Maidsfield Blog - Partnering and Business Development

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

Referrals are a great source of new business but may not build your business fast enough to suit your goals.

So your product suits everyone, but who does it suit best? Who will get the greatest value from your product? Who will buy fastest?

To market effectively:
=> You need to break down your market on a sector-by-sector and/or on a region-by-region and/or on a demographic basis, even if you are operating a web-based business.
=> You need to tune to your target market defining your key messages, your language, offerings and customer support accordingly.
=> Do not market everything you can do, as the message becomes too complex. Market your company, key Unique Selling Proposition and an initial “hook” offering. You can vary the hook on various campaigns.

The purpose of your marketing efforts is to develop leads and not to educate the market on everything you can do.

A basic high-level direct market attack plan is as follows:

1. Know your business direction
You must decide what products, capabilities and offerings that allow you to put your best foot forward taking advantage of the right opportunities in the marketplace.

2. Define your offerings
- Define and detail what you have on offer.
- Create a corporate image for your company that represents your standards.
- Create Marketing and Sales materials that show what you have on offer
- Use Case Studies with client endorsements.

3. Define your Ideal Client Profile
- Know who you want to do business with, based on who you work best with and provide greatest value to.
- Detail the Ideal Client profile

4. Gather a list of your target companies and contacts that broadly fit your Ideal Client profile
Using your Ideal Client Profile, with Market Research, create a list of prospective clients. It?¢‚Ǩ‚Ñ¢s worth buying a completed list or paying someone to build a relevant list of companies, addresses, contact names, job titles, phone numbers, email addresses, systems in place etc.

5. Plan and Execute your campaigns to build your pipeline
- Put the resources in place and start
- Use a CRM system to manage your Prospects, Leads, Contacts, Marketing Materials etc
- Execute, Follow-up and geneate leads
- Build a relationship with your marketplace
- Build your pipeline
- Gain new clients

Marketing should not be an occaisional activity for your company, no manner how small. Marketing is one of those good habits that when in place and done effectively will produce on-going results. This is an on-going action that will generate leads and continue to open doors to develop business.

As in everything, 10% planning, 90% effective action.

A typical belief of a Service Business is that:

Selling Services means Selling Time of relevant Expert Personnel

So, by this belief, to grow a service business’ revenue you need to employ and/or contract more people…

IS THIS WHAT YOU THINK?

Firstly, an event you must attend. I am acting as host at an IT@Cork’s Sales and Management Forum event “Managing a Service Business for Growth” on Wednesday March 22nd at the NSC. Another high value IT@Cork event where valuable business insights, networking and refreshments are certain.

Paul Hourican, founder and MD of PFH Computers is one the speakers on the night. Paul is one of the early entrepreneurs of the Cork IT Sector and has built a tremendous national IT services business in PFH. Well worth hearing his views….

SO, back to topic.

following the train of though, “to grow a services business’ revenue, we need to hire more people”. As in bespoke software development houses, more staff means greater ability to sell more ‘Units of Time’. For each Unit of time there is a clear margin. Then different level of expertise have different charge rates. For example, within the same project a Senior Business Analyst may charge out at E200 per hour, while a junior developer may be E60 per hour…

Is your business is focussed on solving particular business needs and selling expert time as a solution?

DO YOU use high-level expertise every time?

How Many times, in the past, has your company solved the same business needs in the past?

You know all about re-usable code in software development, whereby when developing a system component/module that is likely to be used in other systems in the future then you’ll develop it in a general manner, parameterised, configurable etc. Then it is reducing future project effort and reducing risk.

NOW, a thought (to be further expanded at a later date)…
If you were asked to provide a service to solve the same problem in 20 different client businesses, would you approach it differently than solving it in 1?

YES, you would. You would stand-back, define an approach, a process of gathering information with review points, decision points and actions. You can then decide on the level of expertise required at each point and whether your high-level expertise need to be at every stage…. This is the basis of Productising a Service.

As a discussion piece to the article on “How Do You Price Your Product?” in the December Maidsfield Market Leader Newsletter.

When businesses buy, they are investing to gain a return. Pricing is inherently linked to Return-On-Investment.

Do you know how a buyer constructs a Business Case for buying your solution? Do you know what arguments they make internally to their financial directors on why their organisation should buy your product? Do you help your prospects construct this business case?

Understand the Pain, the needs that your product is solving. Understand the cost of these pains to your prospect and how they calculate this tangibly. Understand your ability to resolve these pains, both tangibles and the intangibles, ie: the frustrations, complaints, distractions, sleepless nights etc. Sometimes the intangibles are worth more than the tangibles, to the certain people.

Price according to what your solution is worth to your prospect to resolve the need and clearly demonstrate your proven track record, which better guarantees success. Your clients success that is.

do take a look at the December Maidsfield Market Leader Newsletter.

and all comments welcome

Many people and companies focus too much on capabilities and expertise they don’t have. They forget and take for granted the expertise they do have.

Your customers are the best people to find out the true value of what you do, even if you don’t charge for it.

I think its better you ask an experienced third party to do this for you. Surveys are OK but may not give the full picture. Ask someone to meet with key clients and talk to about why they do business with you.

In doing this for others (in the past), I would always ask

would your pay three times as much as you did?.

In one case in talking to 10 customers, 9 out 10 said yes.

Whether you sell a system to enable greater efficiencies and reduce costs OR you sell a gadget to enable better communications you are selling a component of success for your client. Do we understand what defines √¬¢‚Äö?ᬮ?Ä??Success√¬¢‚Äö?ᬮ‚Äö?묢 for your client?

If we are selling to a Production Manager, success is likely to be: interruption free, efficient production, attaining target volumes at the required quality levels. If your system allows the Production Manager to make any component of this work more efficiently what other components are needed to complete the full picture?

In understanding the full picture of success for our clients you can identify all the components of success.

Within this exercise lie two business development opportunities:
1) Identifying new products or services your company can develop and provide.
2) Identifying potential partners companies targeting similar clients to your business who share your interest in your client√¬¢‚Äö?ᬮ‚Äö?묢s success.

So get on with it - understand you Ideal Client and what defines “Success” for them