Open Book Management

Blair gets David to admit that he was kind of wrong about open book management being just a fad when he originally wrote about it almost two decades ago, and David offers ways that it can actually improve relationships with both employees and clients when used appropriately.

via 2Bobs

Coaches Corner: The Solution For Being Too Expensive

It’s early January. My phone rings. It’s Sue, a former client I spoke with two weeks earlier. She had called to share she was leading a new firm and they were growing like mad. She needed our help again. I had always liked Sue. We did really good work for her and she’s a straight shooter. I trusted her. We also hadn’t worked together for quite some time and our prices were higher now and our process more finely tuned.

The conversation we had two weeks ago had gone well. I walked her through our process-framed case studies and gave her a proposal for the work with options. This was the green-light call, I was certain of that.

“Hello, Sue. You ready to hire us again?” I joke.

“Well, I wanted to talk to you about that,” her tone sombre.

Uh-oh. I knew she was looking at other firms. I suspected they were all local and generalist in nature. Is she calling to give me bad news?

“Okay…what’s up?”

“I know you can do a good job. But you’re just so much more expensive,” she says. “My firm is young. And your price is just….,” her voice trails off.

To keep the conversation from turning from bad to worse, I jump in.

“Sue, do you mind if I ask you a question? Is your firm trying to be the low-cost provider in your sector?” I know the answer.

“No, of course not.”

“Well, neither are we. I know you’re looking at other firms, and there are some good designers here locally. But let me tell you why we’re worth every penny. Then you can make your decision. And if the decision is not to hire us, that’s fine. We’ll still be friends, okay.”

“Sure.”

“So the first reason we’re worth it is that we specialize in your sector. And this gives us insights that other firms won’t have. Are the other firms you’re talking to going to be able to hit the ground running, or are you going to have to start by explaining in excruciating detail exactly what it is you do? You know me, Sue. We’ve worked together before. You won’t have to train my team. I’ve already done that for you, by working for dozens and dozens of firms in this sector.”

She says something non-committal. At least she’s listening. If I go down, I’m going to go down swinging.

“And Sue, we’ve shown you exactly how we work. I walked you through our process-framed case studies. We’ll take you through each step in that process, just like we do with all our clients. Now, did any other firm show you exactly how their process is going to work, or did they just wave their hands a lot?”

Again, a non-committal answer. But I think I’m making headway, so I keep on. Next, I make a strategic move.

“And Sue, you know you can split this project into two portions. We’re better than anyone on the planet at strategy…” Did I really just say that? “…so why don’t you hire us for the strategic part, and then you can give the tactics to some low-cost (inexperienced) pair of hands?”

I’m doing what Win Without Pitching calls “stepping on the tactical to raise the strategic.”

This has worked with other prospects in the past. Once we finish the strategic component, it’s actually pretty tough for the client to go elsewhere. Their comfort level and their confidence in our abilities is pretty high by that point. But it doesn’t work this time.

“No,” she says. “I don’t want to split this up. All that will happen is the second firm will say, ‘Well, we wouldn’t have done it that way.’ So the results will suffer. And I don’t have time to babysit this process. I’m looking for a firm that can act as my marketing department. I’m too busy to babysit them, or to play referee.”

“I totally understand that, Sue. You don’t want to have to play referee. Our goal is to deliver great results for you, which is why we put together the proposal and price options the way we did. We can handle all your needs.”

“And Sue, there’s one more thing I want to say. I normally don’t do this for very many people, but we’ve worked together before and I trust you. So I’m going to do something I don’t normally do. I’m so confident that our process will deliver great results that I’m going to give you a money-back guarantee. How many other firms are that confident?”

“Not very many.”

“That’s right. So, you want to know whether we’re worth the investment. I understand that. I’ve given you three reasons. First, we know your sector. You won’t have to train us. Second, we’re going to be following a clearly defined, well-honed process. And third, I’m giving you a money back guarantee. If you get to the end of the strategic phase and you don’t think our deliverable will work, then you give us one chance to fix it. If we don’t fix it to your satisfaction, I’ll give you your money back.”

There’s a silent pause.

“Sue, this reduces your risk a lot.”

“Hmm…” She’s thinking about what I’ve said.

“Sue, what concerns do you have?”

“None, I just need to think about it.”

“Okay. That’s fine. Again, I want you to know that I’ll respect your decision, no matter which way it goes. As you think about it, if you have any other questions, give me a call, okay?”

“Okay.” There is a pause. “Oh, I do have one more question.”

“Sure.”

“Well, we had a really good year last year, and I need to get some money off my books. Can I pay you for the whole year in advance with money from last year?”

I laugh. “Yes, Sue, I’ll take your money, no matter what date is on the check.”

She laughs too. We trade some pleasantries and hang up.

Less than a week later, I have a check in my hand for more than a quarter-million dollars. She never negotiated the price.

What just happened?

Maybe she called to tell me I didn’t get the job. Maybe she called to negotiate on price. But she called. And I won the work at a higher price than any other supplier.

Reading this conversation, ask yourself how confident I sound. Pretty darn confident, right? Where does that confidence come from? It comes from the expertise my firm and I have built in our one sector.

And how does this expertise manifest itself? It manifests in expert processes.

And the money-back guarantee is a great way to back that confidence with action. I know that most challenges are no match for the systems we use to develop a solution. Yes, there are outliers, those thorny, horrendous problems that cause my team to stretch and sweat. But I’d asked enough questions to know that Sue’s challenge isn’t one of those. So the risk I’m running in making the offer is very, very small.

Our expertise and the resulting confidence also manifests in expert sales processes. I knew how to help her reach a decision that would be in both our interests. Thanks, Win Without Pitching, for all you’ve taught me.

The Money Back Guarantee Step-By-Step

When I first heard Blair talk about offering a money back guarantee, I was deeply skeptical. No, worse than that, I was frightened at the thought of actually having to write out a check. I’m sure many of you feel the same way. But I’ve been using them for a while now and I’m here to tell you that they’re a lot less scary than they sound. I’ve made this offer three or four dozen times, and I’ve closed a fair share of those and no one has yet to ask for their money back.

I urge you to use money back guarantees. They’re incredibly powerful. The firm that offers them exudes confidence. And that’s exactly what the prospect is seeking. At the end of the buying cycle, buyers need reassurance. Many of your prospects don’t buy what you’re selling very often, so they’re unsure. They need to understand that you represent a safe choice. They need confidence. And that’s exactly what a money back guarantee provides. You’re offering to take their financial risk down to almost zero.

The Components

First, only guarantee the strategic portion of the engagement. It’s too easy for the tactical details to go sideways. When I was talking to Sue, that’s what I did, guaranteed just the strategic portion.

Second, you have to require the involvement of the principal. They can’t disappear while you’re doing your work, foisting you off on some low-level person with no power and no vision, only to pop back in and say, “Well, that didn’t work. I want our money back.” I didn’t require this of Sue, because I knew that she would need to be deeply involved in our process. That’s the way she works.

Third, the less “fine print” you have the better. So, no caveats, no exceptions, no escape clauses. This should feel like a handshake deal, not like one where the lawyers have to redline every clause. This is where you need to have the courage of your convictions. The only thing I told Sue in this regard was one minor detail: if it’s wrong, you give us one chance to get it right. But there was no other fine print.

Fourth, there needs to be a limit of some kind on the guarantee. Typically it’s a time limit. The guarantee can’t go on forever. This was implied in my offer; our strategic offerings only last a few months.

Fifth, give them a range of options. “We’ll get to the decision point. Then we can decide to proceed, or we can decide to stop, or we can decide to stop and I’ll give you your money back.” This fifth point is not strictly necessary, but it’s a more realistic representation of the possible futures than just: “You get your money back or you don’t.”

How to make the offer

When it comes to making the offer itself, here are some tips:

  • Make the offer to one person, not to the whole room. This will be the highest ranking person at the prospect company.
  • Look that one person in the eye. Focus on them. Smile. You want to humanize this moment.
  • Slow down. You’re making an incredibly important point. Your audience should sense the room lights dim and the spotlight on your face grow brighter.
  • Tell them that you don’t do this for everyone. (That’s true, isn’t it?) They’ll feel special.
  • Frame your offer as a way to reduce their risk. You can call it “financial risk” or just “risk,” but you want to highlight the benefit for them.
  • Be confident. Exude trust and power, even if you’re shaking on the inside. This kind of offer is the mark of a supremely confident professional. It won’t work if you telegraph your doubts through tone of voice or body language. Don’t mumble. Speak up.
  • Place your offer carefully into the flow of the meeting. You probably don’t want to lead with it. Wait for the right time, and once you start, don’t let anyone interrupt you. Once you make the offer, pause. Let the silence stretch. You want to sear this moment into their memory.
    Then ask a strategic, high-gain question. The one I asked Sue was a variant of this one: “How many other firms are so confident that they can deliver outstanding results that they’re willing to guarantee their process?” You want to distance yourself from the competition.
  • Practice by making the offer to a few “gimme” prospects first. These are the prospects that won’t ever take you up on it, or where the cost of failure is so low that you could afford to pay them back. These types of situations are low risk for you. In using these as practice, you’ll learn what it feels like to make the offer, how the words sound coming from your mouth, and what types of responses are typical.

What could I have done better?

Thinking back over the conversation I had with Sue, there are some things I could have done better:

  • I should have sent her an email right after our conversation with the guarantee spelled out. This would have hammered home the point.
  • I probably shouldn’t have spent so much time questioning my competition. I was trying to draw distinctions, but looking back, I feel I might have overdone it.
  • I could have been much more clear about the three choices: if you don’t like it, we get a chance to make it right, in which case we’d proceed. But if we can’t fix it then we can decide to stop, or we can decide to stop and I’ll give you your money back.

That’s okay. I’ll do better next time.

Did Sue take me up on that offer of a money back guarantee?

We recently wrapped up the strategic engagement portion of the project with Sue. I had all 8 members of her leadership team in the room as my team and I walked through our findings and recommendations. At the end of the meeting, we do what we always do: ask them to fill out an NPS (net promoter score) survey. We got 9s and 10s from everyone, so our NPS score is 100%.

The next day I came into the office and sent Sue an email.

Sue,
I neglected to say one thing in our Monday meeting. I doubt I actually need to say it, but just in case, here goes:
Do you remember the sales conversation we had at the beginning of the year? That’s when I offered you a “money-back guarantee” on the strategy portion of our engagement.
Well, the strategy is set, so if you want your money back, now’s the time to ask.
Otherwise, full speed ahead.
David

Her response was simple:

David
Full speed ahead
Sue

When Clients Ask for Financials

I recently spoke with an agency ownership team about an RFP they had received from a new prospect. One of the submission requirements was a copy of the firm’s financial statements.

How do you respond in such situations?

You would be well within your right to issue the most impolite of two-word responses to such a demand. Of course that’s not necessary, though. This is, after all, merely a game. Rather than stress you out, such a request should bring a smile to your face and an eager acceptance of the challenge. Let’s go over how to play the Show Us Your Money game.

Is This a Game Worth Playing?

Before we begin, prepare yourself for the fact that any selection process that begins with a request for financials might not go well. When the client opens this way then they’re likely a price buyer. If the relationship begins through procurement then whatever you’re being asked to bid on is seen as a commodity and you will have no power. It’s a price-driven decision all day long. Best to bow out.

If things have gone well in the sales cycle only for procurement to pop up at the last minute and demand financials, that’s actually good news. When procurement gets involved at this stage its almost certainly because they see this as final negotiations with the preferred firm – although they will never let on that this is the case. You’ve got more power than you realize in this situation but wielding it begins with the word “no”. Until you clearly say no, procurement is hearing yes. There’s rarely a need to get uppity or indignant. Remember the WWP key principle of kind ruthlessness: be ruthless in your behaviour – in this case getting right to the issue of why the client is asking and what a more appropriate answer might be – but be kind in your words. So a healthy amount of skepticism and direct professional questioning is called for.

Playing The Game

First, let us recall the Win Without Pitching Four Priorities of winning new business:

  1. Win Without Pitching, if possible. If you cannot then…
  2. Derail the pitch. If you cannot then…
  3. Gain the inside track. If you cannot then…
  4. Walk away.

Priorities two and three are about gaining concessions that affect the buying process thereby giving you an indication of how likely you are to win. You proceed with opportunities where you have proven that your odds of winning are good, ideally better than 1/n (with n being the number of firms under consideration). The assumption is someone has the inside track. If it’s not you, it’s someone else. This is the inverse of the saying about poker, that “If you can’t spot the sucker at the table, it’s you.”

Now, the step-by-step guide to our game. A lot of these steps are the same as those you would follow for any RFP response, with the specifics around financials added.

Step 1: Pick Up the Phone

The first thing you do is call – even if the RFP says no phone calls. Don’t apologize, just ignore and call. Get to a real decision maker and not a gate-keeper or process manager if you can. If the opportunity has come to you through procurement and you can’t get to a decision maker then you’re either a filler candidate rounding out the roster, perhaps there as a source of pricing pressure on the others, or the entire engagement is seen by the client organization as a commodity. In either case you want to think deeply about the merits of proceeding.

Step 2: Why Us?

Once on the phone ask why you’ve been selected. You’re looking to see who referred you, if anyone, how they see you and ultimately, how much power you might have in the relationship. Like step one above, this is standard RFP response protocol. “Thanks for thinking of us. I’m curious why you did think of us?”

Step 3: Raise The First Objection

Now put the RFP objection on the table. “We don’t typically respond to RFPs.” You can say this in different ways but I strongly recommend you use these exact words. Now pause, if you have the stomach for it, and listen. Whatever you hear next will be invaluable in letting you know where you stand with this client.

Leaving the objection on the table, which subtly implies the smallest of openings through the word ‘typically,’ proceed. It might sound something like, “I did want to say hello and explore whether or not there’s a path forward here.”

Step 4: Now Raise the Financials Objection

Proceeding full steam ahead you are now putting on the table all of the items in the RFP about which you have questions or issues. “There are some things in here I’d like to talk about.”

Right to the financials. “You ask for financials. We’re a private company and there are no circumstances under which we would hand over financial statements, but tell me what you’re looking for and why? I’m certain there’s a way to get to you what you really need.” You’re saying no but also that this is not a barrier but a bump. Let’s get over it together.

Step 5: Identify and Address the Real Issue

Now you are two people having a real conversation. You have placed aside the direct request and are in search of the reasons behind it. Some are valid. Some are not. Let’s explore each.

Valid Reason #1

The client wants to know what percentage of your total income their account would represent. This is perfectly valid. You want to know this, too. You want your new clients to be in the green zone, representing between 10% and 25% of your total revenue.

0-4% red zone
5-9% amber zone
10-25% green zone
26-35% amber zone
36%+ red zone

Smaller than 10% would not meet your minimum level of engagement (MLOE) and larger than 35% would be dangerous. The research that ReCourses CEO David C. Baker has done across hundreds of firms shows that when a firm loses a client that represents 35% or more of its income there’s a greater than 50% chance the firm will go out of business.

So, this is valuable for both parties to know, therefore it’s appropriate for you to disclose your revenue and even the number of clients you have, and it’s equally appropriate for the client to disclose the budget. If the client will not take you at your word for your revenue then this isn’t going to be a good partnership, is it? Go ahead and say that, if necessary.

Valid Reason #2

The client might have legitimate concerns over your financial stability. In the example I gave at the top, the agency had over two decades of experience doing this type of work for Fortune 100 clients. If that’s not enough to assuage someone’s stated concern about stability then the concern is a lie and there’s something else the client is looking for.

Find other ways to prove stability. There are many, including references from clients or your bank. Financial statement disclosure should not be required. Some RFPs, especially those crafted by procurement, attempt to pass all risk onto you and that’s just not realistic. They know that – they’re not demanding, they’re negotiating! Don’t assume because it’s in the RFP it’s mandatory. “I have to ask… if you think we’re a fly-by-night operation that might not be around to see this project through then why did you send us the RFP?”

The Big Invalid Reason (Which The Client Will Deny)

The client wants to dictate your profitability. Ahhh, now we come to the real reason. The procurement department wants to control your profit, ideally having you work at or close to cost.

You might want to lean right into this one. “Your only concern regarding our profitability should be that any work we might do for you IS profitable. How profitable is our business and not yours. You just want us to be profitable. And you don’t have to worry because we price all of our work so that it’s profitable for us and for our clients.”

If your spider-sense tells you this a price buyer, lean right into that too. “I’m concerned with this focus on our financials that this decision is all about price and I’ll tell you right now that we’re not likely to be the lowest price.”

The two valid reasons are easily dealt with without having to share your financials. The invalid reason, if it is the reason, needs to be outed and addressed head on before you politely walk away and leave it to your competitors to do the stupid thing. Sometimes that is just as gratifying as a win.

Wrapping Up

In summary, never share your financials. That’s like going into a fencing match in which your opponent decides he’s going to try something outrageous and ask you to hand over your foil – and then you do! Never give procurement the upper hand this way. Yes they sometimes ask but they’re laughing their asses off when you comply.

Look for the reason behind the request and if it’s a valid reason find another way to get them the assurances that any reasonable person would require. If they want to dictate margin to you, tell them to get stuffed. But do it kindly. This is, after all, but a game. Win or lose this should be fun.

The Justice of Price Premiums

How much does a logo cost?

Your answer probably begins with the words, “That depends…” and it does, but have you spent much time thinking about what it really depends on?

The difference between a $10k logo and a $100k logo is not the amount of time it takes to design it or even in the quality of the creative. The difference is $90k worth of reassurance – confidence on the client’s part that you won’t

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