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Service Business Management
January 22, 2008
Marketing and Selling Make Nice
Marketing and selling should work together. I don't think you'll find too many people who would disagree. Still, marketing and selling departments at companies far too infrequently play nice with each other. The Yankee Group studied the handoff of leads between marketing and sales and found that 40% to 80% of leads were dropped or lost.* See their "Causes of Lost Leads" graphic below.
They also found that an 11% reduction in dropped or lost leads, combined with a 1% improvement in lead-to-client conversion rate, increased annual gross profit by 136%. At first glance this seems unrealistic. It's not. Read this article and see why.
So what's going on at your firm? Do marketing and sales work together? Could you be more effective at collaborating between departments and teams? How do you stack up with other professional services firms?
Suzanne Lowe, esteemed industry colleague and leading thinker on professional services marketing, is conducting a survey on the topic. Take the survey here:
http://www.surveymonkey.com/s.aspx?sm=2x080TxYwXC2Tx0DS5NX4A_3d_3d
She'll feature the results in her upcoming book The Integration Imperative™: Erasing Marketing and Business Development Silos - Once and For All - in Professional Service Firms and share the results with survey participants.
* Increase Revenue by Optimizing Lead Management, Sheryl Kingstone, The Yankee Group, August 2002
January 18, 2008
To Discount or Not To Discount Your Service Fees
You never see this one on a consulting or professional services firm website:
"We offer excellent services and deliver superior value, but our prices are negotiable. What you'll pay really depends on whether we're hurtin' for business this month, whether you're a marquee client we want to have on our roster, and whether or not you pressure us."
Yet, that's what's happening. Just a day out of the gate, the first several hundred survey responses are in for the Wellesley Hills Group and RainToday.com Pricing and Fees in Professional Service Businesses benchmark research study. With an initial but already significant percent of precincts reporting (love that presidential primary season):
- 61.4% of professional services firms report that they discount their fees from their internally standard or externally published rate or fee structure.
- 38.6% report they do not ever discount
What drives companies to discount? Which firms tend to discount and which don't? What are the greatest factors that affect a firm's ability to raise (and get!) the highest fees? More to come as we continue to collect and analyze the data...
Take the survey - open through the end of January: http://www.surveymonkey.com/s.aspx?sm=uJMDeOD9q69m3HT6VG3RIQ_3d_3d and you can get a complimentary copy of one of the following:
- The Professional Services E-Guide To Online PR
- How To Write And Market A White Paper E-Guide
- How To Become A Thought Leader E-Guide
- How To Set Appointments Through Cold Calling E-Guide
- Marketing Strategy, Planning, and Budgeting for Professional Services (Webinar Recording)
December 07, 2007
Marketing Plans Before Business Plans
A RainToday.com recent webinar attendee asked via email:
Many mid-sized professional services firm have no business plan and I've had to use the marketing plan to "back into" a business plan or general direction for the year. I find this is the case more often than not. Do you see this as well? It's almost impossible to get "dealmakers" at all levels (CEO on down) to take the time, and more importantly, make the decision on building a business plan, which should then facilitate the marketing strategy.
Often times, the businesses don't need a plan. That's why they don't have one. Why?
Strategy at professional services firms is different than strategy at other types of companies. At many firms, strategy boils down to a set of industries to target, services to offer, and geographies to serve.
Revenue projections are often based on arbitrary measures such as the leaders'/owners' desire to make a certain amount of money, percent of delivery capacity (i.e. we have this many people who can bill this much, so we'll make this much money), or picked-out-of-the-air percentage growth targets.
General direction for the year, depending on the firm's stage of growth, often consists of strengthening quality of services delivered, improving operational efficiencies, adding the right amount of staff to match historical growth pace, perhaps offering new services, and here and there something more strategic like acquiring other business or entering new markets. (And, of course, most firms state the obligatory "we're focusing on our people" strategy messages internally.)
Because these strategies don't always change year to year, you often don't see a firm with a written business plan per se. And if you do, it's in a PowerPoint deck...a short one, and maybe an Excel spreadsheet with projected revenue and costs.
Thus, not having a business plan in a formal sense is neither bad nor good. What's not good is when firms get lazy about trying to be better or more competitive, get lazy about delivering the value they say they deliver to the market, or aren't serious about focusing on their people.
Business plans do become important if you're looking to raise capital because you need investors. Without the need for capital (or the need to satisfy another stakeholder like a board of directors), many services firms don't need formal business plans.
Regardless of whether a business plan exists, marketing can still be the impetus for something interesting or strategic to happen at the company.
Marketing can:
- Be the key to unlocking growth in particular industry segments.
- Radically change your overall ability to generate leads and win new business.
- Create new service packaging and pricing such that revenue, margin, and repeat business increase.
- Force the company to study its own messages and value propositions, thus creating a stronger shared understanding of the purpose and norms of the firm.
- Uncover service or industry segments that are stronger prospects for revenue and margin growth than others, and focus firm efforts on these strong opportunities.
In the end, it doesn't matter much where the energy, passion, enthusiasm, and innovation come from, be it business strategy, marketing strategy, or individual team members. What's important is that it comes from someplace.
December 05, 2007
Strategy and the Fat Smoker
I've now read quite a bit of David Maister's new book Strategy and the Fat Smoker. As usual with David's work, I'm enjoying it and finding myself nodding often in agreement. (Which is better than nodding off...what typically happens when I read business books.) I'm guessing most folks, should they read this book, would say, "Not only do I agree with David's strategies, I already held the same beliefs before I read the book, and could articulate them if asked."
And that's the point: most folks know what they need to do to run a successful professional services firm. They just don't do it.
David says, for example:
- We know what to do, we know why we should do it and we know how to do it. Yet, most businesses and individuals don't do what's good for them.
- A strategy is not just choosing a target market, but actually designing an operation that will consistently deliver the superior client benefits you claim to provide.
- Even the most senior vice-presidents and partners indicate that they do not think the new strategies and polices they have designed themselves will be implemented. If they are skeptical about their own ability to implement their own declared strategy, can you imagine how cynical the employees are?
- People may say they want the benefits of romance, but yet they still act in ways that suggest that they are really interested in a one-night stand.
- Conversational skills apply to effective marketing and selling. You may remember to behave this way at a dinner party, but do your client meetings really meet these criteria?
Pretty straightforward points, if you ask me. That doesn't make them any less powerful or less relevant.
Strategy and the Fat Smoker is a winner. Well worth the time and effort to read. Also, keep a look out for a RainToday.com webinar based on the book this May 15th to be delivered by David. The webinar's content will focus specifically on how to build the strongest business relationships possible.
October 03, 2007
Next Research: Fees and Pricing
A few weeks ago I was playing golf with some old friends. Now that my old friends are, well, old, conversations tend to include family, kids, hobbies (what little time we have for them), and work. One of my old buddies is a litigation partner at a suburban law firm outside of Boston. He was talking to a friend who runs a hedge fund. Here's how the conversation went:
Blah blah blah kids blah blah blah hobbies blah blah blah family vacation blah blah...
...by the way, does your company's law firm have a litigation department? Even if they do, if you ever run into a problem you should give me a call. Our rates are really reasonable. Less than $300 an hour.
My first thought for my old buddy was...mistake. When it comes to litigation attorneys, hedge fund managers don't buy hourly rates. They buy winners.
Because of the nature of my work, I happen to know the details of the rates that many consulting, accounting, technology services, law, and other professional services firms charge. I know who charges fixed fees, who charges time and materials, and who uses contingency fees. I know how my clients scope projects, and I know (sometimes more than they do) what their project profitability is.
While I've read research on the subject (nothing much I liked), more questions came to mind. On a large scale, I'd like to know:
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What are the regional differences in pricing and fees?
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Do large firms charge more than small firms? The other way around?
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What are the differences across service specialties?
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How much does brand recognition affect the ability of firms to charge premium fees?
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Do service firms discount? If so, when?
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Are "compliance" services really commodities, generating lower fees than other value-added services?
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Are the higher fee firms more profitable? If so, how much?
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Are firms with higher fees growing faster than firms with lower fees?
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What do firms with the highest fees do differently than those with average and lower fees?
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Do national firms with national clients generate higher fees than regional or local players?
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Do firms with set service packages and specialties generate higher fees than generalists?
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How do firms go about raising fees?
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What have firms learned about fees?
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Are fees going up? If so, how fast?
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As a percent, how many firms offer fixed fee, time and materials, and contingency fees? Of these firms, are any of them faster growing or more profitable than the others?
Thus was born our newest major research report on pricing and fees in professional services. We're just getting the survey writing and response generation process underway now, and expect to launch the report in early 2008 through RainToday.com.
What data have you seen about service firm fees and pricing? When it comes to fees and pricing, what do you want to know? Feel free to email me or comment below.
July 06, 2007
Service, Leadership, & Referrals: Are You a Josh?
It’s 3:02am, and I’m on the redeye from Alaska back to Massachusetts, via Atlanta, of course. Sitting next to me is a partner of a CPA firm in Miami who’s flying back from the Kenai Peninsula. He just spent 30 days there with a construction team working to build his dream vacation cabin on the water.
For the last two years, that dream has been a nightmare. The service prov ider he hired two years ago to build the house started it, and then poof he was gone…vanishing into the great Alaskan bush. A few years, a few lawyers, and a lot of heartache later, he flew his own team to Alaska from Florida to finish the cabin. Now, he’s got a great cabin to go along with the lingering bad taste of bad service.
Meanwhile, I spent a week at the Bear Bay Lodge fishing for Alaskan salmon, trout, char, and grayling. On the ride to the airport before the long journey home, Josh, the Camp Manager, spent quite a bit of time talking about how he strives to deliver the Disneyland Experience (minus the clean shaven look…this is fishing in Alaska after all) through each member of the staff to all the guests at the lodge. Since I was a recipient of that service, I knew quite well he meant it, too.
When we got to the Dillingham airport, the woman at the ticket counter was having quite a bit of trouble with the computer (Don’t they all?). Most of the lovely patrons in line seemed annoyed by their extra wait even though, once they were done waiting in line, there was no waiting area to speak of, no coffee shop…no nothin'. No one was harsh, but they were semi-snide, semi-irked, and semi-quiet about it. She could hear what they said.
Josh, on the other hand, had a different reaction to the situation. After the frustrated ticket agent finally got some love from the computer, and we were done checking in, he told her that she was doing a great job.
If I worked in Dillingham, AK, I’d work for Josh—but I don’t. So instead, I’ll just recommend other folks to visit him. It seems you can get good service in Alaska as well as good fish.
Joshes inspire loyal teams. Loyal teams deliver great service. Great service gets referrals from happy clients.
Are your leaders Joshes? Do they make your team understand what it means to deliver the Disneyland Experience? And then, do they lead by example by making a positive comment when it might have been unexpected?
May 23, 2007
Tell Me a Story
On my first day at a new job at a new company years ago, a number of folks took me out to lunch, as was the tradition. My schedule up until lunch was the usual fare: going over benefits with the benefits manager, listening to welcome discussions, reviewing my agenda for the day with my team, reviewing the various products and services the firm offered, etc.
It was all quite interesting...well, not really. That is, until we hit lunch.
Before lunch, the people I met with ran through the topics they set out to cover with relative competency. Once we hit lunch, the agendas melted away, and folks started telling me stories about the firm.
There was the story about the CEO who built a whole training program in the back seat of the car on the overnight drive to the client site. And wowed the client the next day. (That's the myth, anyway.)
Then there was the story about how the CEO leased cavernous office space and said to the team, "In 2 years, we'll need more space." They looked at him with "yeah, right" eyes, but, sure enough, they were doubling up in offices not long into the future.
And then there was the story about how, on a Sunday morning, a small group of folks sat in the CEOs office and said, "Let's be bold and change the whole model of how this service works in our industry." Six months later, the competition was trying to catch up.
It's not what these stories had to say about the culture of the company that's imporant. It's that stories made the company come to life. Stories create lasting impressions where other forms of straight-up communication fail to connect as deeply.
For my part, the most effective business developers and leaders regularly capture people's attention and imagination, leading them gently towards specific actions or ways of thinking. Storytelling does not make leaders and business developers, but it can make them more impactful.
Do you have a story about the power of stories? I do. It all started when I was five...
May 14, 2007
The Big Picture
It's often been said that management is seeing the forest through the trees, and that leadership is picking the right forests.
Why is it that good often-said things are not often-heeded? Day-after-day, I encounter leaders and managers in organizations toiling away at tasks, and chugging their way down paths, that will lead nowhere. Or nowhere good.
People so often miss the big picture. I think they'd miss it less if they did a better job asking themselves, and other folks, more of the right questions. Here are some examples:
- "Big picture, what do we need to do to grow our company 25%, and 25% again?"
- "Big picture, how can we improve our overall level of client dedication and service across the company?"
- "Big picture, what do I really need to do to make the transition to Rainmaker at my firm?"
- "Big picture, what will success look like for this client engagement...for this internal project...for our new website?"
- "What are we missing, big picture, that might derail our ability to achieve our 2 year goals?"
In service businesses, it can be more difficult to think big picture. Service business leaders, more often than not, need to sell, deliver, and manage client teams as well as guide the ship. They have precious little time to step back and ask the big picture questions, as well as take the necessary time to come up with worthwhile answers. What's a service business leader to do?
Stop making excuses.
Everyone else is as pressed for time that you are. Everyone else faces seemingly insurmountable challenges. And few people do something about them in real ways.
One of the most innovative service businesses I've seen is Gem Plumbing. They're not a traditional professional services firm like a consulting firm, law firm, technology services, accounting, engineering, etc. But plumbing businesses in general have many similarities with professional services firms:
- They're typically run by professionals themselves. (I.e. People don't get MBAs from top schools and go to work for plumbing companies...plumbers and family members typically run plumbing companies.)
- It's tough to differentiate. There is a guy down the street who says he can do the same thing.
- Referrals are important.
- Repeat business is important.
- Reputation is important. (And it only takes one bad experience to spoil the reputation.)
- Managing the professional staff can be a challenge.
- Plumbers have to balance technical expertise, people skills, and business operations prowess to make sure clients get a complete service experience.
Meanwhile, the two brothers that took over the firm in the 1990s when the firm was about $3m in revenue, plus or minus, for about 20 years asked themselves one important question. "Big picture, what will it take to build a world-class plumbing company?" They came up with relatively few big needs to solve regarding people, operations processes, quality management, inventory systems, and pricing and marketing. Now, they had to work day in and day out on executing against their needs, and not a day goes by when they don't stay on top of it, but the major big-picture needs haven't changed.
Seven or so years later, they're a $35,000,000 company with good profit.
Big picture, what will it take to get your business to the next level?
April 27, 2007
To Be Perfectly Honest With You
Diogenes should have gone errand running with me yesterday after work. First, I went to the Verizon store to get something for my phone. I overheard one of the sales associates say, "to be perfectly honest with you, I'd get the A product and not the B product." Then I heard the same thing at a furniture store from one of their sales reps.
Message to anyone who works in any kind of business: don't say the words to be perfectly honest with you!
Whenever I hear this phrase (and I hear this one a lot), I am tempted to say, "you mean, as opposed to the part of our conversation where you were imperfectly honest with me, or just not honest at all?" (I'm tempted to say it, but I can usually avoid letting that one sneak out in my out-loud voice.)
Instead of saying it, just be perfectly honest with people as a matter of course.
When I mentioned this to one of my team members here at the office, she reminded me that Diane Berenbaum and Tom Larkin at our client Communico, a customer service training firm in Westport, CT, included this phrase in their list of subtle "tragic phrases" in their fabulous new book How to Talk to Customers.
Other subtly "tragic phrases" went like this:
| Tragic Phrase |
Implied Message |
| "As soon as possible. |
"When I get around to it." |
| "I'll try." |
"Not sure what I can do." |
| "The truth is..." |
"I probably shouldn't tell you this." |
| "To be honest with you..." |
"I was lying up until now." |
| "Hopefully..." |
"Who really knows?" |
| "Maybe or "Possibly." |
"I really have no idea." |
You'd think it would be easy enough to avoid employing tragic phases like this, but unless you 1) know what they are, and 2) maintain vigilance to keep them out of your conversations, they'll sneak in.
What other tragic phases have you heard in your business travels? To be perfectly honest with you, I'd be interested in hearing what you have to say.
April 12, 2007
How to Avoid the Everyday Distraction Blues
Elwood: It's 106 miles to Chicago. We got a full tank of gas, half a pack of cigarettes, it's dark, and we're wearing sunglasses.
Jake: Hit it.
Many professionals and leaders at services firms appear quite efficient. They're always busy, running from thing to thing. But what kind of progress are they really making towards reaching their proactively set goals? Do you, as the steward of your own effectiveness, reach your goals in the timeframes you set for yourself?
I often observe time slipping away from professionals and managers because:
- Busy as they might look, they often focus on urgent issues (that need immediate attention but may not have significant consequence in the grand scheme of things) vs. important issues (that may not need to be done now, but are of great consequence).
- Firm leaders too often do work that can be delegated to others, work that, for one reason or another, they "buckle down" and do themselves.
- Firm leads allow themselves to be distracted by unproductive meetings, random telephone calls, putting out fires, interrupting visitors to their office, and a host of other lampreys of time.
Books have been written about the subject of time management. I could expound upon each one of the points below for paragraphs on end to drive them home. But I don't have to (and thus it wouldn't be a good use of time). Follow the summary and you should be in good shape.
- Set goals and accomplishment milestones. If you find yourself working on anything that will distract you from achieving those goals, step back, look at what you're doing, and figure out how to get back on track. (Willie Hall: So, Jake, you're out, you're free, you're rehabilitated. What's next? What's happenin'? What you gonna do?)
- Practice saying, No. Why practice? When you really need to say no, it will come out. Often people don't want to be disagreeable, so they don't say no. Learning to say no at the right time will help you actually deliver on the important commitments you've made to yourself and others. (Mrs. Murphy: You want butter or jam on that, honey? Elwood: No ma'am, dry.)
- Heed Occam's Razor – Plurality should not be posited without necessity. In other words, don't do more than you need to do. Once you've achieved success on any particular task, move on. Sometimes you need to polish the polish to make sure something is just perfect, but more often you should begin to invest your time in the next important endeavor. (Elwood: Ah, what kind of music do you usually have here? Claire: Oh, we got both kinds, Country and Western.)
- Ask the question, "Is this what I should be doing right now?" You might save yourself days of time just by catching yourself in the act of less productive work than you could be doing. (Little Kid: Will you please put this in the window, lady, 'cuz it's real important.)
- Be proactive. Habit #1 of Steven Covey's 7 Habits of Highly Effective People is habit #1 for a reason. Proactive people are productive and reach goals. Waiting around and reacting isn't a good way to get where you want to go. (Jake: We're putting the band back together.)
- Control the clutter. Messy desks and disorganized to-do lists derail many a manager. Some folks can work through the piles-o-junk, but not many. Some may disagree with this point, but I've found disorganized managers to be less productive even if they don't know they're being less productive. If you want to step on the gas, sometimes you have to clear path first. (Elwood: Our Lady of Blessed Acceleration, don't fail us now.)
- Check in with yourself frequently. Ask yourself first thing in the morning, "What do I want to get done today?" Check in later in the day with yourself to see how you're doing. If you find yourself getting derailed from the important work that will help you reach your goals, you can often re-rail yourself with a simple check in. (Elwood: Then we gotta figure out some way to collect the gate money and get it to the Cook County Assessor's Office as soon as they open in the morning.)
- Kill unproductive activities. I know some folks in sales who are constantly analyzing their sales activities and results to the nth degree. After their exhaustive analysis, they learn month after month that they're still underperforming. Perhaps ten hours less of analysis would give them ten hours more of productivity. Perhaps there are 4 sets of ten hour activities that they can replace with more productive activities. Most people don't question what they do and how their activity patterns affect their success. They should. (Elwood: You want outta this parking lot? Okay.)
- Don't suffer time wasters. Squash unproductive meetings. Turn off the phone and the email (that's right...I dare you.)* Nip the office chit chat in the bud. If your colleague is not getting to the point, get them there. Sure, sometimes having a relaxed and meandering conversation is important for relationship building such as with clients, with prospects, or with colleagues during lunch or after work. Most of the time you can cut the conversation in half and get right to being productive. Time wasters...don't heed them. Don't notice them.
If you find that anyone you work with unduly derails you from reaching your goals, confront the issue. How you confront the issue may be a subject of quite a bit of thought, but that you confront the issue is a must. If you don't, you're no longer pursuing your own agenda. You're pursuing someone else's, whether that person be your superior, subordinate, or colleague. (Jake: How often does the train go by? Elwood: So often you won't even notice it.)
*I'm not advocating you should be unresponsive to clients, prospects, and team members. Perhaps you can get more done for them with four hours of undisturbed time. Unless it's one of those days that you have to be accessible 100% of the time, or must return a call immediately, non-emergencies can usually wait a reasonable short while.
Now, what do I want to get done today? Right! So without further adieu, back to it. "She caught the Katy..."
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