
some Sens tickets that she can bundle with restaurant meals. If she breaks even
on the Sens tickets but drives her restaurant’s utilization rate higher, it
would be a pretty simple job for Jay to show Shelly how the purchase of these
tickets was a negative cost.

You can extrapolate from these examples for florists, Banks, auto
dealerships, spas, REALTORS, Accountants,… Once you understand the concept, the
rest is just ‘making license plates’ (to borrow a phrase from Neal Stephenson’s
Cryptonomicon.)

How would this approach work for REALTORS and Accountants (actually
tax preparers)? In the latter case, Jay would want to give his client (the tax
preparer) something that would appeal to his clients—the answer again, Sens
tickets! Now Jay’s clients’ clients’ client is CRA (Canada Revenue Agency) so
he should stop at 2-D. CRA auditors won’t want (and obviously can’t accept)
Sens tickets! But you get the picture—look at least 2-dimensions deep and
sometimes 3 or more will be appropriate and useful and new ideas and ways of
using negative cost selling will occur to you.

5.21 The Ultimate Negative Cost: Free

 

In the summer of 2003, Rob Hall,
a brilliant Internet guy and owner of Momentous.ca (Internic.ca, Zip.ca, etc.)
came to see me with a new business model. He wanted to enter the domain name
backorder business which at that time was dominated by Snap Names. Rob had this
idea of giving the product away for free and I had heard a lot of pitches for
giving things away for free on the Internet many of which had come to grief so
I wasn’t too keen at first.

But Rob
hit another home run with Pool.com. He launched it later that summer and it was
a runaway success. Here’s why Pool.com was a “heads Rob wins, tails Rob
wins”, revolutionary business model:

 1.
SnapNames.com was the recognized leader in backordering deleting domain names.
So say you owned the domain name MyGreatCompany.ca or .de or .uk or .ne or .com.au, and you wanted the
dot-COM TLD (Top Level Domain) equivalent but someone else had it.

 2.
With Snap Names, clients had to pay $60 USD per year for each domain name they
wanted to backorder and if the name you want was deleted by the dot-COM domain
name registry (Verisign), then they would try to get
it for you (but there are no guarantees).

 3.
So along comes Pool.com.

 4.
Now you can register any domain name that you want to back order for free with Pool.com. Hundreds of thousands
promptly do. You only pay if Pool.com is successful
at getting your backordered domain name.

 5.
More than 20,000 dot-COM names are deleted each day. (There are about 80
million dot-COM domain names registered as of Q1 2009 (Source: Versign Domain
Name Industry Brief).  Pool.com is bound
to have many names on its list that drop every day.

 6.
If there is more than one client that has backordered the same domain name,
then here is what they do:

 "You
pay only when we successfully secure a domain for you. We charge a low US$60
fee which includes a 1 year domain registration. In the
case of a domain backordered by multiple users, a short auction will take place
and the winning bid replaces our standard fee.“ Pool.com, December 2003.

 7.
They are currently doing over 3,000 deleted names a day (at $60+ USD each), 7
days a week. Note that almost 60% of backordered names are wanted by more than
one client so mini-auctions are happening all the time, with an average price
exceeding $200 USD, so do the math. This became a significant business from
nothing in just a few months. Gross margins are in excess of 80%.

 8.
The $60 USD also includes a one year registration so they are automatically
locked in to their domain name registrars and Rob can sell them many other
things like email, hosting, etc.

9. Having
millions of domain names backordered through Pool.com gives Pool.com a chance
to sell them other things even if their backordered domains never come up.

 10.
Rob has developed a good algorithm for attacking registry sites with multiple
channels (as of November 2005, he had over 120 registrar channels to the
registry) so his success rate at getting deleted names was more than 60%. (Snap
Names at that time was less than 50 %.) Pool.com’s goal
is 80 % with maybe 70+ % actually do-able.

 11.
Many IP lawyers, domain name speculators and sophisticated Internet users moved
over to Pool.com in just a few months.

 12.
This business went through an intense geometric growth period.

So basically if you are an Intellectual Property law firm that had
backordered 40 domains with Snap Names at $60 each, Rob’s company can come to
you and say for a -$2,400.00, you can back order the next 40 domains with us.
Now that is a compelling sales proposition.

 

Pool.com Negative Cost Selling

 

 

Domains Backordered with Snap Names

40

 

Cost of Backorder with Snap Names

$2,400

$60

per backorder

Cost to Backorder with Pool.com

$0

 

Negative Cost of Backorder with Pool.com

($2,400)

 

 

 

 

5.22 Non Linear Selling

 

I have given advice over the
years to various sales organizations, NGOs, Not-for-Profits, Charities, what
have you. They all intuitively seem to know that if your organization is not
growing, it’s dying.

But it always amazes me how
some of the most basic steps they can take to increase their sales, their
sponsorship dollars, their donations, etc. are ignored.

When I worked at the Ottawa
Senators, we had about 300 signs and rink boards that we needed to sell every
year. If you attend a game at Scotiabank
 Place today, you will notice that all rink boards
and most signs are sold in pairs– this is so that everyone in the arena can see
each sponsor but also because it cuts down on the number of sales they need to
make.

Think about it. If you have to
sell 300 signs and you sell them in pairs and for a minimum of three years, you
will only need to make 50 sales a year instead of 300. This makes your
organization much more efficient.

The same philosophy is applied
to the Ottawa Senators (Charitable) Foundation and I brought that concept to
other charities that I support like Christie Lake Camp for Kids. The latter’s
sponsorship has grown hugely in the last two years because they are not
starting over every year. So you are not like a baseball player having to start
over every season with 000 home runs…

It is the same for a business.
If all your deals are for one year, you have a growth curve that is essentially
flat, year over year. You need heroic efforts to grow your business and outputs
are pretty much in a linear relationship with inputs (this is a fancy way of
saying that you are basically an hourly wage slave).

If you do three year deals
(or, at a minimum, two year deals), you start to get a positive slope to your
revenue curve and maybe even some non-linearity; i.e., exponential growth.

More money, less effort,
sounds right to me.

5.23 Bottom Up Versus Top Down
Selling

If you look at the diagram
below you will see one of the most common mistakes made in sales—the top down
sales method. In this scenario, lazy salesperson X in Organization A, knowing
that their President or CEO is friends with the President of Organization
B,  asks him or her to call/ text/
message/ Facebook/ Tweet/ email/ meet the other President telling him or her about
A’s great products and services. Then the President of Organization B is
expected to tell Buyer Y in that company all sorts of nice things about A,
strongly suggesting that it would be a good idea to add them to their supply
chain. Finally, X calls Y hoping to seal the deal.

Now how do you think Y feels?
Maybe like the rug has been pulled out from under him or her? Y will do
everything in her or his power to find an alternative supplier.

So what is the right way? X
should call Y and introduce the company and its products. If the discussions
look promising, X can then and only then enlist her or his President M to call
the other company’s chief executive (N) to solidify the budding relationship
but only after Y has talked to the President of Organization B and given a
briefing so they are not taken unaware.

The idea is to develop deep
relationships between the two organizations and that starts from the bottom up
not the top down.

5.24 Technology and
You

I
remember trying to convince my law firm in 1982 to buy a fax machine. They were
recalcitrant in the extreme or, at least, that’s what I thought. Why do we need
a fax machine, he said. We have couriers!

One of
the most important aspects of providing your clients with the highest possible
service level is raw speed. I tried for over a year to get them to invest in a
bloody fax machine. Fax machines are a classic case of network effects what is
the value of owning the only fax machine in town? Not much. As more people
adopt them, the value of my fax machine goes up I have someone to talk to!

Speed is
key. Fax machines allowed us to increase the speed with which we were able to
do things in business in the 1980s. The Internet is capable of increasing the
speed limit even more. (I’ll elaborate on this in a minute.)

I think
that every city economy (which is really a city-state in the sense that, for
most people these days, your economic well being is probably far more tied to
how well your local economy is doing than the national or global economy) has a
certain speed limit attached to it. That is, the maximum speed at which a local
economy can move is limited by many local factors such as how fast your lawyer
moves, how fast your local financial institutions react to your requests for
financing, how fast your customers make up their minds, how fast your suppliers
can move, etc.

My
perception is that business moves a lot faster in Hong Kong, NYC and Singapore than it does in Toronto
or Sydney. And Toronto and Sydney move a
lot faster than folks tend to in places like Ottawa
and Vancouver
say. Anything that increases speed in your city-state will increase overall
productivity and increase overall financial well being there. The reverse is,
unfortunately, also true.

The
investment we all made in computers and, especially, personal computers didn’t
really pay off until we added a communication aspect to them email and even
more importantly the browser. Email is a push technology while the browser is a
pull technology. The so-called killer app on the Internet isn’t email or
pornography or video on demand or any of the things that you may have thought
it was  the browser.

Mark
Andreeson’s invention of the Mosaic Browser (which later became Netscape)
really was the key invention for sharing (communicating) information on the
Internet. Think about your own use of the Internet how many times are you using
Google for research, how many times are you checking out websites for
information? It is a far more important use than email.

I mean how bad is Spam these days? Well, here is an example that
should prove my point. Bill Gates receives 4,000,000 (!) spam messages A DAY.
He is the #1 target for spam on the Internet.  

Most
people are receiving anywhere from a dozen to 100 spam messages a day. When you
send email to someone with a Hotmail account (or for that matter pretty much
any account these days), if you don’t follow up, you can never be sure they
actually received it because of the spam problem.

 The
THREE TOP THINGS in entrepreneurship are SALES, SALES, SALES.

 If
you want to make a sale, here is my list is how you communicate (in descending
order of priority):

 1.
Face to face meetings are ALWAYS preferred.

2. By
phone.

3. By
Social Media.

4. By
Email.

5. By IM.

4. By
Browser.

7. By
Fax.

8. By
Snail Mail.

Notice
how the Browser ranks fourth on my list. Now I know that many people think of
their website as nothing more than a glorified brochure. It is a static
document that gets changed rarely. Well, think about that for a minute you are
narrowcasting 24/7 to your audience the same thing over and over. It’s like
every channel on TV broadcasting reruns of I love Lucy; no, it’s worse than
that. It’s like every channel broadcasting the same episode of I love Lucy all
the time.

So maybe
you think that what I am getting at is you should tell your office managers to
get with the program and change the background colour of the home page every
once in a while? Nope. What you need to think about is that your firm’s website
is a method of two-way communication. Clients can come to your website to find
things out but they can also come there to contribute too. This is called
reversing out the work and is a huge part of what the Internet revolution is
all about. It’s a huge boon to productivity and to speed too. Let me give you
an example.

Let’s say
you are a lawyer working for a large home builder in Tampa; you know your client is likely to sell
800 homes next year. The way the system works now, their sales people are
sitting down with home buyers (for many hours) and filling in paper APSs
(Agreements of Purchase and Sale).
The APSs are submitted to head office where they are signed and a copy is
returned to the sales office for transmission to the happy couple; one copy
goes to their lawyer, one copy comes to you and one stays in head office for
later transmission through the accounting department to their auditors.

Of
course, the home buyers might want a few changes to their agreement after they
have thought up a dozen or so changes in their house plans and finishes, so
there has to be another process to capture those COs (Change Orders) and make
sure they get paid for too.

But what
if we had a different process that went something like this? The home buyer
goes to the home builder’s website. Probably they are doing that with the help
of the home builder’s sales person, right in their field sales office. They can
‘build’ their own home online, add finishes, change the design a bit, whatever
and they can also see what this will cost them. If it’s too much, they can take
out some of the options themselves. When they’re ready to buy, the APS reflects
the work they have done and is automatically submitted to their lawyer, to you
and to the home builder.

You can
see some that some of the work is reversed out to the client. I can tell you
that clients like doing this and sales people usually don’t. The retail
customer is a special breed they are huge time wasters. So after an hour of
showing them how to play around on the home builder’s website and how to use
the online engine, the sales person can send them home to continue their
research. Customers will spend many hours doing this til they get exactly what
they want. That is many hours the sales person doesn’t have to spend with them.

Now you
may ask why should you care? You’re only providing their legal services. But
you know what I said above about intrication, if you are part of your client’s
processes, then you are much more valuable to them.

Also,
capturing your APSs online will hugely speed up the sales process and your
closings too. Speed goes up, productivity goes up and your fees too.

Now I had
a devil of a time trying to convince my brother, Peter (a lawyer in Victoria) to even buy a
computer. He has since discovered email and that’s good but as you have
probably gathered here, I believe that this is a minor benefit of what the
Internet actually will finally deliver. It doesn’t worry me or disappoint me
that the Internet revolution is so slow. It took decades for electrification to
reach pretty much every corner of the economy to the point at which I am sure
that you can not contemplate operating a modern economy without it. I know that
the Internet is not even close to reaching its full impact on us. That is still
a few decades away*.

(* If you
are interested in getting some idea of what the Internet will do, read Neal
Stephenson’s Snow Crash. When you read it, remember it was written in 1989 to
1991 before the browser. It is that much more impressive because of when it was
written. Ignore the story. It’s the actual uses that the main character puts
the Internet to that are of interest. Stephenson calls the Internet the
‘Metaverse’, a better term I think than cyberspace. It’s a whole other essay to
tell you what the productivity implications are of the Metaverse but suffice it
to say it will dwarf what we are doing today. A lot of research is going on to
turn the Internet into ‘stereo space’ but you’ll have to read the book or wait
for another essay to get more info on it.)

Peter
likes email today, but I have already pointed out one of its limitations the
spam problem. Another is that it is a push technology. One of my clients, a CEO
of a major corporation, told me that he used email to communicate company
policy to his employees and to spread the company’s culture, an important part
of creating a team out of all the diverse characters at any firm.

But how
many of his employees actually open his mass emails? Fewer than 15%, it turns
out. And that is how many actually open his emails on average. We don’t know
how many of them actually read it. When an email is more than a few paragraphs
practically everyone prints them out* if they are going to read them at all.

(* That’s
why I am sure that email newsletters are all but useless. Sure they’re ‘free’
to distribute but you get what you pay for. No one reads these things anymore.
They don’t have time and they need to print them out if they do want to read
it. So you want to start a newsletter to keep in touch with your clients? If
it’s going to be email based, don’t bother is my advice. Snail mail them if you
must.)

What we
did instead is we created a personal website (PWS) for the CEO on their
Intranet where he could post his thoughts and his employees could browse them
when they had time, when they needed information on company policies and directives
and direction. We taught him a few basics in less than an hour like how to post
something to his PWS, how to add an image or graph and a few other simple web
development skills.

He can
get up at 3 am and post important notices on his PWS this is pull technology.
The next day he can alert the people who need to know by phone or in F2F
meetings that the info they need is there. This works much better and is a far
more productive use of both the CEO’s time and his employees too. Intra-company
email is an even bigger time waster with all its unnecessary cc emails than
outside spam is.

Notice
how we disintermediated the techies. He learned basic web development skills
(in less than an hour). All of my students at CU are required to learn basic
web skills and I encourage you to do it too. If I can learn how to do this in
my 40s and 50s, by golly, you can too.

This is
heresy to most IT departments and the marketing and office managers aren’t
going to like it either. They like controlling the firm’s website; they don’t
want you to have access to your little piece of it. Too bad and tough luck, I
say. The productivity gains for you, the higher revenues you will generate and
the better service levels you will offer your clients outweigh their petty
concerns about every corner of the website having the same look and feel.

Let me
give you another (and last) example to try to drive home this point. I am a
consultant to a real estate company active in industrial leasing. I maintain a
lease agreement for them which is stored on the server side of our IT
infrastructure. What that means is that it isn’t stored on my PC’s hard drive.
The client, the client’s clients and the client legal firm can all get access
to the server (just to the little piece of it that stores their data). This
means that if their lawyer needs to make a change to their standard lease
agreement, she can get at it in only one place our server. She updates it and
saves it, to the server. This is known as source control; there is only one
copy of the document but everyone can share it and you know that you are always
working with the latest version.

This is
hugely different from passing around lease documents (or any legal document or
accounting record for that matter) by email for people to use or to comment on
or to redraft or update. You are never sure if you have the most up to date
copy and you might be adding your changes to an older version of the document.
So you can end up with a dozen different documents, none of which contains all
the necessary changes. This is very inefficient and opens up the law firm or
accounting firm to unnecessary liability if their clients are using defective
documents.

You have
all experienced this problem. The answer is working on what is called
server-side documentation. For my client and his salespeople, they know that if
they download the document using a browser* (or for the somewhat more
technologically sophisticated, using FTP (File Transfer Protocol) software),
they are always using the right lease agreement.

(* They
can use a Browser since we land them on a secure page that requires them to use
their personal password that generate for them.)

Now you
can see how efficient this can be and you can see how I have intricated myself
into my clients affairs (I control their documentation information is power.)
So build a PWS and use it for more than just a nice brochure or puff piece
about yourself.

5.25 Deal Maker or
Deal Breaker?

But the
passage of time and being good at keeping files only gets you so far. You need
to be a deal maker rather than a deal breaker.

As an
Accountant, it is much easier to simply be a bean counter; do the double entry
bookkeeping and leave it at that. But anyone can be good at that and therefore
you can be replaced pretty quickly if someone else will do it a bit cheaper.

One
accounting firm that I know, intricates their clients by providing their
management and ownership with what I call Personal CFOs; that is, they know,
how busy these people are so they have bookkeepers visit them in their offices
or in their homes to do personal bill paying, make personal deposits and
generally handle personal financial affairs. These bookkeepers tie into their
tax practice so that personal tax returns are a breeze. And because they are
doing the personal work, they can provide advice on tax strategies for the
business too. As my father, the later Professor O. J. Firestone once told
me:  Son, be proud to pay your taxes in a
great country like Canada.
But don’t pay more than you have to.

One young
lawyer I worked with in my early days, Bill (not his real name) was a funny,
profane, charismatic guy who was a supreme deal maker. He had so much charm
that he could get away with saying practically anything. I remember at one
meeting we had with a fantastically wealthy home builder, Ian (not his real
name either), Bill said: Now Ian, I know you want to pay $6 million and Bruce
wants to sell for seven. There’s no way Bruce is going to sell at your price
and no  way you’re going pay his price so
let’s stop frigging around and cut the crap and you both agree to six and a
half and let’s go get a glass of wine right
now.

I
couldn’t believe it but Ian, who was a real gentleman, burst out laughing and
we made the deal. Not I am not suggesting that you brush up on your slang but I
can tell you without a doubt that the vast majority of accountants and lawyers
that I have known are deal breakers not deal makers. You want more clients,
better clients, more interesting work? Then be the latter type of professional,
OK? Find ways to make things happen for your clients.

Returning
to Gary Bettman and Bob Goodenow, would you send two lawyers into a room by
themselves to work out or negotiate anything? Not likely. Lawyers are trained
to state the case for their client in a forceful and convincing manner. No
doubt Gary and Bob are doing this supremely well. They are both super bright,
talented guys but I wouldn’t call either of them deal makers. They need to have
players and owners in the room without which, nothing is going to happen
(except the NHL is going off a cliff).

It takes
years to unlearn what your schooling and profession have taught you. But if you
want to become indispensable to your clients, you need to do this.

5.26 Billing your
Clients

Clients
hate the feeling of being nickel and dimed.

I can
remember the day that Ted Beament completed a large and complex negotiation for
my family. It was 1972 and the final agreement had been reached to gift the
Firestone Family Group of Seven Art Collection to the people of Ontario. The Ontario
Heritage Foundation took ownership and control of the Collection and the family
home (which was then used as a museum to hold the Art).

Mr.
Beament, a former Captain in the Canadian Armed Forces and a WWII hero, had
returned to Ottawa
after the War to create his own legal practice. He was successful; his
reputation for integrity and competence was exemplary.

Ted had
two bills that day for my father, the later Professor O. J. Firestone. Jack, he
said. I have two bills for you. The first one totals $ _______ which is for our
time and disbursements in this matter. The second one is for $ _______ more.
Now if you don’t want to pay the second one, I’ll tear it up right now. But in
the past, you know that sometimes I have adjusted our firm’s billings down
because the results for you weren’t worth paying those kinds of fees for and I
didn’t think it was fair for you to pay them. But in this matter, I feel that
the results have been extraordinary for you and your family and I think our
services are worth more to you than just our time on this.

My father
picked up the second invoice and said: Ted, you’re right.

5.27 Customer Churn
and Horsepower

You can’t
plan on winning the lottery but you can plan to get rich, slowly. Build your
practice one client at a time. Even mighty IBM starts off every year at $0.
They don’t suddenly go out and sell 85 billion dollars worth of stuff on day 1
of their new fiscal year they build their business one customer at a time just
like you do.

If you
have great clients, even if the number of them is small, and you keep them
happy, your practice will grow. There is practically nothing worse for a
business than customer churn. Churn is very expensive it takes time, effort and
money to attract clients in the first place and to replace them if they leave.
The customer that comes in the door and needs a tax return for herself and her
spouse isn’t a $1,500 customer. If they stay with you for ten years and all
they do with you are personal tax returns, they are a $15,000 client. But if
they bring you their business audit and other work and referrals too, they
represent a lot more than that.

As your
clients develop their careers, they can bring you along for the ride. One of
the things that I look for especially in legal work is horsepower. When we were
closing the purchase of an expansion franchise with the NHL in December 1991, I
remember stopping counting the number of layers working on the transaction in Ottawa, Toronto
and NYC when I got to 35. As your clients’ businesses grow so do their demands
and you need to be able to grow with them.

Timeliness*
is another one of those crucial elements you just can’t be late. Whether you
are preparing tax returns, closing a transaction, conveying real property,
whatever, don’t be late, ever.

A client
of mine just fired his law firm of 15 years because they were chronically late.
If the partner in charge were here today, he would have a million good reasons
why they were late and a lot of them he would pin on his client. So what?

(* Here
is a comment from a good friend of mine, Dan Warren, CA, who has built a very
successful accounting practice by paying attention to quality, reputation,
service and also being a part of the solution for his clients instead of being
part of the problem.

I tell
our people that if they focus on the quality of their work, have frank and
honest communication with their client and (as you say) try to make themselves
indispensable, they will be successful.

I have
found that as some professionals age, they act as if they are more important
than their clients. While they did not start out being arrogant, some seem to
develop that attitude. This is the starting of the end in my view. A good dose
of humility now and again keeps professionals grounded and focused.

One
attribute that is worth mentioning again is responsiveness. I think it is very
important for a professional to get back to their clients on a timely basis.
Clients notice this and appreciate it. Now it is not always easy to do. I
started this email to you this morning and had to run out to a one hour
meeting. During that time, I have received 15 emails and 4 phone messages. As
already noted, it is a challenge to manage one’s communications, but it is
necessary. Being responsive I think is a key attribute.

My final thought
deals with your comment about providing your client with something more than
just the core service—a legal agreement or a financial statement This is often
hard for a young professional to come to grips with. They may feel that they do
not have enough experience or that the client may dismiss their ideas. That is
a risk that one has to take but in the end; I have found that clients recognize
that you are trying to go beyond the core service and give you credit for that.

Now if
you want to have a good meeting with your Banker once a year, then you need to
remember to make a profit every year. Do you think your Banker wants to hear
how many cold calls you made, how many presentations you made, how hard you
worked? No, they really don’t care about any of that. They just want to hear
that you got results.

You need
to manage your clients, not the other way round. You need to worry about her
business as if it were your own. You need to push your client so that they are
not a roadblock to their own (and your) success.

I have
always liked Sigourney Weaver’s character, Ellen Ripley, in the Alien film
series. She was the first woman I ever saw in any film that didn’t scream and
wait for some hero to come by and rescue her. She took charge. She adapted well
to very rapid changes in her environment. No matter what bad news came her way,
she coped. She didn’t sit around trying to figure out who to blame. She figured
out how to survive.

I don’t
care whose fault it is, just get it done. That’s what your clients really want
from you.

 

5.28 The Ethics of Pre-Sales

Pre-selling means you are taking people’s money before
providing the service or product and that is a kind of a trust. It is a grey
area. But you pay for your train ticket before boarding the train. You pay for
your restaurant meal after you have eaten it. So it depends… on leverage. I
am sure that if restaurants could ask people to pay before they consume food
and drink, they would.

As you know, I have talked about one of the keys to
generating a successful business is to have a business model which has control
over some type of factor of production. This gives you leverage and the power
to pre-sell. Pre-sales give you cashflow, and cash is power.

We faced this situation when we brought back the Sens in
December 1990 and collected $22m in cash for season tickets in December 1990
for a team that wouldn’t play until October 6, 1992. The NHL grants a
franchise, which gives you control over the boundaries of your home city plus
50 miles it is your territory. This is an obvious form of control over a factor
of production. You have the exclusive right to exploit the value of playing
National League games in your home market.

The funds collected from pre-sales are ‘impressed’ with a
trust even if they are not legally placed in a trust.

The funds also appear on your B/S (Balance Sheet) as a
LIABILITY since you have the money but you have yet to perform or provide the
service or product (i.e., playing NHL games).

Disney sells Disney Dollars on a one for one basis one USD
equals one Disney Dollar. There are hundreds of millions of these Disney
Dollars (like Canadian Tire money, I suppose) in kids drawers all over the
world. Disney has to account for these on its B/S as a liability because it is
possible that all those kids (now many of them adults) could suddenly show up
one quarter and demand services from the Company.

Disney Dollars Asset or
Liability?

 

This shows you the difference between cashflow and
assets/liabilities. Most entrepreneurs are interested in cashflow.
Entrepreneurs tend to manage their businesses pretty much by watching their
bank balance at the beginning and end of each month, the difference being the
cash collected in that month.

Having said all of this, if entrepreneurs were not
allowed by government dictat to pre-sell, there wouldn’t be many startups and
certainly almost no bootstrap startups. Overall, this would be bad for the
economy even if there are a few bad apples out there taking people’s money and
then folding.

Again, it is a matter of trust and your reputation.
People don’t mind buying from Terry Matthews in a pre-sell phase because they
trust Terry and he has a track record of performing. But remember, Ryan, he and
Mike Cowpland pre-sold Mitel products in their early days together and these
products were pretty much vaporware but, somehow, they came through.

The ethics of entrepreneurship are like history the
winners write history and they are always right. Most entrepreneurs start with
nothing and take horrible risks. If they win, they are heroes. Look at Fred
Smith at Fed/Ex. He did some things to keep Fed/Ex flying in the early days
that nearly landed him in jail but he is a legend today.

To paraphrase from James Clavell’s SHOGUN: "There is
no excuse for revolting against your liege lord… UNLESS YOU WIN. Yes, that is the only excuse,” Lord Toranaga.

The Shogun is
Always Right

5.29 Win
By Losing Sales Model

I learned
a new technique of selling from the folks at Brymark, a promotional products
company: it’s a how-to-win-by-losing, guerrilla marketing (GM) strategy.

They like
to sell using the six degrees of separation. The kinds of products and services
they sell require a personal approach to selling. Nothing works better than
face to face sales calls for them.

They are
moving up market as well targeting larger clients along the way. The key
question for them is, if no one in their network of contacts knows someone in
the target company, how do they develop a relationship with them?

Well, we
devised a GM solution to this problem they established a Large Contracts Group
(LCG) that would go after big tenders within their industry.

Their
strategy was two fold a. if they won the tender, great  more sales, b. if they didn’t, they now had
all the contacts they needed within the target company. They had been through
the interview process and they were on a first name basis with key managers
including the Vice President of Purchasing.

So when
they lost (as is often the case in these thing
incumbents have a huge advantage and companies are often using the RFP
process to either get better prices out of their existing suppliers or else at
least make sure they are not getting fleeced), they thanked the company for the
opportunity. Later, they went back and said something like: Well, we have a
suggestion for you. Why don’t you try something like this and give us a smaller
order to try us out.

It is a win-by-losing strategy as mapped out in the flowchart
below.

Sometimes You can Win by Losing

5.30 Conclusion—Why Businesses (Really) Fail

 

Negative cost selling is a technique that finds many applications.
Whether you are a former student of mine telling a would-be employer: “I’ll pay
you to hire me” or a top-flight HR recruiter showing a CEO how by paying your
firm $30,000, they can save and make an additional $390,000, you’ll be much
further ahead if you master this technique in many ways.

You and your firm will make more money, not only by selling more but
by selling more to each client (the average order size will increase) and your batting average will rise too.
That is, you will close a higher percentage of the pitches you make. If you are
closing 2 out of every 10 potential clients and you can move that up to 3 or 4,
think what that will do to your income and how it will change your place in your
company.

I use these techniques and I have been able to improve my closing
rate to 7 or 8 out of 10. No one closes every deal but I try.

It also takes a lot of the fear out of selling—you go into each
meeting knowing almost as much about your clients’ businesses and their clients
as they do. This gives you confidence and confidence is the sine qua non of
moving your closing rate upwards. But it isn’t artificial confidence—it’s real,
the best kind and its authenticity will shine through—your clients will pick up
on it just as they can pick up on the reverse. Humans are incredibly good at
picking up signals that say ‘this person is lying to me.’

Why don’t more people do this?

Some don’t know about it or don’t know how to do it but I find a lot
of salespeople are just plain lazy. They figure the beauty contest approach is
easy and simpler and will work often enough that they don’t have to put
themselves out to learn much if anything about their clients’ business
ecosystems. This is not sustainable—in a tough, competitive world, a negative
cost selling master will eat their lunch.

If you can’t sell, you can’t be a CEO, Entrepreneur, Founder or a
Self Actualizing Human Being. If you can’t sell your ideas, your suppliers,
your clients, your bosses, your colleagues, your Bank, your Board of Directors,
your Faculty, your sponsors, your patrons, then you can’t be a researcher, a
supply chain manager, a sales executive, an upwardly mobile hot-shot product
manager, a middle manager, a CFO, a CEO, a Dean, an Executive Director of a
Charity or Not-For-Profit or an Architect or Artist. That’s a lot of ‘can’ts’.

If you don’t believe me just think about this for a minute. You are a
Product Manager at Cisco. You wake up at 3 am with a super idea and you write a
few notes so you won’t forget your brainstorm. The next day you go in to see
your boss and tell her: “I have this great idea for a new product or service…
It’ll take two years of R&D at a cost of $10 million but the potential
market is huge.”

Your boss says: “That’s really interesting. Build a business model,
do a biz plan, work up some revenue numbers, get some market research done and
then come back and see me. If I still like it, I will take to the Director. If
he likes, we can take it to the Vice President and if it passes that test, we
get to take it to the CTO. After that, we still have to tackle our CEO and
BOD.”

Your shoulders hunched, you walk away thinking this is going to take
a long time before you get the green light.

Meanwhile, one of your peers has also approached your boss. She said:
“I have this great idea for a new product or service… It’ll take two years of
R&D at a cost of $10 million but I got four strategic partners to each
pitch in $2.5 million and they are willing to be our launch clients too and
take the first 18 months of production plus the potential market is huge.”

She is using the negative cost selling model on her boss and she is
an intrapreneur. She has the full skill set* of an entrepreneur but she is
applying them within a large established organization.

(* Do you want an employee who has the skill set of an entrepreneur?
Do you want someone who can: take initiative, doesn’t need a lot of direction,
is innovative, can do everything in parallel, will find launch clients, knows
how to build cashflow, understands the value of a client and customer, will use
bootstrap capital, can sell/sell/sell, knows how to use guerrilla marketing and
social marketing to build the brand and capture market share at a reasonable
cost, is not afraid to try new things, understands negative cost selling,  knows how to build a sustainable business
model with a lot of ‘pixie dust’ in it, can set goals and achieve them, is
dynamic and has high energy, can create a business plan and be ready to change
it when the market moves in sudden and unexpected directions?)

Now whose project is more likely to get the go ahead, which project
is going to launch first and which person is going to be promoted first?

There is nothing more rewarding in your professional life than
working on a project you had a hand in initiating and creating. To be there at
the first glimmer of an idea, to help it grow and develop, to see it launched
into the world, to see it successful and meeting real needs and helping people
to achieve their goals—that’s what I mean by being a self-actualized human
being. And a self-actualized person is a highly-motivated, serene, confident
person who is terrific to have around.

I have hung out with NHL coaches and they are all, to a man,
self-actualized people. They make everyone around them feel special; they make
everyone around them feel like they are part of something bigger than
themselves. They make everyone around them better at what they do. They put
round pegs in round holes and square pegs in square holes and they tell you
it’s OK if you are a square peg—they have a place and role for you.

That is the essence of leadership and it is an ingredient missing in
many working lives. Here is hoping that you will have people like this in your
life and that you will be one of those people too.

I always liked this cartoon.
To me, it spoke of many business models that are bound to fail. Sometimes, we
think we are getting fitter when, in fact, we are just setting ourselves up for
failure.

Dumb Business
Models and Dumb Businesses Get Eaten

A lot of students seem to
think that every business model they design needs to be brand new, never before
seen or done. It turns out that, sure, the Business Model needs to be good but
execution needs to be even better…

I always like to refer to my
experience with the Starflyer: a great consumer product, backed by a superstar
athlete (Wayne Gretzky) that failed to generate significant revenues. The
business model was based on the fact that it was new, it was well designed, it
flew really well and ‘Gretz’ was endorsing it.

Starflyer

This was a ‘great’ product
when it was first introduced to the marketplace in 1983. It had everything
going for it:

1. The endorsement of the
greatest hockey player ever (at least in my view)—Wayne Gretzky.

2. A good design—it had a
patented (by me) aerodynamic shape (it used a dimpled surface on the flying
disc which, much like a golf ball, resulted in superior performance). The
industrial design was inventive and useful in terms of playing with flying
discs, distances traversed, accuracy and so on.

3. It used persistence of
vision to create a halo effect so that the flying disc could be thrown and
caught at night.

4. The small camera sized
batteries were neatly tucked away and lasted a long time.

5. Throwing ‘Frisbees’ was
‘catching’ on in a big way. Ultimate was in development.

6. There was just one tiny
problem. It turns out that no one wants to play
‘Frisbee’ at night and
there was zero demand (or close to that) for the product.

Student entrepreneurs need to
know that the market is always right even when it is wrong. The planet is
littered with neat products for which there is no demand. So, one of the simple
rules of business is to introduce products or
services that the market actually wants. Don’t necessarily
substitute what you think is great for what the market actually wants.

Most successful startups are
not based on e = mc**2; they are usually small improvements of existing
products or services—someone has identified a niche not being filled now or a
way of doing something that is already being done but they see a way to do it
better.

There are very few startups
like Priceline.com (where the customer names his or her own price), Google,
eBay, Fed/Ex (Fred Smith invented a whole new category of overnight package
delivery), Apple Computer, Digg.com … where the founder(s) are really breaking
wholly new ground and they are successful.

It is essential to understand
whether you have a gadget or gizmo type of idea (mostly developing into
marginal businesses at best) or something substantial. Gadgets and gizmos make
great hobbies but that’s all. Entrepreneurs should be trying to create more
value than that.

Here is an example of a gadget
introduced to the marketplace about twenty-five years ago. It is a neat analog
device that allowed a consumer to turn off the bell or ringer on his or her
telephone. In those days, phones in Canada
and the US were rented from
the Bell
companies or purchased through them. The Bell
companies did not want you to turn the ringer off—it would tie up their
networks with longer answer times and more redialing. So you could turn the
ringers down but not off. For folks who wanted a quiet dinner—tough luck.

 

The ‘Bell Control’ allowed
people to plug their phones into the device and the device into the wall and
turn off their ringers (a safety light would flicker instead of the phone
ringing). It was a cute device—there were only a couple of problems: a) because
the Bell group
of companies controlled the market, there was no obvious channel to market
these devices, b) not too many people really wanted to turn off their phones.

These problems occur over and
over again with gadgets and gizmos—neat ideas with no real potential to find a
market. The best you can do with these types of things is make a J.O.B. for
yourself—there is really no way to create a lasting business with substantial
value creation with these types of things.

The problem is how to find a
market. The toy, game and electronics markets are dominated by huge industrial
players with enormous marketing budgets.

There is no effective way to
gain entry to shelf space—retail chains will ask the entrepreneur how he or she
will support shelf space with national roll-outs. The answer will be: “Uh,
actually, we don’t have one.”

Well-capitalized companies
with huge marketing budgets and strong management are a formidable group to
compete with. Even if the entrepreneur has great ideas, indeed, possibly much
better than existing toys and games, gizmos and gadgets, they will find it
tough going.

It is true that the Internet
today makes it possible to compete on a more even footing but the entrepreneur
with a gadget is still highly likely to do no more than create a J.O.B.

Even a whole series of neat
ideas usually can’t create a sustainable business model—often they don’t even
use the same distribution channels so it becomes nothing more than a grab bag
of stuff with close to zero synergy. Try instead to Get the Business Model
Right so the harder you work the more money you make.

(Just in case you think you
have the next Hula Hoop, Trivial Pursuit, Frisbee or Air Hog, read: Why Large
Companies Buy Cashflow Not Ideas, http://www.eqjournalblog.com/?p=431).

Below are some data published
by BusinessWeek on why businesses fail. I’ll bet you that the top five reasons
(too much debt, inadequate leadership, poor planning, failure to change and
inexperienced management) are in fact related to number six on their list: not
enough revenue; i.e., business not generating enough income is probably by far
the biggest cause of business failure and they are not generating enough
revenue because of inadequate leadership, poor planning, failure to change and
inexperienced management, which also means they can’t meet their debt
obligations.

KEYS
 TO FAILURE

The top reasons most
 businesses fail, according to 1,900 professional who help troubled companies:

1. TOO MUCH DEBT 28%

2. INADEQUATE
 LEADERSHIP 17%

3. POOR PLANNING 14%

4. FAILURE TO CHANGE
 11%

5. INEXPERIENCED
 MANAGEMENT 9%

6. NOT ENOUGH REVENUE
 8%

Data: Buccino &
 Associates, Seton Hall University,
 Stillman School of Business (BusinessWeek, August 25, 2003)

If you have enough revenue,
you will get financing today, not the other way round. This is the lesson of
the false boom of the late 1990s and early 2000s when VCs and others financed
startups with interesting business models but no revenue or early prospect of
revenues. This has almost never worked, in any age.

If you have enough revenue,
you can meet debt servicing cashflow demands so a focus on revenue growth is
vital. One needs to not only generate revenue but collect it too. This seems
self evident but a lot of startups don’t do billing, invoicing and collections
very well.

How long do you think mighty
IBM would last if it didn’t collect its receivables? IBM sells around $105
billion (in 2012) worth of goods and services (one customer at a time, btw);
their monthly revenues average around $8.75 billion. Also in 2012, IBM had
around $18 billion in free cashflow which means, like everyone else, they have
bills to pay—only theirs are humongous. Their payables are approximately $87
billion per year, an average of $7.25 billion per month. If they somehow
‘forget’ to collect their receivables for three months, their AR (Accounts
Receivable) would balloon by $26.25 billion. Worse, their receivables would be
aging fast. Meanwhile their employees, contractors, suppliers, Landlords and so
forth would expect to be paid over the same period; their AP (Accounts Payable)
during that time would be around $21.75 billion which they would have to pay
from existing bank lines, cash on hand or via deferment. Even for IBM, this is
untenable; they would be in serious trouble in less than 90 days as bankers,
analysts, shareholders and other stakeholders become increasingly nervous. Their
CEO would not last out the quarter.

So we need to be cautious in
how we interpret the above Seton Hall University Stillman School of Business data.
In my experience, the number one reason for failure is absence of buoyant
revenues. I mean how many businesses have you heard of folding if their revenue
numbers are ratcheting up every month?

(Frisbee is a trademark of the
Wham-O Corporation.)

Postscript: I prefer to do business with people I like and
trust but occasionally I find myself doing business with people I don’t like
but still trust. I ALMOST NEVER DO BUSINESS WITH PEOPLE I DON’T TRUST.

So you don’t have to like everyone.

A few things will help—

1.         justify what
you do carefully and fully on the cost side—explain what your costs actually are
in detail

2.         take your
time

3.         break it
down for them

4.         check out
what I do on the scheduling side of things, https://www.youtube.com/watch?v=hA5G4KvVmnk&index=55&list=PLd3QdcBlEm9-b9B3sAnGd86s79M8ib_P3&t=14s  

5.         I would show
every client a detailed schedule and breakdown of team resources and costs so
they know exactly what they are paying for

6.         again, I
would also justify my fees based on the value I create for my clients—which you
can certainly do too.

Prof Bruce

See also: How to really
negotiate, http://profbruce.tumblr.com/post/159938216284/how-to-really-negotiate

close

25th Anniversary Edition includes special FREE Bonuses

Dont_back_down-cover

​Find out the real story behind the founding of the NHL's Ottawa Senators

  • circle
    Limited time bonus material
  • circle
    Enter a draw to meet the author!