Running your own business down

So often I meet earnest business people who work hard and are not making money. So often it is because they undervalue themselves and what they do. They offer a great service, and if you asked their customers they would say that the businesses really stand out in terms of service quality.

This is one of my favourite themes. You need to value yourself and your own business, and know that your extras and special care for your customers and clients warrant higher charges, and your clientele will not complain. You must not join the race to the bottom.

And if you don’t believe me, see that that Master of Marketing, Jim Connolly, thinks. Do you believe me now?

No time-wasters?

Blog pix 21 March 11 001I do not like having my time wasted. However time-wasters are hard to avoid when they telephone to try to elicit free information or professional advice, even though they should know that free advice is not worth the paper it is written on, as Sam Goldwyn might have said, but didn’t.

I well understand the sentiment of wishing to avoid such people who just want to use us, but quite often I see small ads selling an item or a product, with that “No time-wasters” prominent in the entry.

It just gives a bad impression of a grumpy person or business owner. The average would-be purchaser would want to avoid dealing with an angry seller, and time-wasters would be too thick-skinned to care and would turn up anyway.

If you are selling a product or a service and are writing any sort of copy, you want it to be attractive and to sound inviting, and more genuine than someone else’s offering in the same market. That is why you need to explain what your offering will do to make the buyer feel better.

Comfort is what most people want. They do not wish to be scared away by someone’s list of qualifications which most of us have, because they think such a list sounds pompous and expensive. They do not wish to read about a business’s prestigious premises on the High Street because that sounds expensive as well.

Customers want to feel welcome and hope to get that nice warm feeling inside, and we all need to remember that when presenting ourselves and our businesses. Don’t you agree?

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Don’t sell yourself short – lessons from a great physicist

 

As you know if you read this blog, I am all for selling our skills on value. All too many business professionals think “How much will it cost me to do a project?”, then they add a bit of a margin for their “wage”, and quote to a prospect. What they do not realise is how much they sell themselves short for three reasons:

English: American physicist Richard Feynman Po...

American physicist Richard Feynman (Photo credit: Wikipedia)

  • They don’t think about how much learning and experience they have put into their project that they have accumulated over so many years
  • They forget how much specific effort they have put into the particular work they will be offering.
  • They forget the value to the client and how to sell that

In many ways, the third reason is the most important. When I meet a new prospect, that person is either looking for a particular problem to be solved, in which case their objective is peace of mind, or they are looking for me to deliver a particular result to help realise an ambition for them; to achieve an objective to make their lives and their financial situation better.

In either case, the prospect is looking for a nice warm feeling inside, and that has a very high value. It does not matter what you think someone else might bill for similar non-standard work. What really matters is what you deliver in terms of satisfaction. If you deliver a great financial result too then that has considerable value too. As long as the client is happy with your professional fee then it must be fair.

Strangely enough I was reminded of that recently when reading the memoirs of Richard Feynman, the great physicist and one of the marvels of the twentieth century. He was a great storyteller.

When he was a lad a fellow student asked him to solve a problem, which he did in twenty minutes or so. Later, when some other students asked him for help with the same problem, he was very quick to come up with the answers. They were very impressed and thought him really clever (which he was) and naturally they would have told everyone else how satisfied they were with the work. Just because he had only solved the problem once, it did not mean it was not of great value to each individual student later.

Feynman dabbled in art later on in his life. He was modest about his artistic achievements, which was uncharacteristic. Of course he certainly had no reason to be modest about his abilities in physics and maths. In my opinion, as someone with not much artistic ability, Feynman was rather good at drawing

He had a painting he was looking to sell. His normal price was $60, but those who commissioned it (brothel owners) did not want it. To sell it to someone else, a friend of Feynman’s suggested he tripled the price because “With art, nobody is really sure of its value, so people often think, ‘If the price is higher, it must be more valuable!’”. He sold it quite quickly to a weather forecaster.

So the value of what you do is in what the client perceives, and it is up to you to help with their perception to give you a fair price and a proper reward for your service. It does not involve ripping off fearful old ladies, but providing the luxury of satisfaction to people who really appreciate what you have done for them. Don’t you agree?

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Giving the customers what they want

 

English: Logo of Marks & Spencer displayed on ...

Logo of Marks & Spencer displayed on products and in stores since 2007. (Photo credit: Wikipedia)

Taking a dip

The famous UK department store chain, Marks and Spencer, has reported falling sales in clothing and non-food items again.

It is sad to see a flagship high street name struggling. They always used to be so reliable for quality shirts and smart wear. I was never a big fan of their underwear though other people always swore by it.

Getting shirty

Someone (actually my Mum) was kind enough to give me some M & S gift vouchers and the other day I went to spend them in the store on (I hoped) a couple of smart cotton shirts. I browsed around the men’s department, and although I found a couple of shirts I quite liked, I thought they were expensive. To put it in context, these shirts were more expensive than I can get in the current sales of the “up-market” Jermyn Street shirt-makers. Of course they do not always have a sale, but my instinct is always to buy on value. I could not find it in M & S.

I was eager to buy. I had “free” money to spend in vouchers; yet I was not prepared to spend on what is not good value.

They can’t tell the bottom from the top

In the clothing market we have generally the “luxury” end and the cheap end. You can buy a poly-cotton shirt for £5.00 though its quality might not be great and it might not last so long or be so comfortable. However it will serve its purpose. You can buy Jermyn Street shirts in the sale or otherwise pay a lot but get quality. There does not seem to be a middle market, and M & S have not understood or adapted to that; certainly not enough for me to see value.

It is our client’s choice, but ours as well

In many businesses including mine, prospects are looking either for a cheap and reliable service, or they want to be cosseted. All too many accountants are simply too generic and undifferentiated. Clients do not feel they are getting much or any more than from the cheaper providers. Their clients want to pay less, because they do not perceive value, although perhaps some would pay a lot more to feel as though they were a firm’s only client and had their full attention at all times.

It is no good chugging along in business assuming that what you have always done will suffice for a client. The market is constantly changing. All of us have to keep selling our value to our clients according to what they actually want; otherwise they will kiss us goodbye, or leave us in a less polite fashion. And we have to choose which part of the market we want to be in, don’t we? That is not the boring middle bit, is it?

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Tailoring your offering to suit the client

Package deals

In many businesses, including my general area, it is customary to quote package prices. For example, there might be a price for a tax return, and then a price for self-employed accounts and a tax return, one for lettings accounts and tax return, and one for company accounts and tax return.

Clients and prospects know what they are getting, and the businesses offering think in terms of value and profit per package on an average basis, knowing that on some they will make a very good margin, and now and again they will make a loss. It is the overall net profit on the portfolio of compliance clients which counts.

Think about the customer's needs!

Think about the customer’s needs!

 

À la carte

My approach is not quite like that, because although my firm does some of that sort of work, I prefer not to be too tied in to fixed prices. I like the flexibility to tailor my fees according to the value the client actually receives, so that allows me to charge more according to their particular needs, or sometimes less if they really do not want the Full Monty. That aside, a lot of my business is not compliance anyway, and that work has a value which the client and I determine between us in the sales process. The fee will suit both of us if we agree on one, and it is down to me to sell the value.

I think that initial fixed price packages have to be flexible sometimes because not every client with broadly the same description of requirements actually needs the same service. The “one size fits all” approach does not always work. If sellers of services stick to the “fixed” formula they will lose business because their prospective purchasers cannot fit themselves into the packages offered.

How not to do business

A small accountancy or tax practice will have particular requirements for tax software. For example they might have a hundred personal tax clients, but only five partnerships and eight company clients (but their client portfolio might be disproportionate the other way round).

My old software provider charged per module for personal tax, partnerships and company tax. That added up to a lot, especially when they put their prices up. I no longer had value for money, compared with competitors who offered all-in-one packages for those who had client proportions skewed as in my example. I would have paid a high price for services I mostly did not use.

You might say that the old provider did not want my business, but that is not what they said when I tried to negotiate a better deal, and their website purports to attract smaller practices. Anyway, they did not have the common sense to make a deal with me. I wanted something which had real value and not want to pay for what I did not want.

Bespoke suits me!

I took my business to a software house who gave me an all-in deal which was exactly what I wanted. It is good value for me and it works, so I am no trouble to them as a client either.

It is always important to listen to our clients and our prospects to know what they need, and to ensure that they buy on the value of what we give them. If they are happy with us they are happy to pay.

Do you know businesses that have a limited selling policy of “that’s what we offer, so take it or leave it”?

Penny-pinching in small businesses can be very expensive

What shall I do?

Do you try to do everything in your business or do you confine yourself to the sharp end – your expertise?

Most of my work is to do with tax; that is advising people on it or writing about it. I am comfortable within my area. I have a lot of experience. I know how and where to do research to find the right answer.

I did not always know how to find the answer, though. I remember as a junior trainee being tasked with finding the answer to an unusual problem. I did not want to show my ignorance on the subject, and I had difficulty understanding the technical books in the library. After all, I was very wet behind the ears. So I relied on a book published by a well-known bank and aimed at the layperson – in other words, the amateur.

When I took my answer to my manager he told me that the issue was more complicated than I had thought, but not only that; the book’s author had actually got it all wrong! I was sent way with my tail between my legs to try again. I asked a more experienced colleague and she explained the difficult bits from the technical publication. I had my answer, which was different from the previous one because it was right.

Of course I hadn’t known what I was doing, because one of the worst mistakes we can make is in forgetting that we don’t know what we don’t know, or in other words if we are not strong on a subject our incomplete knowledge can cost us dear.

I am not great at sales and marketing. I look to others for advice because otherwise I would waste a lot of time and money. I subcontract quite a lot of work that I do not enjoy or that is not profitable to be done within my office. I have someone to help me with my business websites, though I like learning playing with others which will not cost me money commercially.

If we are inexperienced or simply do not have the time to do something to support, promote or oil the wheels of our business, it will cost us a lot more in sales than if we pay a specialist to help us.

What do you think?

Small business and the baked bean test

HP beansSmalls

Shopping around for products and services, it is human nature to look for good value. Because an offering is cheap does not necessarily mean it is good value. It may be though, depending what you want, and if the seller has devised a particular method of delivery that suits a particular market at a cost which leaves a good profit margin.

I think we all like to buy quality. If we are careful we can sometimes find it at a very decent price. Once upon a time we could rely on Marks and Spencer (a UK department store) for quality underwear at an affordable price, but some years ago they lost their way. I have not checked recently whether they have got back their underwear mojo, but many of us have drifted off to find other suppliers.

Not quite what it says on the tin

Not every product or service can be delivered at what might be perceived at a very low price. Sometimes something can sound cheap, but what it delivers is poor quality even if its generic description is the same. The other day I saw a special offer of four cans of baked beans for £1. It was a brand I knew at what sounded like a very good price; better than a local supermarket’s cheap label beans, which frankly are not very good.

I bought the four cans of beans. They are very poor quality, with fewer beans in the can and watery tomato sauce, not even as good as the supermarket’s basic cans of beans.

Premium brand

Some goods and many services can simply not be delivered to a discerning purchaser cheaply. I deliver quality advice, but the cost of delivery is quite high in terms of purchasing technical information, attending courses, being properly briefed and giving proper attention to a client’s problems as well as meeting the office overheads. My fees to clients take this into account as well as the value to them in being advised by me.

If you buy fillet steak or red mullet, the cost of production and / or delivery in getting it to your fridge and table is high. The cost of production of baked beans is low, but exceptional cheapness may be reflected in the quality.

When we buy in services, we should be careful that what we get really suits us, because the better the value we get from it, the better service or product we can offer ourselves.

Have you been disappointed with a “bargain”?

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Shouldn’t you part from your ungrateful customers?

List of titles of works based on Shakespearean...

Giving thanks

We should always thank those who give us good service. It oils the wheels, makes them feel good towards us, and it is only polite. It is a question of respect, and most of us know this.

Unfortunately not everyone understands. We know thanking people is the right thing to do because we like our hard work and attentive service appreciated. As Shakespeare wrote:

Blow, blow, thou winter wind,
Thou art not so unkind
As man’s ingratitude;

Now and again there are customers and clients who take advantage of our excellent service to make continuous demands, taking advantage of our attentiveness. They call and ask for extra advice they do not wish to pay for. They resist an increase in our charges even at less than the rate of inflation. They never thank us and they are brusque in their letters and emails.

I do hope that any clients you have who are like that do not represent a substantial part of your business, because if they do, you are their employee rather than their service provider. As long as you are not beholden in that way, then it is time for you to ask that client to find someone else.

I like good relationships with all my clients and from my side do my very best to look after their business needs to their satisfaction, but all relationships are two-sided. If a client is gruff, demanding, unappreciative and fee-resistant then they regard what your business provides as a commodity with a price. They do not see the value in what they get. They do not value what they get from you. They do not deserve to have you.

As you like it

There are always times when we have to ask our clients to find someone else because they must be unhappy whatever we do, but mostly because they make us unhappy. I like my business to be fun. Do not be afraid to weed out the unhappiness in the nicest possible way.

Have you parted with an ungrateful customer recently?

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Dealing with yesterday’s men and women

 

Harold Wilson, UK Labour leader, at a meeting ...

Harold Wilson, UK Labour leader, (Photo credit: Wikipedia)

Old times

In 1970 the Labour Party published a poster during the General Election describing the Tory opposition as “Yesterday’s Men”. It was a short-lived element of the campaign and was withdrawn very quickly. The Labour Party lost that the election, but we can understand the thrust that the Tory old guard had not moved with the times. Prime Minister Harold Wilson had some years earlier talked about “”burning with the white heat of technology,” which he saw as something in which the country should be involved. He believed in modernity or at least thought it was a good theme for winning elections.

As an aside I hope I can say that Wilson was not a conviction politician. He wanted to be Prime Minister, achieved that objective, and thought that was enough.

Modern times

Perhaps that was not so much of an aside though when we see people in larger businesses promoted beyond their appropriate level in accordance with the Peter Principle. They are often yesterday’s men and women with yesterday’s ideas, just happy to be where they are. In the modern world, we have to adapt in business or our business dies.

Time sheets

Yesterday’s people stick with yesterday’s ideas. I have nothing against time sheets for seeing what directors, partners and employees do with their work time. I do have an issue with charging out clients according to how much work time is spent on them.

  • It ignores the value of the work done for the client; perhaps a lot more than some arbitrary charge-out rate.
  • It gives the client no certainty as to the bill they will receive, and
  • the client might believe that your people will string out the time to charge more than your business deserves.

Because you’re worth it

I believe that as far as practical and especially in professional services, your client deserves a fixed price. That price should reflect the value of what you are doing. The knowledge you are selling is worth a significant sum. It may be saving your client a large amount of money and the value of that is what the client is buying.

After all, how much does an iPhone cost to make? The answer is a small fraction of what it is sold for. The customer is buying the experience, comfort she is in safe hands, and the valuable and probably money-saving service you offer. This means you can pitch your price at a level that makes a good profit.

You deserve it, don’t you?

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Selling our knowledge as a small business service provider

 

So what’s it worth?

They can’t do what we can

Having knowledge, an expertise, is to have a highly valued asset. It is up to us to exploit it as well as we can. If we are service providers there are two ways of doing it. Either might be the right way for us, but it is up to us as to how we use our special knowledge.

Processes

The first way to profit from our knowledge is to sell a process. In one of my businesses the equivalent would be completing tax returns with basic accounts as necessary. This satisfies a need. A client would find the process too much or too incomprehensible to do, or at least to meet the deadline.

No one wants to worry about a fine, and at the same time they want their tax return to be correct. If they don’t have that confidence they pay someone else not only to take on the task, but to take away the worry of having a ghastly chore (as they see it) hanging over them. What they are really paying for is relief from stress.

Valuing the product

From the provider’s point of view, it is mainly a process. Hardly any Tax Returns are exactly the same of course, but the process is something the service provider is very used to doing. However, the sale price (our fee) is based on the length and complexity of the process. It is theoretically a process the client can shop around for, so while there has to be a degree of trust, there tends to be a perceived limit to the value. That is a psychological barrier which is hard to overcome for the provider, no matter how many bells and whistles we attach to make the client feel as happy and comfortable as we can. However, there is a value which we can sell in terms of giving the customers the feel-good factor.

Made to measure

Our second method of selling our knowledge is by providing bespoke consultancy. Accountants, solicitors, architects and all sorts of engineers might do this. People have a specific problem, unique to them, and they need a solution. The solution might be worth a great deal to them, whether (depending on the profession) it is the best way to buy another business, the most tax-efficient way to sell their rental properties, the design of the client’s perfect house or how to build a new bridge across the local river.

There is a significant value in any of these which might involve cost-saving or fulfilling dreams, or simply as a practical solution to a difficult problem. Clients will also pay not just for peace of mind, but to save time, and simply to make their lives easier. When we sell on value here, we should pitch the price as to what it is worth to the client; not what it costs us to do at the time, because that is a totally false basis.

Value yourself

Like all providers, I know what my office costs are, but we who have the knowledge did not gain it overnight. We have been on so many courses, we once burned the midnight oil passing our exams, and we pay a lot to keep ourselves up-to-date with all the latest developments. We have worked hard to have that something others do not have, which is our knowledge; not only that actually in our heads, but the knowledge as to how to find out what we don’t know if you ask us right now.

Never under-value your knowledge. Ask yourself what the imparting of knowledge is worth to your client. Remind yourself how hard you have worked to know what you know. Convince your client of the value. They won’t buy what they don’t value and you don’t want to allow them to buy at a price that doesn’t value you enough.

Reward yourself and give your clients real value for money at a price they and you can afford.