Three Laws of Power Selling

Here 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, aka case studies.

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 MARKETING

Thou shalt demonstrate that thy solution is a negative cost for thine customer such that thy customer’s or client’s costs decreaseth or thy customer’s or client’s revenues increaseth or both and these amounts when summed are significantly greater than the cost of acquiring your service or product.

Thou shalt find persons who are willing to pay thou to market thine wares or services to them.

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 and now simply called Grade A), 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 was 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 spyware and adware and popups, as well. Or I can get you something cheaper from Pirate Software Co. for $99; it scans for viruses but doesn’t block popups, etc.

Now the GradeAStudent.com techie is taking on the role of trusted advisor, a consultant to his/her customer, if you will. He or she is on the same side of the table as the client. Suppliers are on the other side. If the client doesn’t like any of these options, the techie can then say: Look, maybe I can get you a better price from Acme or Pirate or perhaps 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 either. 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 website 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 and on behalf of 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 (websites) with many, many of the components being repeatedly reused. By operating client websites (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 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 as well. Huh?

One could carry this on down the food chain indefinitely but I think applying the Three Laws to two dimensions of the business ecosystem is probably 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 products. 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.

Golf Pros do a lot of teaching (their bread and butter) and Dale notices that a lot of those students are lawyers. Dale realizes that lawyers (at least in Canada) are usually in tough when trying to find ways to market and sell and promote their firms to new clients.

Canadian lawyers tend to do fewer 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’ll sell promo items to the Golf Pro but he will get one of Golf Pro’s legal clients to pay for them. This is how it works: He chooses a promo item that appeals to both of them–the Golf pro and the Law Firm, Say, it’s mouse pads. He brands the mouse pads with both the Golf Pro’s information and the Law Firm’s sales-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 salesperson, 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 (activate) 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–basically, they need to 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 salespeople 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 NFP (Not for Profit) outfit and we devised an 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 (shallow) 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 an NHL 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 new facility plus they 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 a sign up, placed a trailer on site and then he pre-sold 10 units from plans.

With the deposits he received from buyers, 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.

Law 3, Examples of NEGATIVE COST SELLING/NEGATIVE COST MARKETING

Negative cost selling 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 and secondly that their revenues will go up (or both!) And that the total of these two amounts is substantially more than what they are paying you. This is negative cost selling.

I also teach folks how to do negative cost marketing–getting people to pay you to market yourself or your wares to them.

For example, I do seminars and webinars where people pay to come hear me speak about real estate investing or business startups. They learn something, sure, but they also hire me to coach them afterwards (at least some of the attendees do) so, in essence, they are paying me to market/sell to them…

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.

Another 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 billboards 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, handcrafted 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 or event spaces in his area to see if they want to put his boat on display in one of their atria in his off-season.

After all, his boat is an artifact–a unique piece of artwork really. And while they won’t pay him (probably) to put his boat in their atrium or convention space, at least they won’t charge him to do it (we hope). So he “saves” three times over–he doesn’t pay to store his gondola; 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 or event goers 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 via 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 via snail 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 salespersons 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 each salesperson would hump the stuff over to their clients homes in their vehicles. Peter saw OPPORTUNITY.

He thought that a better use of a salesperson’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 directly to their customers freeing up precious warehouse space and salesperson time.

It was a simple idea but brilliant. Peter got a 98% market share of movers in Ottawa. He pinged all Three Laws of Power Selling in one fell swoop: 1) he sat on the same side of the table as his customer (where his customer’s customer becomes his customer), 2) he was “solution selling” (by making his customer’s salespeople more productive) and 3) it was a negative cost too since his customer’s customers paid for the packing and moving supplies and the movers all got a piece of that action–it was money for nothing for them, infinite IRR, internal rate of return…

In essence, the moving company gets money for nothing because 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 salespeople to sell more moves.

A few years later, Peter noticed something else whilst visiting with 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 movers’ warehouses.

So Peter asked them what they did with those used boxes.

Most of them 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 knew 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 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. #SeriouslyGood

Peter has created his own clients–he’d 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.

I’ve made the point elsewhere 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.

Peter’s startup had a huge advantage–a decent business model with lots of DV, differentiated value, and a one-to-a-few marketing challenge (at least initially and much easier to accomplish than a one-to-many model).

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 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, messaging and texting hell, I think his advice is even truer today than it was when he said it to me, in 1983.

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 sellers or buyers, there is always some kind of second thought 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 back together again by asking them simple questions, like, what is the alternative?

Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD
Real Estate Investment and Business coach
ROYAL LePAGE Performance Realty broker
Ottawa Senators founder
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