Maidsfield Blog - Partnering and Business Development

My current Dell has served me well for over the past 3 years. Some of the keys have the letters worn off and it’s starting to be a little beaten in launching applications. Anti-virus, Anti-spyware, firewalls and elaborate screen desktop systems are taking their toll on my processors’ capacity.

I’m looking at HP, Lenovo and Toshiba models. I think it’s the Toshiba M7 series with the 14.1″ screen. The others only have 12.1″ screens.

“Why a Tablet?”, a friend asked me. I’m an early adopter and I believe there are efficiencies in a using and becoming used to using a Tablet PC…..

I’m just spec’ing and pricing, but we’ll see…

This is in response to, or to add to, Annette Clancy’s post “Costing and Pricing” about an exercise with artists.

But first, I enjoyed Jeff Nolan’s presentation on “Emerging Trends in Pricing & ROI” at the IT@Cork conference recently.

What is the relationship between how we price our product or service and what it costs us to deliver?

To point out the obvious: Price - Cost = Profit

So which is most appropriate for calculating the cost of your product or service?

1) Price = Cost + Margin (where Margin is % profit you decide to earn on each sale)
2) Price = The perceived value to the buyer adjusted according to competitive forces
3) Price = X% of Return on Investment - where X% might represent one year’s savings as a result of your offering

Lost Opportunity Cost is typically the lost revenue while doing one thing as opposed to earning cash someplace else. The cash that would have been earned someplace else is the Lost Opportunity Cost.

I’m not saying that we should respond to every opportunity. I believe in quite the opposite. Pick your focus and move fast.

It’s becoming clearer and clearer to me that Pace is imperative and not acting with a sense of urgency causes you to lose out. Particularly as a small company on a growth path, you need to act fast when you see a relevant opportunity.

The core of the problem is this:

When we estimate the time to complete a task, we rarely try to do it faster, thus losing that time forever.

Completing the task faster is reducing your lost opportunity costs.

This is why I’m becoming a big fan of Eli Goldratt’s “The Theory of Constraints”. Part of which is about estimating individual tasks to be completed under ideal conditions with 50% certainty and manage the uncertainty at a more all encompassing level.

A construction company was commissioned to build a really grand five star hotel in New York. They decided to use their best engineer, a founding partner with the firm, Jim O’Reilly (he was originally from Cavan, Ireland). The managing partner, Chuck Houlihan (of Irish ancestry) was a strong business man but a little hard headed.

In building the hotel, Jim was at the core of engineering design and construction until business differences separated Jim and Chuck. Jim left the company.

The hotel was completed and all went well and opening with a grand celebration.

Then one day, there was a problem with the air conditioning. This became a big problem and all the expertise with the company couldn’t pin point the cause. Chuck was forced to call Jim to ask him back to check it out, whatever the cost. Chuck asked his engineers to follow Jim everywhere in finding the problem.

Jim toured the hotel checking the system at different points, asking questions and moving on. Then after about two hours he stopped. He had found it. Taking our a piece of chalk marked an X on a piece of equipment. The other engineers saw instantly what we meant.

Jim sent in a bill for $50,000 dollars to Chuck. Chuck nearly had a heart attack and smartly replied to Jim for his billed to be itemised.

Jim responded:

$1 for the chalk, $49,999 for knowing where to put it

Being able to do forecast sales and meet them is magic. Isn’t it?

Recently, I’ve being reading many books on sales management. Many of theses books were from a large company point of view, with 268 sales reps and such. They were typically public companies with quarterly results to report and shareholders expecting the continuous growing sales and profitability. These companies would talk about the certainty required in the measurement of the sales process. “Having a few in the bag, just in case” was always a safety being used. “You must be paranoid”, another would say repeatedly.

When you can pay for the best of everything:
1) You have strong market intelligence of what the buyer wants
2) You know what the markets’ purchasing plans for the coming year
3) You know what you can produce and can move fast to add capacity for contingency reasons
4) You know your sales cycle and lead time to sales
5) You have a pipeline and understand the probabilities at the various stages
6) Your team of 268 sales reps are well trained and managed by the best

So what if you have none of these.

The principles still apply. Do what you can do.

Progress is everything.

Case Studies are an invaluable sales tool. Nothing can explain your value clearer than showing how a similar company gained by using your product and/or services. Being able to show all the concerns being alleviated and typical challenges overcome goes a long way to removing barriers to a sale.

When you struggle to understand what a company does, A Case Study shows it very quickly.

With every new client engagement is an opportunity for you to demonstrate your capabilities. Collect the before picture precisely, both the financial and emotional measures.

With good case studies in your arsenal your proposal for business is much more believable as a future vision of success for your client.

Treat every opportunity on the basis that the world is watching how you perform.

People complicate business plans.

A business plan is a profit and loss forecast and the exhaustive set of assumptions to meet or beat this forecast.

Every number in your spreadsheet has a great number of assumptions behind it.

What are the list of questions that Bill Gates, Richard Branson, Your Accountant, Your Enterprise Ireland Development Advisor, and others would ask?