My name is Jonathan Stark and I’m on a mission to rid the earth of hourly billing. I hope that Ditching Hourly will help achieve this, one listener at a time 🙂
Similar Podcasts
The Rabbit Hole: The Definitive Developer's Podcast
Welcome to The Rabbit Hole, the definitive developers podcast. If you are a software developer or technology leader looking to stay on top of the latest news in the software development world, or just want to learn actionable tactics to improve your day-to-day job performance, this podcast is for you.
El Podcast DEV
Oscar Swanros habla con personas de la industria para conocer qué es lo que sucede detrás del teclado. Nuevos episodios todas las semanas.
The Business of Authority
How to make a living while you’re making a difference.
A weekly show for independent professionals who want to go from six-figures to seven while increasing their impact on the world.
Fishing Where The Fish Are with guest David A. Fields
Guest David A. Fields shares a gold mine of practical advice on outreach, positioning, building authority, trust building, and more. Talking Points How to maximize your impact as a consultant How to "fish where the fish are" How to identify ugent problems that your clients are dying to pay you to fix for them How to win business even when you're up against giant competitors How to build trust in a five minute conversation Quotable Quotes "It's about the finding the right people, right problem, right solution, right time."—DAF "Winning business is easy when you're fishing where the fish are."—DAF "If you don't hear back from clients, you're operating where there's a lack of urgency."—DAF "If you're not winning as many clients as you'd like to, you have to make some changes."—DAF "You have to make your practice about the client, not about you."—DAF "Every time I have a conversation with someone who looks like my prospective clients, I learn something."—DAF "If you're smart and your willing to pick up something new, the sky's the limit."—DAF "Asking your client about hypotheticals will give you bad data. You have to ask them about the past."—DAF "What you differentiate yourself on are reliability and credibility."—DAF "Your whiz bang super unique process is likely to scare off clients."—DAF "Fees are the trickiest part of consulting."—DAF "There's more money to be had if you're solving a bigger problem for a bigger company."—DAF "You don't have to work with big companies to win big business."—DAF "You can build trust fairly quickly by living up to small promises."—DAF "Targeting aspirations is a longer sale than targeting problems."—DAF Related Links David's website David's book Guide To Winning Clients Dale Carnegie quote about fishing with strawberries and cream Oren Klaff's power frame concept from his book Pitch Anything Gartner Hype Cycle Transcript Jonathan S: 00:00 Hello and welcome to Ditching Hourly. I'm Jonathan Stark. Today I am joined by David A. Fields. David is the co-founder of Ascendant Consulting, is a true consultants' consultant who works with selling boutique consulting firms worldwide, a best selling author, speaker, consultant and mentor. David also heads the Ascendant Consortium whose clients are who's who of the business world. David, welcome to the show. David F: 00:22 Thank you so much, Jonathan. It is fabulous to be here. Jonathan S: 00:25 It's really my pleasure. So for folks who maybe haven't come across you before, could you just give people a crash course and who you are and what you do? David F: 00:33 Sure, and imagine that, there are people who are not aware of me. It happens every day. 95% of my business right now, Jonathan, is actually working with other consulting firms. So whether they are solo practitioners, or small boutiques up to, call it $25 million, I work with a few folks that are larger, but mostly 25 million and under, down to the folks that maybe have just started a practice and are just sort of cracking six figures. And so while I have corporate clients, most of my work now is with the consulting firms that are trying to win those corporate clients. And that's what I spend my days doing, is helping them accomplish that goal. Jonathan S: 01:12 Excellent. So I've got your new book, it's called the Irresistible Consultant's Guide to Winning Clients. Thank you very much for that. And in it, it's broken into six sections, six steps to unlimited clients and financial freedom. And there's a section that I'm particularly interested in, so I think it would be a great place to start, and that is this section on, I think it's maximizing your impact. Am I- David F: 01:37 Sure. Jonathan S: 01:38 Okay. Cool. So can you sort of give ... There's a bunch of sort of sub-sections here. Could you give us a kind of overview and then we'll drill into individual questions? David F: 01:48 Sure. The one thing I would ... Let me preface this with, because this section, which on maximizing impact which is sort of step two, but it's important to understand that this comes before you start building visibility. A lot of consultants, a lot of freelancers want to get out there and just get known by everyone they can. David F: 02:09 And before you run out and try to spread the word about yourself, you need to make sure that the word will be listened to, that you're not just out there talking, you're saying words that people want to hear. And that's impact, that's maximizing your impact. So that's where this fits in. It's very early in the process, making sure your message is going to resonate. David F: 02:29 And basically, maximizing impact just comes down to a few pieces. You need to talk with the right people, about the right problem, offer the right solution in a way that's compellingly articulated at the right time. So right people, right problem, right solution and right time. Of those four, time is darn hard to figure out. David F: 02:50 And so I tend to say you know what, put that one aside because if you talk to enough of the right people, about the right problem, and offer the right solution, then you don't need to worry about the timing. Some of them will be ready to move and want your services. So that's it. That's really the core of maximizing impact. Jonathan S: 03:10 Excellent. So you have a great graph, it got six quadrants in it where you talk about the awareness of ... your sort of the clients' awareness, or the prospects' awareness of a problem- David F: 03:25 Sure. Jonathan S: 03:26 ... or opportunity, and their urgency around that. And this is a different way to describe something that I talked about here a lot. So I wonder if ... It is kind of visual, but I wonder if you can break it down. David F: 03:40 Yeah, sure. I can describe it. As a matter of fact, all your listeners can sort of build it for themselves very quickly and easily if they want. This is useful, so it's interesting you pulled this out. This is one piece I didn't mention inside maximizing impact, which is this idea that I call fishing where the fish are, and business is so much easier if you're fishing where the fish are. David F: 03:59 So here's how you figure out where the fish are. I would say regular consultants, they do two by two charts, but we're super sexy here, so we do a sextant chart. You're going to draw a horizontal line, and then instead of bisecting it with one line, you're going to trisect it with two vertical lines. David F: 04:18 So now what you have is sort of six boxes, three on the top, three on the bottom. So that vertical axis is really is the client aware of the problem that you solve? So at the top, you might say yes, all those three boxes at the top are yes. And the three boxes at the bottom are no, they're not aware of the problem that you ... they have the problem. David F: 04:38 They may have the problem, but they're not aware that they have the problem. So yes or no. And then across the top is the urgency that they have, how urgent is their desire to solve the problem that you can solve for them. So all the way on the left might be no urgency. They have no urgency at all to solve it. In the middle is some or maybe tomorrow, or maybe in the future, and then all the way to the right is now, they want to solve that problem right away. David F: 05:09 So now what you have, if you've drawn this out, is you've got a box in the top right where your prospects are aware of the problem that they have that you solve, and they urgently want to solve that problem. That spot, that box is what I call fishing where the fish are. And when you play in that box, this business is actually very easy. David F: 05:31 Winning business is easy because you're not trying to convince someone to work with you, you're not trying to tell them to work on the problem, you're not trying to say, “Hey, you really need me even though you don't realize it,” both of which are quite difficult. You work with people who know they've got the problem and they're saying, “Yeah, I need help.” And boy, isn't it easy to sell a consulting gig when someone's saying, “Hey, I got a problem and I need help.” So were you able to sketch that out? Did that work for you, Jonathan? Jonathan S: 05:58 Yes, that does, mentally. That's a perfect picture. Can you describe for a second what it might feel like to someone who is not fishing where the fish are? So let's say someone has a ... Let's say someone is aware of a problem that's just epidemic proportions. So, for me, just to instantiate it a little bit, for me, I was doing consulting in the mobile web space for a long time. Jonathan S: 06:23 And you could just go ... almost any site you went to on iPhone was just garbage for the first couple of years, so I could see this as a problem like there is no way this is good for the conversion, this has to be hurting their traffic. This has to be causing a really bad bounce rate on mobile so on and so forth. Jonathan S: 06:41 But it was surprising to me at the time this going to about like 2010 that so many people, prospective clients with these terrible experiences didn't really see it as a problem or they want aware there was a problem, because unlike their audience, or their customer, or their users, they weren't on their own website on their phone all the time trying to get things done. Jonathan S: 07:05 So it's just wasn't ... it just didn't raise the level of consciousness. So I could run around beating the drum all day long saying, "If your business isn't mobile friendly, you're going out of business," sort of Chicken Little Approach. David F: 07:16 Yeah, how'd that work for you? Jonathan S: 07:17 Not that great. Early on, I magically got clients because there were early adopters who saw the problem. And my estimation of the situation is that over time, all of the early adopters, and then the sort of cutting edge people, and then the late adopters solved ... they got someone to fix it for them. And we started to get down to the late adopters, and then laggards. And it became a really hard sell, because they just didn't see it as a problem and still don't. Jonathan S: 07:48 So it's really hard. And there's a line in the book that made me laugh out loud, because I've heard it so many times where a student of mine, or someone on my mailing list, we'll be inside of a client organization, and maybe have done one project. And while they were in there, they were just appalled by the inefficiency of a laundry list of other things that they could easily automate, or at least, you know, not that it wouldn't be a lot of work, but they knew exactly how to automate it. Jonathan S: 08:16 Like, “Hey, I could automate this whole system, and you wouldn't need this entire department,” And still find themselves extremely frustrated, sort of ... it is kind of this Chicken Little thing, where you're almost saying ... it's kind of like walking up to someone in a Starbucks and saying ... as a personal trainer, walking up to someone in Starbucks and being like, "Hey, you're super fat, you want me to help you with that?" It's the wrong timing. It's just terrible. Obviously, it's terrible. David F: 08:45 It is. But now, I have got to ask, what was the line that made you laugh, if you remember it? Jonathan S: 08:50 It was not verbatim, but it was basically like, all these clients have the same problem, but no one sees it. But really to me that's not what's actually happening, to me it's that maybe they see it, maybe they don't, but they just don't ... they might be aware of the situation that you're pointing out. But to them, it's not a problem. David F: 09:10 Right, so that would shift them from the bottom right, which is, they're not aware of the problem. But if they were aware of it, boy, they'd want to solve it. Right? The hidden cancer if you will, right? Jonathan S: 09:21 Exactly. David F: 09:22 Or the hidden pot of gold, even if they're aware of it, they don't have an urgent desire to solve the problem. And that's different. Now, you're in that middle box at the top. And those folks are, you have to deal with them differently. There's a lack of urgency. It's not a lack of awareness. It's a lack of urgency. So you need to create desire, and frankly, that's hard to do. David F: 09:49 And so if you had been working in an environment where you're chasing folks. You're trying to create this desire, you go, look, there's a huge problem. I'm looking at how you people at Starbucks, who I can help because I'm a personal trainer, and you're not as fit as you could be, I could help you, right? And you're trying to create demand, and you're submitting proposals and nobody assigning, you might not even hear from anyone. Right? David F: 10:11 That problem, if you have a lot of proposals that are languishing, if you don't hear back from prospects, it's because you're operating where there's a lack of urgency, and it's extremely frustrating. And the answer actually, isn't later in the process. It's not that you're doing something wrong in the selling process, is you're doing something wrong in the prospects' selection process. Jonathan S: 10:35 Right. Right. So to use your metaphor, and to use myself as an example, because I know examples help people, when I ... you talk in the book about you can move your boat ... you can sort of paddle around in your boat and find where the fish are or you can just randomly moor yourself somewhere and assume that just by throwing the line in the water, you're going to be pulling fishing. Jonathan S: 10:59 And you're like, I can't believe, this industry is dead, there's no fish coming out of the water. This pond is dead. Well, maybe you're just in the wrong spot in the pond. And with me, it was a similar sort of feeling where it wasn't that I was in ... To use the fishing metaphor, when it first started the whole industry was basically invented by the iPhone in 2007, 2008. Jonathan S: 11:21 So there was no pond and I was the first boat in it, or one of the very first boats in it. So we were pulling ... fish were jumping into the boat, because the pond was incredibly small. So there was some competition, but not enough to support the demand. But then the pond got bigger and bigger and bigger and bigger. And if you didn't move your boat, you're still sitting in that same spot and the fish went somewhere else. David F: 11:45 Right. Right. So we weren't totally butcher the metaphor. Then we say, even where you are, if you're somewhere in your pond, or whatever and you're not catching any fish, you could move your boat, right? So that's one way at it. There's another way at it, which is to basically talk to the fish, become the Dr. Doolittle of fish, or whatever it is and- Jonathan S: 12:05 The Incredible Mr. Limpet. David F: 12:06 ... Or SpongeBob or something like that and find out what it is, because you're not solving the right problem for them. You don't have the right bait in some ways. So you don't always have to move your boat, though in all likelihood, you're going to have to make some changes. The one thing you know is if you're not winning as many clients as you'd like to, you have to make some changes. David F: 12:29 And you have to make your practice not about you. You have to make it about the clients. You have to make it about the fish, so that you're going after fish with what they're looking for. Jonathan S: 12:39 Yeah, what's the line, don't fish using strawberries and cream as bait. Use worms as bait, just because you like strawberries and cream. So- David F: 12:50 I have not heard that, but it's an interesting image. Jonathan S: 12:54 I completely destroyed it. It's a great quote that I destroyed and it's a classic. I think it's a Jeez, it's a classic. I think it's How to Make Friends and Influence People. David F: 13:07 Dale Carnegie. Jonathan S: 13:07 Yeah, I think it's a Carnegie quote. David F: 13:07 Yeah. Oh, that's great. Jonathan S: 13:11 Yeah. Anyway, I'll link to in the show notes, with Google under my fingertips to actually get it right. So there's something I want to point out here that we're not making explicit. I mean, we're saying it, but we haven't made it explicit. We're not talking about solutions. We're talking about problems, the problems that the clients have that you solve, and you just talked about, it's about the fish, It's not about the fisherman. Jonathan S: 13:35 So let's talk a little bit about ... this all sounds logical and straightforward. But how do you talk to the fish? How do you find those problems? How do you find your way to that top right square? David F: 13:49 Wow, what a great question. Not enough people ask that question. The answer to that is, it's actually extremely simple, not easy, like most of this stuff, it's not easy, but it's simple. And the answer you ask, you flat out ask. So I'm heading up to Toronto tomorrow as we record this, and please, I have an all day session with a consulting firm up there on Thursday. So what do I do tomorrow before I get there? David F: 14:18 Well, what I do is I reach out to other boutique firms, the leaders of boutique firms, some of whom I know, some of whom I don't know. And basically say, "look could I meet, not for any kind of sales call just to learn from you, just to hear what's going on in your world." Now, this isn't easy, especially if you're introverted, and I'm actually introverted. David F: 14:41 But it's critical, because every time I have a conversation with someone who looks like my prospective clients, I learned something, I learn about what's going on, what their problems are, what their problems aren't, which is just as important, because I don't want to waste my time talking about things that they don't need to solve. David F: 14:58 So the way you learn about this, the way you figure this out is actually by talking to people and asking them. And you might ask them, what problems have you had in the past year, two years that were so pressing, so urgent, so expensive to leave unsolved, that you actually hired someone to help you solve them? That's the right question. David F: 15:20 The wrong question is, "Hey, here's my fishing line. Or here's what I want to do. This is what I'm thinking about building my consulting practice on what do you think? Or would you maybe buy this, those are the wrong questions, anything hypothetical, like that will give you bad data, it would just give you very bad information. David F: 15:37 You need to find out what they are actually experiencing right now, or what they paid for in the past. That's what's going to tell you what the problems are in the marketplace. Jonathan S: 15:47 Absolutely. And you already said it. But I'm going to say it again, the answers to these questions might not be solvable with your current solutions or your current activities. But could be well within your skill set, your broader skill set, or that could be some skill that you could easily acquire. David F: 16:07 Sure. Jonathan S: 16:08 So- David F: 16:09 You can learn things. As matter of fact, the firm I'm working with tomorrow is a great example of it. Now, they're a small boutique. They're under $10 million. And the two owners, I want to be careful, because some people know who I work with. They're working in an industry and they're now extremely well regarded in the industry. Yet, neither one of them has a background in that industry. David F: 16:33 They have a background in a completely different world. And that's true of a number of my clients, quite a few of them that are very successful. They didn't define themselves by what they had done in the past. They define themselves by what their clients want. And as long as you're willing to do that, and you're smart, which I'm sure your listeners are smart and you're willing to pick up something new, sky's the limit. David F: 16:56 It's easy. I mean, that's one of the great things about consulting, there's no iron in the ground that you're paying for. There's no capital or equipment you've invested in. David F: 17:00 In the ground that you're paying for. There's no capital equipment you've invested in, in a massive assembly line. You can pick up just about anything. So find it and pick it up. Jonathan S: 17:10 Exactly. A lot of people might have heard you say the question, "What if you've hired someone from the outside to come in and help you with the past year or two?" You did not say, "What copywriters have you hired in the past year?" Or, "What software developers have you hired in the past year." Or, "What kind of software have you had outside [inaudible 00:17:31]?" You didn't say that at all. Jonathan S: 17:34 It's much broader than that. I tell people to do this exact same thing, optimize for conversations. If you aren't getting enough leads, you're not talking to enough people. Go out and have this exact conversation. Jonathan S: 17:47 This is sort of aspirational, if you could wave a magic wand, even if it was impossible, what would you change about your business, or your industry? Or, what keeps you up at night? The classic one is what's keeping you up nights. What's been on your to-do list forever that you haven't done? Jonathan S: 18:03 Yours is even more practical. Yours is actually a question that I use when I'm thinking about helping people choose which software features to develop. You say, "Don't ask people what features they wish something had because they're not software developers, they're probably not optimized to think of the answers to those questions. Ask them where they're having a hard time with their existing software solution." If you've got some competitor, go talk to their clients and say, "Hey, the last time you had to do X, last time you had to do a mail merge", or, "Last time you had to do some sort of marketing automation, what are your pet peeves about that? What blew up in your face? What was the biggest problem you had?" Jonathan S: 18:49 Because they can tell you and they're right. It's their history that they're telling to you. It's not this, "Oh well maybe I would like that feature." It's like no, find the pain, or the opportunity. But we usually just like pain. Go back and say, "Huh, I wonder if there's something I can do about that." Jonathan S: 19:10 To reiterate, this could very well mean, shock of shocks, you might have to change what you do. A little bit or a lot, I don't know. But it's really, if your goal is to go out and go where the fish are, as you put it, you need to be open to solving the problems the fish have, and not just having this hammer and going around looking for nails. David F: 19:32 Absolutely right, and it's a great mix of metaphors. There's just all sorts of awful images there. I love that, you're absolutely right. David F: 19:43 Jonathan, you and I and all the listeners, everybody who's listening to your podcast, are future focused. We're all entrepreneurs. We're all looking with optimism toward tomorrow and next month and next year and five years from now. But our clients are not entrepreneurs for the most part. Our clients are not as future focused. David F: 20:05 Asking them about the hypothetical, asking them about tomorrow and what do they need, not only is it not a good use of time, it will steer you in the wrong direction. You will literally get bad answers that will cost you time and money. Our clients, we need to focus them in the past. It can be difficult for us because we're future focused. It's an absolutely critical step. David F: 20:30 Keep those conversations past focused. And focused on symptoms. Like you said, problems or sometimes symptoms is a good way to think about it. What is that pain that they're experiencing? Jonathan S: 20:42 Yeah, that's a good segue into, I read something, I'm not sure if I misinterpreted it. It's a phony question but there's a ... Before I jump into that, can you give people a background on what you mean when you say, "Fishing line"? David F: 20:57 Fishing line is a very short encapsulation of your target and the problem you solve. I work with small consulting firms that are not achieving the revenue they think they could. Someone here, they either work with a consulting firm, or they run a consulting firm or they don't. If they don't, they say, "That's not me", and that's perfect. David F: 21:18 They either have the problem that I help solve, or they don't. If they don't, that's fine also because now I don't waste my time with them. What it does is your fishing line very quickly selects people, allows them to self select, to ask more. They say, "Oh, that is interesting. I run a consulting firm. Tell me a little bit more." David F: 21:36 That's all you're looking for. It's a conversation starter. You throw that line out and you see if someone nibbles and tries to get into conversation with you. From there on, you're good. You move into relationship building and nurturing and conversation. David F: 21:50 That's all a fishing line is, a very succinct encapsulation of your target, which is extremely narrow, and the problem you solve, which is very precise. And it's meant to start conversation. David F: 22:03 That's it. Does that make sense? Jonathan S: 22:05 Not only does it make sense, but it's like brother from another mother because listeners have heard me beating this drum endlessly. I have a different name for it, that doesn't matter, it's the same concept. Jonathan S: 22:16 Notice, dear listener, what is not in it. What's not in it is how you solve that problem. There's no "how" in there. There's no explanation, because you want them to ask how. It's exactly what you said, it's a conversation starter. Jonathan S: 22:33 Very focused, target market our audience or demographic or psychographic, this is very clear. I help people who believe this", or, "I help people who have this job title", or "I help people you work in this industry with this problem they have." Which is different than saying, "Oh I build software for businesses." David F: 22:51 Right. Or even, "I support a software platform." If it's a narrow platform. I work with a number of firms that do that. They're working with clients that use a certain platform and then they'll code within that in order to make it fit a particular client. David F: 23:12 But it has to be beyond just the platform. It's supposed to challenge the platform. Ideally, it's industry focused and on a certain platform, because the number one things clients look for is industry experience. Jonathan S: 23:24 Yeah, that's good. I have a lot of people who do platform specializations too. Things like Sales Force or File Maker, Shopify, that kind of thing. Jonathan S: 23:32 I do agree with you that it would be more powerful instead of saying, "I'm a Shopify plus expert", to say, "I help people who use Shopify", or "I help store owners who use Shopify, with this particular problem that is common to the platform." Jonathan S: 23:47 Or maybe it's not widespread, maybe it's very specific, but expensive problem for a small, small segment of Shopify users. David F: 23:54 Right. Actually if you say, "I'm a Shopify expert", you start devaluing yourself. Jonathan S: 24:00 Interesting. David F: 24:00 I'm not smart enough to know what a Shopify problem is, but if I could say, "I solved the problem with Shopify duplicate" or "basket abandonment", that adds value. And therefore you're able to charge a higher fee, because you're adding value. David F: 24:25 Focusing on the problem, especially a high value problem, is how you create the opportunity to win a high margin, high fee project. Whereas, if all you do is you say you're an expert, you're setting yourself up like a commodity, as someone who will unfortunately end up in a fee structure that's commoditized. Jonathan S: 24:43 Oh that's really interesting. That's funny that the notion of saying if you call yourself a Shopify expert now, you're in competition with every other Shopify expert. I wouldn't actually recommend someone call themselves a Shopify expert, but Shopify consultant, or advisor, I could see that on a business card. Jonathan S: 25:06 I do believe that you're right. I agree with that, that it would be even more powerful as a conversation starter. I don't know if you like the word "differentiator", but certainly you're differentiating yourself when you are decommoditizing yourself. I see that synonymously, but tell me if you disagree. David F: 25:29 I don't see them quite the same, but that's okay. In part because one of the lines you may not have seen in the book is that, I don't think consultants should differentiate. I don't think they should worry about differentiation. Jonathan S: 25:42 That's why I'm stammering, because I did read it. I feel like it's a distinction without a difference because in the book you say something along the lines of, if the client says why shouldn't we go with cheap-o ink and you say, "Well because I'm more reliable." That's a differentiator though. David F: 26:02 It is. Ultimately you do differentiate. What you differentiate on is reliability and credibility. Can you credibly solve the problem and are you gonna solve it without screwing up, without making your client look back. David F: 26:14 That's very different from how most people perceive differentiation. Most folks who approach their website for instance, or they approach their conversation with clients and they're thinking, "How do I make myself different? How do I make myself look different from everyone else?" That's the wrong question. David F: 26:34 There is a difference because our clients are choosing us for a reason, not just because they flipped a coin or threw a dart and hit our name. So there is a difference, it's just that difference is not what people typically associate with differentiation, which in marketing often means finding the subtle or unique points of difference. That's not what we're after. Jonathan S: 26:57 Like product or solution focused differences. Like different features. David F: 27:02 Right. And that's just not what we're after. It's not about your whiz bang, super unique process. As a matter of fact, your whiz bang, super unique process is more likely to scare off a prospective client than it is to attract them, because it doesn't look as reliable. David F: 27:19 If you're the only person in the world who's done this, if you say, "I've got something so new and so innovative", they're actually less likely to use you. Most clients aren't looking for innovation, they're simply looking for a solution to their problem. They want their pain to go away, no fuss, no muss, no issues, cause no harm. Jonathan S: 27:39 Yeah, and they've been burned so many times. David F: 27:41 Absolutely. Jonathan S: 27:41 Yeah exactly. They want something reliable, something that they can trust. They want risk mitigation, they want to feel like it's not risky. David F: 27:49 Absolutely right. Hiring any kind of freelancer or consultant, whether it's a programmer or a coder, someone helping with marketing strategy, you name it, it is fraught with anxiety for the purchaser. Because they've all been burned before, because there's very little that's concrete. David F: 28:07 We're selling what's inside our head, we're selling what's between our ears. That's difficult for them to get their hands around. And there's a big purchase they have to be able to justify to other people why it is not being done internally, or why they're not doing it themselves, and why they're spending so much money. There's a lot of head wind that you need to calm down. This whole idea of liability or credibility is lessening or dampening those winds to make it easy for our prospect to say, "Yeah, come on in. Come on board." Jonathan S: 28:42 I completely agree. You mentioned fees a little bit there, a little while back. Is there a big picture you can draw for me around pricing? David F: 28:52 First of all, fees are the trickiest part of consulting. The figuring out fee structures is without a doubt the most complex. There is as much art to it as there is science. David F: 29:04 There are a couple aspects to this. The one is fee structures. There are different fee structures. Some will create more value and create more margin for you. David F: 29:16 But there are other pieces. To the extent that you are working on a higher value problem, you can charge more. There's more value to be tapped. To the extent you are creating more value, you can charge more because there's more value to be tapped. Which means if you can solve the problem faster, if you can solve it with less interference, with less risk of failure, any of these kinds of things, those all allow you to increase your fees, to charge more. David F: 29:45 If you have more credibility, if you have renown, if you have a reputation in the marketplace, that allows you to charge more because it implies a certain level of reliability and credibility. Jonathan S: 29:57 You appear less risky. David F: 29:59 Yeah, you appear less risky. Exactly right. Contracts and pricing is actually all about risk, it's all about risk allocation. I don't talk a ton about that because that goes off into the really nerdy world of risk allocation pretty quickly. But ultimately that's what it's about. That's what they're paying you for. David F: 30:19 The more confident you can make your prospect, that you can solve their problem, that you are thinking about them, that you will not in any circumstances make them look bad, if you can hit those three, and the better you hit those three, the higher fees you can charge. Straight out. David F: 30:36 Now of course, there's a cap. The cap is set by the value of the problem you're solving. Solving a problem for one individual is likely to have less value than solving a problem for General Motors, or Microsoft. There's more money to be had if you're solving a problem for a bigger company. David F: 30:54 But you don't have to work for global giants to bring in very good consulting gigs, or contracts. This is a new learning for me. This is something I've learned over the past five years or so, is that I can work with firms, or companies, that only bring in seven figures, or maybe low eight figures, and win six figure contracts. David F: 31:19 I used to think because my corporate business was all with big companies. But you don't have to work with big companies to win big business. What you need to do is solve valuable problems and that will push your pricing up. David F: 31:30 That's all a little bit vague, so do you want to drive it to a level that's more concrete? Or what would work best do you think for your listeners, Jonathan? Jonathan S: 31:39 There's a specific thing I'd like to drill into, which is this. You referred to increasing your authority in the space, becoming a recognized expert if you will, or if you want to use another term, but basically looking like the low risk option. What are the strategies and tactics that someone can use to go from what looks like a risky option to what looks like a safe bet? David F: 32:07 Yeah, and again, really insightful question. Because how do you compete with Accenture? How do you compete with Deloitte? They've got big brand names. The consultant who walk in with a card that's stamped with Deloitte, or Accenture, or PWC or E&Y, they have the brand behind them, and that brand's worth a lot. David F: 32:29 What do you do if you don't have that brand? One thing of course is, over time you establish the brand. That's a long term, multiple years, if not decades, endeavor. But you can establish a brand. David F: 32:45 What could you do in the short term? There are quite a few things you can do in the short term. I'll give you just a handful of them. One of course is, you do good work. You can bring in case studies, you can bring in testimonials, you can bring in references from other people. David F: 32:59 I'm gonna tell you something that you can do. I'll give you and your listeners a tactical tip. I don't know if it's in the book or not. It's something I call Loop Backs. Basically, when you are in conversation with a prospect they might ask you something. Rather than answering it right away ... Maybe they ask you, "Do you know how to solve this certain type of problem in JavaScript?" And excuse me, because I'm not a coder, even though both my sons are, I have no idea what they're talking about either. Jonathan S: 33:27 That was good. Yeah, you nailed it. You had me convinced and then you blew it. I was like, "Whoa, he knows what JavaScript is." David F: 33:33 Yeah, there you go. Try selling something to JavaScript. Rather than saying, "Yeah, I can do that", what you might say is, "You know what, that's a good question. If you don't mind, let's put that one to the side for just a moment and I'll get back to it in about five minutes." Because you were also talking about this other thing, and you continue the conversation. David F: 33:50 Then five minutes later you go back and you say, "You asked about this question, about JavaScript. Let me address that, let me give you the answer to that now." David F: 33:58 Or, they say, "Can you send me some materials?" And you say. David F: 34:00 "... and can you send me some materials?" You say, "Absolutely. I will get those to you tomorrow," and then, you get the material to them tomorrow. David F: 34:09 What you are doing in this case is you are fulfilling a small promise. Because your prospects don't have any experience with you fulfilling large promises, no direct experience, unless they've been a client of yours before- Jonathan S: 34:22 Yeah, [crosstalk 00:34:23]. David F: 34:22 ... they have to rely on your ability and willingness and consistency in fulfilling small promises, and then, they extrapolate from that. So you can build trust fairly quickly by living up to small promises, and you can create the opportunity to live up to those promises with these loopbacks by saying, "Hey, you know what, let me go back to that," and then, getting back to it." Jonathan S: 34:45 That is great. I often talk about the small promises thing and do things just even on follow-ups. You've got a long sales cycle happening, you say, "Hey, if I don't hear from you by blah, I'll email you on date." Then on date, you say, "Hey, as promised, following up about this thing you wanted me to check back and see the status of the project," so on and so forth. Jonathan S: 35:10 This is sort of in the nurture phase, so you got one of these long sales cycles where the problem is not urgent, but the client knows you're a good fit for something like when they do pull the trigger, you're definitely going to be in the running, but you just want to keep in touch with them. Jonathan S: 35:26 I do with email all the time, and I tell people to do it. Put a follow-up date in the email, and then, when you follow up say, "As promised, following up," and- David F: 35:37 You're absolutely right. And, of course, well, I know you do and I do and hopefully many listeners do, is if you are in conversation with a prospect, you do not hang up the phone, if you've been on a phone conversation, without actually setting that date in the calendar so that the email is more of a confirmation. David F: 35:54 They receive many calendar invite anyway because you agreed ... "We'll talk in six months. It's July right now. What do you say we talk ... Oh, no, how about December? Should we start to talk at the beginning of the year? Great. Pull out your calendar. How does the second week in January look?" Jonathan S: 36:09 Exactly. Yup. But, no, see the new tip, though, the tip that I love that you gave, was their opportunities create these, what did you call them, loopbacks? David F: 36:19 Right, loopbacks. These small promises. So you're going to create something, then you're going to loopback to it later and fulfill that promise. Jonathan S: 36:27 I never thought about looking for them. I definitely, like when they show up, jump on them, but you proactively doing it is a really good idea. Because you'll see quickly that most people don't do this, so you suddenly, in a really short amount of time, you look way more professional than your clients do because they're busy, and I know we're all busy, too. But if you do this one thing, you will come across like you're significantly more put together than most of the people than you're in contact with. Jonathan S: 36:59 And it shifts the power frame a little bit, if you're familiar with- David F: 37:02 Sure. Jonathan S: 37:03 ... what's his name, Oren Klaff, and his ... Geez, I can't remember the name of the book. But he's got this concept about power frames and he's kind of an aggressive alpha dog type of guy. It's not my favorite approach, but I do- David F: 37:17 I've got to say that's not really my approach. Jonathan S: 37:18 It's not my favorite, but I don't think he's wrong, where the sort of social weight or the social ball quickly comes into your court in a good way. They're starting to feel scattered, you're just doing what you said you were going to do and you do it when you say you're going to do it, and it becomes an attractive force. David F: 37:45 You bet. Jonathan S: 37:46 On top of the trust-building aspect, I think there's another kind of attraction that happens there. It's almost like a- David F: 37:53 Oh, I think you're absolutely right. Setting dates in particular which some people feel like, " Oh, but isn't that being pushy?" or "I'm not imposing on them?" No, actually the exact opposite. What you're doing is you are offering your prospects some clarity on their calendar and their calendar their future is as murky, messy, ugly, scary thing hanging out there. So when you offer clarity, you say, "Let's talk the second week of January. Let's talk that Tuesday at 10 AM." It's locked in. It's clarity for them. They feel relief by having it on their calendar. The worst thing is not knowing when you're going to talk again. That's anxiety. People don't deal very well with ambiguity. Ambiguity causes stress, it causes anxiety. So putting something on the calendar, you're absolutely right. It actually creates a lessening of the anxiety, it creates some clarity, and then, makes you more attractive. Jonathan S: 38:47 Absolutely. I wanted to drill into something that I know a lot of listeners to sort of rationally understand and perhaps even recognize in the brands or vendors or products and services that they use, but they have the worst time ever identifying when they're doing it wrong. It's just so hard to see the forest for the trees, can't read the label from inside the bottle. Jonathan S: 39:17 It was in the section about common mistakes with your fishing line, or whatever you normally call your positioning statement. There was one where you said, "We get rid of bugs" is a solution versus "We help homeowners whose kitchens are infested with roaches." Do you mean in that sentence or that phrase, do you mean that like the entire fishing line would be "We get rid of bugs," and that's- David F: 39:45 No, and I don't recall that way exactly. Jonathan S: 39:49 Fair enough. David F: 39:50 That's right. But often what happens is, and I may be heading in the wrong direction here, but it's more common to say, to talk about the bugs as opposed to the homeowner and their situation. So the issue actually isn't ... No one says "I want an exterminator," or they'll say it eventually, but how they get there is, "Oh, my God. This is so disgusting. I have roaches all over my kitchen," right? [crosstalk 00:40:23] feel- Jonathan S: 40:23 Yes. Well, that's the fishing where the fish are. That's the urgent. David F: 40:26 Right. And it's the emotional challenge also, so you want to deal with that emotional challenge also. Jonathan S: 40:36 The thing that I'm getting at is the difference between using the desired future state versus the current state in the fishing line. It sounds like you prefer to say it's not that ... "We help homeowners have a bug-free house." That's very different than ... I mean to your listener I'm sure that when you heard "Kitchen infested with roaches," you might have even recoiled. It's a powerful visual versus "We help homeowners live a bug-free life," or whatever. David F: 41:18 See, you're talking a little bit about aspirations versus problems and should we target aspirations or should be target problems? The answer is you can do either one. You can do either one and succeed. The aspirational version is "We give you a clean house. We give you a bug-free house." That's the aspiration. The problem version is "We kill those disgusting roaches in your house." We solve the problem versus we give you an aspiration. They're very close, they're subtly different. David F: 41:50 There's some interesting connections between that frame, whether it's a positive or a negative frame and pricing. There's an interesting research I wrote about a couple of years ago, I think. There's an article on my website about that. But you can go either way. Consultants tend to want to be aspirational because it sounds better, it sounds nicer. What they didn't tell you is it's a longer sale to target aspirations. Targeting a problem is a faster sale because people want to solve their problems usually fairly desperately, fairly urgently. Whereas, aspirations have less urgency and they're more discretionary. David F: 42:34 Now, on the other hand, aspirations, when you win them, can sometimes be the larger projects. So from the coding world, if there's a bug in the software, well, let's go back to Y2K for any of you who were alive back then. Jonathan S: 42:47 Probably not. Probably not as many as I wish. David F: 42:49 Yeah, I know. I'm dating myself here. But Y2K was a clue that there was a problem. We have to fix the problem or a software will break. That was not aspirational. It was a problem and there was huge urgency on that. There was desperation in some cases, and so, back in those days, there was business galore for folks to solve those problems and you were familiar with legacy systems. David F: 43:13 The aspiration at the time may have been, you know what I'd love is a ... I don't know. We're talking about the early '90s. I would love a graphical interface. I know [inaudible 00:43:26] thing for back then with the aspiration [inaudible 00:43:28] but getting that graphical interface, if that was an aspiration, was not nearly as important and urgent as getting the problem solved. So the graphical interface might ultimately be a bigger win, but it's the Y2K problem at that time that got the money more immediately. Jonathan S: 43:55 That's funny because that just happened with GDPR and- David F: 43:58 Right. That would be a better example. Jonathan S: 44:02 But the thing about that is, those two specific examples and there are other ones, and it is also similar to the Gartner Hype Curve and blockchain and augmented reality kind of churning at the very peak of inflated expectations. They are all this sort of globally ebbs and flows. I mean like in 2001, if your whole business was around solving Y2K bugs, see you later, that's, I don't know. David F: 44:02 Exactly. Jonathan S: 44:34 That's a very different kind of problem than, say, we help people who manage apartment complexes get rid of roach infestations. That's the kind of problem that's, unfortunately, almost fairly recurrent. Or it's not globally happens once, and then, it's done. David F: 44:54 Yeah, but I'll tell you what. Some of the most successful firms jump on those one-and-done problems, and then, pivot off of them. Jonathan S: 45:02 Interesting. David F: 45:02 They create momentum and they pivot off of them. It is important, especially for your listeners because your listeners aren't focused on certain software platforms or software in general. It is very important to keep your finger on the pulse of what's going on in the area you specialize, and then, don't hang on too long because it evolves. Jonathan S: 45:26 Yeah, [crosstalk 00:45:26] David F: 45:26 One of my clients is actually a nice size firm. They are around $20 million, but almost all of their business was built on a certain call center software platform and doing implementation and that type of stuff. David F: 45:43 Unfortunately, the market has moved on from that particular platform to another platform and they've been hanging on desperately. Now what I've been doing is just beating them into submission to let go and move on to someplace else, so we're finding what their someplace else is. So your listeners do need to be very careful of hanging on to one spot. David F: 46:04 But if there's an urgent problem, there's nothing wrong with jumping on that, creating the connections, creating the relationships, and then, nurturing those relationships and letting those people know that you got broader capabilities. So narrow is your way in, narrow gets you in the door. But once you're in there, you can spread out. Jonathan S: 46:22 That is a really important point to emphasize because I know a lot of people miss it. I see it all the time, too. These sorts of things, this is the sign outside your Irish pub. You don't have a list of all 200 beers on tap out on the sidewalk. You say "Cold Corona inside" because it's 150 degrees. It's how hot it feels in Providence right now, and you want to get them in the door. Jonathan S: 46:48 Once you get them in the door, aka they become a customer, they become a client, then you don't need to carefully adhere to your positioning statement, this extremely narrow focus because you're having conversations, you've built trust, you've delivered wins, people think you're smart, they know you, they like you. It's a completely different ballgame. Well, not completely different, but it's a very different ballgame. Once you're inside and you have contacts and you know the politics, you know, all of the intricacies of working inside of a company, it's just completely different. David F: 47:23 Absolutely right. But plus- Jonathan S: 47:24 So this is ... Yup? David F: 47:25 Plus you know they must be really accepting because they went into an Irish pub looking for a Corona. Now, I get it. Jonathan S: 47:32 Wow. Nice. [inaudible 00:47:34] David F: 47:34 So would you [inaudible 00:47:36] to a client. They will come to you and be open to you doing more once you've proven you can deliver the basic goods. Jonathan S: 47:45 Yes. Excellent. Excellent point. Okay. We could probably go all day and I would love to, but I know we've both got other things coming up. Where can people find out more about what you're doing and connect with you online? David F: 48:02 The easiest place is just jump on my website, which is davidafields.com, so just [inaudible 00:48:09] middle initial, davidafields.com. Or you can always go on to Amazon or wherever you buy books and look up Guide to Winning Clients. It's often in the airport bookstores, too. I've been very fortunate the book has done well, and so Google that and grab it, or jump onto my website. I'm also pretty easy to grab. Jonathan S: 48:30 Yes, I second that motion. The guide, it's really good. It's a fun writing style, the illustrations are very engaging, and it's not dry at all. Very practical and I highly recommend it. David F: 48:44 Well, thank you. Jonathan S: 48:46 All right. Well, thanks very much, David. Maybe we could do this again sometime? David F: 48:51 That would be awesome. It really has been a delight. Jonathan S: 48:53 All right. That's it for this week. I'm Jonathan Stark and I hope to see you again on Ditching Hourly. Bye. If you'd like to learn more about how to ditch hourly billing, please go to valuepricingbootcamp.com to sign up for my free email course. Again, that URL is valuepricingbootcamp.com. Thanks.
All Late Projects Are The Same with guest Tom DeMarco
Tom DeMarco - a former software litigation consultant - explains what all late software projects have in common. Guest Bio Tom DeMarco is a Principal of The Atlantic Systems Guild, a technology think tank with offices in the United States, Great Britain and Germany. He is the author of ten books on organizational dynamics and the role of technology, plus five novels. His most recent work —just published this month — is a romance, entitled The One-Way Time Traveler. Talking Points Why clients get angry when a project is late Who is to blame when a project is late The real reason for tight deadlines How to respond when a project has an unrealistic deadline How the value of a project affects deadline expectations Why clients initiate projects that offer marginal returns How managers use bad estimates to manipulate employees Why software is so inexpensive these days What distinguishes prosperous software developers from those who are struggling What buyers are actually concerned about other than price Quotable Quotes "I thought all late projects were the same in that they were really estimation failures, not performance failures. I still believe that all late projects are the same, but for an entirely different reason. All projects that finish late have this one thing in common: they started late."—TD "By the 1990s, a significant part of my practice was litigation support, which was a natural consequence of raising my rates to the level that only legal departments could afford."—TD "Being blindsided by the competition—is not software developer failure but that of some marketing arm that got one upped by superior marketers in another company."—TD "If a project offered a value of 10 times its estimated cost, no one would care if the actual cost to get it done were double the estimate."—TD Related Links Tom's Late Projects article Tom's Personal Site The Atlantic Systems Guild Procreate App
You Can’t Buy An Hour
You know you can't literally buy an hour from someone... so why do you think you can sell an hour to someone? Here's the tweet that inspired this episode: Matt's Tweet Thanks to Matt Olpinski for asking! —J
Serving vs Selling with guest Liston Witherill
If you hate selling, you're probably doing it wrong. Guest Liston Witherill joins me to change your mind forever about what it means to sell as a consultant. Talking Points Where did the negative feelings about marketing and sales come from? How can you sell without selling? What you can do to relax in the sales process Why persuasion has no place in the sales process The importance of listening in the sales process How to have your products and services sell themselves What activities are okay to give away for free and which aren't? What to do if you find yourself in a terrible client relationship Liston's Bio Liston Witherill helps consultants sell their expertise with confidence by creating sales programs that produce predictable results. He's a coach and trainer who works with consultants, business owners, and their teams to take proactive control over their revenue. You can read his writing and watch his videos at liston.io. Links Liston's website Liston's LinkedIn Value Pricing Bootcamp
Lessons Learned Building My First Online Software Course with guest Chris Buecheler
Thinking of monetizing your expertise by creating an online software training course? Don't make these three classic blunders. Lessons Learned Building My First Online Software Course with guest Chris Buecheler Today I'm joined by guest Chris Buecheler to talk about a few of the hard lessons he learned creating his first online software course, Five Minute React. Chris' Bio Christopher Buecheler is a self-taught web developer with over 20 years of professional experience. He's worked as a developer for a variety of internet companies. He founded CloseBrace because he loves tech and wanted to share his knowledge with other developers. "I believe you can learn Node, Express, React, or anything else you'd like, and I want to help you do it!" —Chris Buecheler Talking Points Using version locking to future-proof your course Building the example app before writing the education materials Knowing how much to material to cover in a single course Links closebrace.com fiveminutereact.com expressjscheatsheet.com jsquickhits.com
Can Value Pricing Work for Firms? with guest Adam Aronson
Guest Adam Aronson joins me to discuss the feasibility of value pricing for firms. Adam's Bio Adam is the founder and principle of FileMaker development firm FullCity Consulting. Since 2000, FullCity has serviced clients like ESPN, the NY Rangers, and the WWE. Earlier in his career, he managed FileMaker database systems for advertising and television production at Martha Stewart Living Omnimedia and provided 24/7 personal technology support for Ms. Stewart and her executive team. Adam managed the IT side of the advertising department at Toys ‘R Us and was database manager for Bloomingdale’s wedding registry website. Without further ado, here's my interview with Adam Aronson. Enjoy! Links FullCity Consulting Find Your Moose Conference Talking Points Hourly billing is like taxes and fossil fuels; there's just not a better answer out there. There are two very different reasons why clients might ask you how long the project is going to take: They have some actual hard deadline They see time as a proxy for cost Developers are like artists. Would jazz musicians do their best work if you were paying them by the hour? Why do you eat hours on things you think took you too long, but you don't add hours for things you think you finished extra fast? If you're asking the client questions about their business logic or entity relationships in a sales meeting, you're doing it wrong.
Bells & Whistles
What if a client doesn't understand what they're getting themselves into? Talking points: The sales meeting is not over until you're reasonably confident that you can help improve the client's condition. Don't quote work that you believe will most likely hurt the client (even if they insist that they know what their doing). If you are skeptical of the client's vision, tell the client so and ask them to help you "connect the dots" to understand their business case. You need to understand the client's desired business outcomes in order to write a value based proposal (a feature list is not sufficient). Separating fools from their money is bad way to build a long-term business. When offering options, the lowest price option should be the thing that you agreed to in the sales meeting. Higher tier options may or may not have been discussed in the sales meeting. The lowest price option should be the most risky to the client and the highest tier should be the least risky to the client. Questions? Leave me a voicemail at (401) 952-8899 and I'll include your recording in an upcoming show. Cheers! —J
The Business of Expertise with special guest David C. Baker
Guest David C. Baker joins me to talk about expertise, positioning, the pros and cons of vertical vs horizontal focus, addressing client concerns about conflicts of interest, the risk of hitching your cart to a third party, and tons more. David's Bio David grew up with a tribe of Mayan Indians in a remote village in the highlands of Guatemala. He’s an author, speaker, and advisor to entrepreneurial experts. This is his fifth book. He’s a helicopter and airplane pilot, an avid photographer, and taught high performance motorcycle riding/racing. Based in Nashville, he has visited and worked all over the world. He is married, has two boys, two daughters-in-law, and multiple grandchildren. His work has been featured in the WSJ, Fast Company, USA Today, Inc. Magazine, and Forbes. He speaks regularly at various TEDx events, Harvard, Adobe, and major international conferences to audiences looking for accessibly refreshing insight into how experts shape their world. Links The Business of Expertise ReCourses: Business Insight for Expert Marketing Firms 2Bobs: Conversations on the art of creative entrepreneurship with David C. Baker and Blair Enns
Value-Based Design with guest Nick Disabato
Guest Nick Disabato (aka nickd) talks about measuring the economic value of design. Links Nick's personal site Nick's consultancy Nick's new book Nick's A/B testing course
Price Sickness with guest Janet Kafadar
Does the idea of doubling your prices make you physically ill? Janet Kafadar shares a very personal, inspirational, and funny story about how pricing herself too low wrecked her health... and yet raising her prices literally made her puke. Definitely check this one out. Links Janet's site Janet's YouTube
Productized Consulting with guest Jane Portman
Jane Portman joins me to talk about her new book, Your Productized Consulting Guide. Links Jane's book - Your Productized Consulting Guide Jane's SaaS - UserList.io Jane's home site 20% Off Ditching Hourly listeners can use coupon code DH20 for 20% any package of Jane's book. Thanks Jane!
Pricing Creativity with special guest Blair Enns
Blair Enns delivers an impromptu master class on the strategies and tactics of value pricing creative work. Blair's Bio Blair Enns is a 25-year veteran of the business side of the creative professions. In 2002, he launched Win Without Pitching, which has worked with thousands of creative professionals in numerous countries through direct engagements, seminars, workshops & webcasts. Blair is the author of "The Win Without Pitching Manifesto" and the forthcoming "Pricing Creativity: A Guide to Profit Beyond the Billable Hour" Links Pricing Creativity Win Without Pitching 2Bobs Podcast Blair on Twitter Blair on LinkedIn Implementing Value Pricing: A Radical Business Model for Professional Firms Jonathan's notes on "Pricing With Confidence" by Reed Holden "The Big Lie of Strategic Planning" in HBR Transcript Jonathan: Hello and welcome to Ditching Hourly. I'm Jonathan Stark. On today's show I'm joined by Blair Enns. Blair is a 25 year veteran of the business side of the creative professions. In 2002, he launched Win Without Pitching which has worked with thousands of creative professionals in numerous countries through direct engagements, seminars, workshops and webcasts. Blair's the author of the Win Without Pitching Manifesto and the forthcoming Pricing Creativity: A Guide to Profit Beyond the Billable Hour. Without further ado, here's my interview with Blair [00:00:30] Enns, enjoy. Blair, welcome to the show. Blair: Thank you Jonathan, my pleasure to be here. Jonathan: I am super excited to talk with you today especially about your new book Pricing Creativity. Could you start off by giving listeners a little bit of context about what the book is meant to do for its readers, who's targeted at, what led you to write it just sort of the big picture. Blair: Yeah so my businesses is Win Without Pitching, it's a sales training for creative professionals. We work with [00:01:00] independent, typically owners of independent creative firms of various types usually design or advertising based but often going into the kind of adjacent markets and their teams and we help them get better at selling what it is that they do and you know there's some right there in the name Win Without Pitching there are some ideas around the conventions that we help to challenge. Pricing Creativity is meant to be a [00:01:30] desk reference ... an enjoyable readable reference manual for anybody in the creative professions who sets, negotiates or delivers price. Jonathan: Excellent. Well that's right up our alley here. We have had similar paths over the years, we've read a lot of the same people, I know Alan Watts is big on your list, Ron Baker, many many others [00:02:00] I think we probably have the same set of 20 pricing books on our bookshelves. Blair: Yeah, probably. Jonathan: And also we both have spent at least a decade I think you probably have at least two decades of actually implementing this stuff or experience in a field that you're now implementing these theories in, actually converting them into practice so it's going to be ... it sort of comes as no surprise to me that we have lots and lots and lots of kind of like shared ... I don't want to say revelations [00:02:30] but it just like, wow this stuff does work, it is tricky to implement and it takes some doing, there's a perhaps more art than science at some points but it definitely works and largely in my case I'm super anti hourly billing in case you couldn't tell by the [inaudible 00:02:51] portal, but I know that you do talk about some types of hourly and [00:03:00] for your target market, for people who are making payroll and they've got a bunch of bodies that they have a lot of capacity I should say, it does make sense to perhaps sell blocks of time. Kind of want to talk about that at some point. Maybe we don't have to dwell into that now but you have this great framework called the four phases of client engagement that talks about this sort of decreasing value curve as you come down [00:03:30] from the discovery phase or I think you call a diagnostic phase and the and that moves into recommendations. Maybe you could talk about the four phases just briefly because people, listeners are familiar with this concept I've talked about you before. Blair: The four phases in any engagement of any expertise space business would be diagnose, where you come to understand the client situation, prescribe, where you prescribe a therapy if we wanted to use continue with the medical analogy, [00:04:00] the deliverables of the diagnose phase would be diagnostic findings, the deliverables at the prescribe phase would be a strategy and then you have what I call the apply phase or the initial application of therapy. Then you have ongoing reapplication of therapy so diagnose, prescribe, apply, reapply, and the highest value offering that you have is first and foremost your ability to accurately diagnose the client's challenges, [00:04:30] assess the scene as it were and from there if you're not able to diagnose properly then it doesn't matter how good your prescription is if it's not targeted to the challenge that's really there. Then when you get into reapplication, excuse me you get into the fourth phase reapplication, that's the highly commoditized stuff of redoing things over and over again where you're adding very little value. It's mostly you're getting paid for things that you do with your hands and your [00:05:00] feet mostly your hands a little bit of your brain still but I do like to break those four phases of the engagement into two separate categories. I refer to the first two diagnose and prescribe as the thinking stages or phases and then the latter to apply and reapply are the doing phases so your point is the highest value offering that you have is in the ... I call them stages, the thinking stages and then once you get into doing that tends to [00:05:30] be more commoditized. I think from time to time it makes sense to package up a whole lot of that doing. Sometimes it does make sense to sell that as units of time. It really depends on the business, it really depends on how you sold the previous stages of the engagement, it depends on how your business is set up, how your clients businesses are set up, so I really do like the idealism of value based pricing. Ron Baker who I'm sure we're going to talk about [00:06:00] has been a tremendous influence on my thinking on value based pricing and he read an advance copy of the book as did you and he had some really good feedback for me and one of his points of feedback where I had to say, "Well I think we're just going to have to disagree on this one," is he's just adamant that at no point should you ever sell time. I like the idealism of that I think practically there are times when it makes sense to sell time and one of those times might be when [00:06:30] you're selling that fourth phase, the ongoing reapplication work and it's just a whole bunch of busywork. It might make sense to sell that in units of time. Jonathan: I think you ... I see this as well, I tend to tackle it in a little bit different a way but again I think this is because of different audiences. There are people who listen to this show who are not just developers and there are firm owners, developer and other types, [00:07:00] and I see ... the thing with the implementation phase specifically, I call it implementation phase with the build phase. Usually the first time you build a new piece of software it's like a build phase and that's what most software developers sell is the build phase and they give away the first two phases for free to try to win the deal or as a first step in it before they start building but they just sort of build themselves out of the normal build hourly rate [00:07:30] because they would never even occur to them to charge for those most valuable pieces. I suppose the way to look at it is if you already have a lot of capacity in your firm and you just have a lot of employees, you've got like 10, 200 column junior devs or whatever you want to call them, you need to have a sufficient cash flow to cover their payroll or if they are contractors their expectations, [00:08:00] you know financial expectations of the relationship. I do, from a pragmatic standpoint say look if you have to ... if you've got these people and you've made these promises, then fine sell implementation and if you have to sell it by the hour then sell by the hour if that's what you need to keep the lights on. I see it as something ... my general advice is to be moving away from that kind of work and to grow your firm instead of by increasing the number of hands on deck to do that kind [00:08:30] of busy work in those later phases to instead not hire, not grow by hiring but grow by increasing your profits and trying to always be moving this I call it increasing the altitude engagement so trying to move farther up the chain of command at the client, working with people who are farther up the chain of command in order to do more strategic types of engagements that are higher value. Blair: I agree with that and I think I can see the point opposite to mine. [00:09:00] I can see you and Ron making the point that as soon as you put this on the table Bair you kind of give people the invitation to go back to hourly because hourly is the easy thing to do that's why we do it. We can rationalize and we can cover it up tell ourselves other stories about other reasons why we do it, it's just easier to price based on inputs. It's easier ... The conversations are so much easier, [00:09:30] you have something you can point to and I think of the few different places where it would make sense to sell time. The idea ... I'm not suggesting that all of your engagements of the kind of the more role implementation or what I call the reapplication work should be packaged up and bundled as time. I think there are better examples of ... and it's interesting you know one of the perspectives I hoped to bring to the subject matter is I'm a sales trainer first. I run a sales training organization for creative professionals. [00:10:00] It's occurred to me that I've met a lot of career professionals who are familiar with the theory of value based pricing but very few of them who actually do it and the reason that if all sure is the conversations are hard, the sales part of it, the interactions with the human beings. That's the hard part. I recognize that as soon as I open the door and say well okay, value based pricing is the way to go but you know from time to time it does make sense to sell time. I'm going to enable a whole bunch [00:10:30] of bad behavior but there are better times. An example of selling excess capacity. When you're out there selling actively looking for new clients for your organization, you're looking for a small number of clients at a certain size and so many firms forget about the at a certain size and there's some math that most firms should be able to do on this so you know that it doesn't make sense to take a client under the size of X. Let's say you're out there hunting for clients the size of X [00:11:00] or greater and along comes something that's maybe like an L or whatever. It's point three X. X should be ... your starting point for figuring out what X should be is 10% of your fee income target for the year. That's your starting point for figuring it out so if you're a million dollar shop, you should be looking for clients who spend about a hundred thousand dollars with you over the course of the year. If you're a ten million dollar shop you're [00:11:30] looking for million dollar clients. Let's say you're a million dollar shop and you're looking for a hundred thousand dollar clients and you uncover somebody who says well I have a twenty five thousand dollar project. You should not pursue project work in a customized services firm where you have capacity constraints there are only so many clients you can work with. Invariably you're going to uncover project work from time to time and when it makes sense to take on project work like 25,000 when you're pursuing hundred thousand [00:12:00] dollar or longer engagements is when you have excess capacity. When it makes sense to sell time in this case is when you have a price buyer, somebody who's really price sensitive, somebody you wouldn't normally do business with, you're looking for more value buyers right so you can price based on value so it's not somebody you wouldn't normally do business with but it's a one off project. You can price it in a way that it can be profitable for you and so you're essentially [00:12:30] using excess capacity and then you just have to make sure you do a couple of things. Number one is you price in, you sell blocks of time and it might be a ten thousand dollar block of time, it might be 20,000, it might be all twenty five thousand dollar block time in this example and you don't open yourself up to an hourly billing engagement. So, number one you sell a block of time and that block doesn't even necessarily have to measure up with exactly what the client's budget is so we can get into [00:13:00] some nuance there and number two you want to make sure you strip all of the excess value out. Things like access to senior people, reporting et cetera, et cetera, maybe even project management like full on project management. You might be able to strip that out. The ideal scenario where I think it makes sense to think about selling time is when you have excess capacity and you're dealing with a price buyer who has a project and [00:13:30] if you think you can frame an engagement or I'll sell this block of time there's no guarantee on deliverables when that unit of time is up, it's up. If we're not finished you need to buy another block of time in this case blocks might be 10,000, 20,000, 25,000 and you don't get to buy an extra five hours you've got to buy an extra $10,000 worth of time, it makes sense to consider situations like that. Jonathan: I do not disagree with that, it's very very pragmatic. This is the kind of [00:14:00] application of value theory. It's not even, it's not even really ... we're not even talking about value pricing here but it's a pricing approach that's super pragmatic based in the real world. Sometimes you need to take on clients who maybe you would rather not or are not a good fit or maybe have some red flags but hey you've got to make payroll, you need the money, how are you going to price it, and there are a couple of things you pointed out there that I think are nontrivial. First, not selling 1Z 2Z [00:14:30] hours you're selling blocks in advance not in arrears. You're not saying like, "Okay here's the invoice for all the hours." It's like "You buy $10,000 block and we'll get going." I think that's super important. The other thing is to recognize that it's for the doing work and it's not for the thinking work and the thinking work would be something that you would price separately outside of the hourly [00:15:00] block model. Blair: Absolutely, nothing commoditizes thinking work faster than selling it in units of doing. Jonathan: Exactly. Another thing that is important to recognize is that moving from what you and probably the rest of the world dear listener are used to doing, billing for your time by the hour is a slow process. It's not the kind of thing you can do overnight and the approach [00:15:30] that you've just described is a perfectly reasonable transition step to keep you from going out of business while you're learning how to work this nuclear bomb of value pricing. It's very powerful and this rocket can take you to the moon but it's really really easy to get wrong the first 10 or 20 times. It's almost a strategic use of trading time for money that I think makes good sense [00:16:00] as a transition step at least. Blair: Yeah, and in this case we're probably talking about one person keeping one time sheet for a week or two. That's probably an area where maybe we differ a little bit but yeah I don't know, I wouldn't call it- Jonathan: I just think there's some nuances there that are important. You mentioned a word that I would love to loop back to which is commoditized and the first thing in your book that blew [00:16:30] my head open was a passage that I'd actually like to read if that's okay. Blair: Yeah. Jonathan: The section is called, "Producer or marketer which are you?" And this is sort of the concluding paragraph so I'll let you expound on it but the concluding paragraph is, "And now we arrive at a fundamental issue of pricing creativity. You can have a culture of efficiency or one of customer innovation aka value creation but not both. You have to decide, are you [00:17:00] going to be a producer focused on efficiencies or are you going to be a marketer focused on value creation." I've never seen this articulated so clearly and I'd love it if you could kind of pull that apart for people. Blair: I'm not going to take credit for it, first time I read something like that was Ron Baker in his book Pricing on Purpose and then again in his second book Implementing Value Pricing and he himself is quoting Peter Drucker the great author [00:17:30] and father of management consulting but I don't quite identify with the words that Drucker used. He used the words effectiveness and efficiency so he has them at the opposite end of the spectrum and I think effectiveness is kind of a nice ... it's a literation it's a nice play on the word efficiencies but when you think about it, it's pretty clear you don't have to spend too much time thinking about. It's [00:18:00] pretty clear that all firms exist on this continuum of efficiencies on one end. Usually efficiency driven firms are firms that are working towards optimizing all of the available hours, so billable efficiency right, so the number of billable hours available, what percentage of those across the firm are your billing, and there's billable efficiency targets that are put up by consultants like my friend David C. Baker ReCourses and others. All firms exist on the spectrum with efficiency, [00:18:30] the pursuit of efficiency at one end of the scale and at the other end of the scale is innovation or delivering client value and you think well if you're a firm that's focus on efficiencies right now you're probably bristling at that. You think well we're not, come on we're not giving up innovation when we pursue efficiencies but absolutely you are because innovation the creation of customer value, these are essentially the same things not ... they're [00:19:00] close enough for our conversation. They require waste, they're hugely inefficient. Innovation is hugely inefficient and it requires time and space to be able to think, try things on, discard things, try something radical. Not just time and space requires money so you need to charge enough that you've got all kinds of time and space to put your feet up on the desk or and think or to experiment and iterate et cetera. [00:19:30] When you are estimating how many hours it's going to take you to do something, you're really confining your people and putting them in that hour box and you're removing ... by removing waste, you remove the opportunity for innovation and it's cut and dried. If you still don't get it just think about it a few minutes longer and you'll see how true this statement is. I've said this from many stages and often in the audience there is kind of a CFO or an operations' [00:20:00] person or maybe even an accountant or some sort of consultant around efficiencies and they just kind of bristle at this and there are whole movements out there about getting your firm more efficient and you can ... through efficiencies you can get to a certain place profitability wise and you can get to a certain place based on other variables innovation wise and value creation wise for your client but the closer you get to ... the more efficient you [00:20:30] become the more you give up on those other fronts. Jonathan: I could not agree with this more. It just changes the culture of what's important and it's ... I agree that I don't see how you can have both. In fact, I'm reminded of an article I just read, it's not a new article but I just read it on Harvard Business Review essentially that strategic planning is an oxymoron and [00:21:00] it's the same kind of concept because planning is around cutting costs and getting efficiencies and strategy is about value creation, how are we going to leap to the next mountain. First of all, where is the next mountain top? Which one are we going to leap to and then figure out how we're going to get there it's top ... and he uses almost ... maybe I'm conflating the two but I believe he uses almost identical terms about it's going to be messy, it's not going to be efficient and that's the way it's supposed to be. It's never not [00:21:30] going to be risky, the strategy part, the value creation part, the innovation part, it's always going to be risky. If it's not risky you're doing it wrong so [crosstalk 00:21:38] Blair: Yeah, you're describing entrepreneurship. You're describing what it means to build a business and then at the same time when we look, hone in zero in on it, you're actually describing the nature of your relationships with your clients. That's how it should be. It should be messy, it should have all of this room for figuring stuff out, it's [00:22:00] organic. You can try to break it down and understand it to a certain extent but the more you do it's like dissecting a frog. Well, it's boring and ultimately the frog dies of it. Jonathan: Let's talk about ... there's a big area in the book where you talk about the sort of stages of a value conversation. I'm probably using the wrong terminology but there's a four step process, four conversations I don't think they're necessarily one after the other. Blair: [00:22:30] Think of it this way, I think of any sale in particular a consultative B2B sale you think of it as an arch of four conversations. It's a little trick that actors use when they're playing Hamlet which is over 4,000 words. It's like four hours to play it and they're told you view the role of Hamlet as you break it down it's just seven soliloquies so you just learn those soliloquies and that's essentially how you break the play down. I've [00:23:00] just chosen to view the sale as four conversations and the value conversation is the third in four conversations. It sounds a little bit ... maybe it sounds a little complex but I'll break it down for you a bit. The idea is if you see the sale is four conversations and then all of a sudden you're dropped into a sale, a prospect reaches out to you, reach out to them, you're introduced, whatever it is where you find yourself about to present a proposal, you just stop and ask yourself, "Which of the four conversations is this?" [00:23:30] Once you identify the conversation then you ask, "What is the objective of this conversation. Where am I trying to go in this conversation?" Once you know the answer that question then you ask, "Well what was the framework that I'm supposed to be using?" So what conversation and my in, what's the objective of this conversation, what's the framework I use. I describe them as four linear discrete conversations but they're not necessarily that way. It might all happen in one conversation, it might happen in six conversations. [00:24:00] Some of the conversations might happen out of order. You might have one call or meeting where you get one and a half way through two conversation ... through one conversation half of the next one you pick it up in the next one after but it's really helpful to think of it as four discrete conversations. The first conversation is the probative conversation, that's where you prove your expertise and you go in the mind of the client you flip and we actually call it the flip. You flip from the vendor to the expert [00:24:30] practitioner so ideally the probative conversation happens without you present. It happens through your referrals or your agents of thought leadership. A prospective client is reading something or saw a video you did or saw a speech or was referred by one of your best clients, they already see you as the expert so you're allowed to take some sort of control in the sale. The second one is the qualifying conversation. It's where you as the vet the lead to determine if an opportunity exists and what the next steps are so a lead is just [00:25:00] a clue to possible sale maybe somebody filled out a form on your website or somebody is active on your website or somebody reaches out to you or you call them. It's the typical sales conversation. You're typically ... when you're qualifying by voting against fairly standard sales criteria of need decision maker time frame and budget. The third conversation is the value conversation we'll come back to that. The fourth one is the closing conversation. I like to call it the transition conversation because when you handle the first three [00:25:30] conversations well, the closing conversation is really is simple as putting three or four options in front of the client and facilitating a choice and it's this seamless transition. When the previous conversations haven't gone well, you haven't done what you were supposed to do navigated to the place where you're supposed to navigate, then you're putting all of your chips on the closing conversation so closing becomes this big stressful thing and it really should [00:26:00] just be kind of a natural extension of the previous conversations. My framework with the value conversation is essentially ... it's the same as all of the frameworks I've seen out there with one step added so the standard three step framework for a value conversation is mission, sorry I got that wrong, objectives, measures value. I just came back from vacation. Objective, what are the business objectives we're trying to uncover? I [00:26:30] call it the desired future state. What is your desired future state Mr or Ms client? What's the place that you want us to help you get to? The second is measurement. How will we know when we've arrived there? What are the metrics? What will be true, what will we measure to know that this has happened? Then the third one is what's the value to you and your organization of doing this? Then the four step that I add is before you move [00:27:00] from the value conversation to the closing conversation is you offer pricing guidance so you give them a sense you've got the information on them about their desired future state, around how you measure success, around the value that might be created for the organization and the individual, and then you say essentially "Okay, now I'm going to go away, I'm going to put some options together for you and we'll reconvene and I'll walk you through those options but I want you to know that those options are going to be [00:27:30] in a range of X to Y." So, you offer some pricing guidance and one of the reasons you offer pricing guidance is I say X to Y it's really Y to X because you want to anchor high, I'm sure you've talked about this before but you want to anchor with the big number so Y to X and I have some frameworks for doing that. If there's a price objection, if there's something ... if you're talking so far beyond what the client is capable of bringing to bear resource wise then you want to know now [00:28:00] before you retreat and actually start thinking about what the solutions might be, the prices might be and the solutions you might deliver. That's it, that's four conversations. The value conversation is the third conversation in there and I have four steps for that value conversation. Jonathan: I love that last step you said it's ... you call it pricing guidance? Blair: Yeah. Jonathan: Like you said that sort of objectives metrics and value [00:28:30] are standard stuff, I've talked about it a lot before, the pricing guidance thing in the anchoring is really good. I've never done that but I can easily see how to slot that into the process, it would be completely natural and it would perhaps increase my close rate or decrease our proposals after rate but those numbers I'm already pretty happy of where they are but it's probably a good technique for people who aren't particularly happy with those numbers. How many proposals they're closing [00:29:00] based on how many they're writing. It's funny because I do a lot of the things that that does, I do elsewhere in the conversation. I'll do it earlier in the conversation. I'll hammer on what is a home run look like and how would that affect the organization so if I do some back of the net calculations we're talking about an extra million dollars a year to the bottom line something like that. I think that that's actually kind of hard to teach people so like when I'm trying to teach people how to do this that's pretty hard so [00:29:30] you really have to be thinking on your feet and asking all the right questions. It's cutting off like a black belt move. To just know that at the end of the conversation you're just going to like have a spot where you say "Look, this is going to be somewhere between a hundred fifty thousand on the high end and probably like 35,000 on the low end." That's just so much easier. Blair: Yeah, followed by a pause because silence is and I don't talk about this too much in the book but [00:30:00] if you can ... I think mastering silence is the single easiest most effective thing you can do to become a better sales person. If you can deliver a price or in this case pricing guidance and then say nothing, win the battle to not speak then because whatever the client says after you deliver the price range it's so valuable to you. There's so much information in there. If they say, " [00:30:30] Okay that sounds fine," you think oh wow all right, all my prices just moved to the right. They're all just right and if you get resistance even over the low number, then that might be a sign that you're trying to have a value conversation with somebody who just is not charged with future value creation or it might be a price buyer or they just don't see you as meaningfully different whatever the case is. So, that pricing guidance we have that built into the step, one [00:31:00] of the rules in the book and it's broken down into four sections. There's principles where I think everybody should just learn and understand and I have taken all the basic value based pricing and basic principles of economics that support pricing and delivered them in what I hope is a readable enjoyable way so you understand the principles. Then there are six rules and these rules are things that you do all of the time and then the largest section of the book is tips. It's actually guidance for specific situation and guidance for putting your proposals together, getting [00:31:30] into retainers, alternative pricing models, how do you come up with your high priced options, your middle price options, your low price options, all kinds of stuff. Then there's a fourth tool section that I want people to use ... actually write on when they're crafting their proposals but one of the rules I think it's the last one is, "Your client should always hear a price before they see a price." From your point of view it's you say a price [00:32:00] before you show a price and you don't find that guidance in the standard pricing literature because that's really something that comes out of the world of sales. If there's a price objection, you want to hear it before you go away and start crafting your proposal. Just think of all of the times maybe you've been in the situation by I know hundreds of people who have been in the situation dozens of times in their lives. It's plagued some sales people their [00:32:30] entire careers where they get into a closing meeting, they pull out the deck, they go through pages pages pages, they get to the last slide the last page, it's the price, there hasn't been a meaningful price conversation or value conversation, the client looks at the price and says, " We don't have that, we can't afford that," and then the sales person is just dejected. That's the moment where you say, "Well, how much do you have?" And you're willing to do it for whatever because you're so [00:33:00] over invested in the sale. Before you get to that situation, before you do any meaningful amount of work to dive into start to create the solutions and understand what the price would be, get some pricing guidance first. If the client can't afford you, you know you've got this target of X which is somewhere around 10% of your total income for the year, that you want each client to be spending at or above that amount, if they can't afford that you want to find that out early. You want to find that out early in the qualifying [00:33:30] conversation. That's the second of our four conversations is the first one where humans are actually speaking to each other. Remember the first conversation the probative conversation Ideally it's had through your thought leadership or your refers. In that first human to human conversation, it's your job to uncover that you know any kind of budget information and then you go through the value conversation and then you deliver what ... the client might say well I've got a hundred thousand dollars and you might be thinking, you're going to need a million but you go through the value conversation and [00:34:00] you uncover the fact that you expect to create $5 million a year in recurring value from this project then you could say ... so let's just say on the high end you say I'm going to come back with a range of ways that we can help you on the high end probably in the one to two million mark like 20 to 30% of the annual value that we would hope to create. On the low end if you really need me to come in with something at a hundred thousand dollars [00:34:30] I'll tell you what we can do for a hundred thousand dollars but I think this is an engagement of hundreds of thousands of dollars or more. Jonathan: Absolutely. That's a perfect segue into the ... well I guess the closing conversation so in the way that you do your proposals because I thought my proposals were short maybe five pages. You talk about running the sort of closing conversation with a single sheet with three options on it like it's a [00:35:00] Salesforce sales page or something. Let's talk about that a little bit so moving into the ... and also I'm sure you'll bring it up but just in case, the prices that you're throwing out there in your guidance, you don't know what you're going to do yet. Blair: You haven't even thought about solutions and that's one of the things that it's really hard when you're moving from hourly based billing, time materials, inputs, whatever you want to call it, it's really hard to get your head around because you're going to end every conversation already thinking about what you might [00:35:30] do and you really want to learn to move off of the solution and just think about the value ... focus on the client, focus on the value you might create for the client. Then from there you set prices and then at least price ranges, and then you start thinking about well what could we do in these ranges. So, yeah you think about solutions later and really, it's really that simple it really is. That's one of the rules is unpaid written proposals do not exceed one page. Jonathan: [00:36:00] Let's go again at this, I love this because I hate writing proposals so the- Blair: Hands up who loves writing proposals? (laughs) It's a promise that we've been making to our client for years. We will get you out of the proposal writing business and in exchange you take all of that free time and you devote it to writing thought leadership or creating other forms of thought leadership. The idea that written the unpaid written proposal needs to exist is just ... it's one of the biggest fallacies and I'm sure people are listening to this thinking, "Wow, nice theory Blair but [00:36:30] that's just not ever going to." I guarantee you there are hundreds of firms out there who limit unpaid written proposals to one page or even no pages just the ... because I've said for years the proposal is the words that come out of your mouth. Here's what we're going to do, here's what we propose to do, here's how long it would take, here's how much it would cost, if you're in agreement in principle we'll write up the details in the contract for your signature. That's how it should work and that changed for me when I started [00:37:00] to read Ron Baker's work on pricing and others and saw the importance of offering options. Always offer options and that's the second rule so your requirement to put, sorry, you have a requirement to put multiple options in front of the client and so when I saw the value of that, I realized okay, well we're going to have to write ... proposal is going to have to go on paper but no more than one page. As I say in the introduction [00:37:30] to the book, my first experience with this I was an ignoramus when it came to value based pricing and I was almost ... I was getting close to a decade into my consulting career and I was working with a very well known firm, design development firm has really set the tone for a lot of what other firms do today. I was working with them and I asked to see their proposals and they were one page with three columns and I think the one that I saw was column one was [00:38:00] 250 grand, column two was 400, column three was six or 650 and I couldn't believe what I was looking at and the owner said "Yeah we always do this." and I said "Well the clients don't ask like where did you get these numbers?" "No." Jonathan: I get students all the time that people do ask them that question and I just say tell them, you know the answer is this, past experience. You cannot let them try to dissect [00:38:30] the number it just turns into disaster. Blair: Yeah if you're really value based, if you're pricing based on value then they ask where did the numbers come from, well it's based in assessment of the value that we might create for you. So, you're in the value conversation which is the hardest part of all of this is having a good value conversations. One of the rules is master the value conversation but to master it you have to have a framework and you have to have lots of practice and if you can master it man you will go to the next level. If you're pricing based on value, you would [00:39:00] justify it not by anything other than saying, "I think that's compensation we would be comfortable taking based on the value that we have created for you with this option." Let's say you decide that it's a million dollars a year of recurring value if you do all of these things well. You offer pricing guidance and you've got to do some thinking on your feet but you come back and whatever options you come back with you are selling essentially the same thing. You are selling to the client their desired [00:39:30] future state that you uncovered in the qualifying conversation and you confirmed again in the value conversation so what's a place you want to get to? Discounted for uncertainty. Your most expensive option has the smallest uncertainty discount and your least expensive option has the greatest uncertainty discount but yours ... if you're selling based on value you're selling the same thing. You are selling to the client their desired future state discounted for uncertainty. Jonathan: Yeah, let's drill [00:40:00] into that. That's further down my list to talk about but now is a great time so a couple of ... I know from talking to perhaps thousands of developers that this is just another one of those things that's a tough mind shift to make when you're used to selling your hand, selling your inputs because all they think about is, "Well, how long is it going to take me?" and by extension they think that their price should be the same for absolutely every client. [00:40:30] It's like well it wouldn't be fair for me to price myself differently from quite a client because they're only thinking about the work that they do and then the thing they're not thinking about which is the only thing that matters to the client really is the results. The outcome that they're going to receive, the business outcome. One of the things I talk about a lot is when people are like oh jeez I just can't bring myself to put this you know we will be working together on a proposal that they're getting ready to present and I'll give them a number [00:41:00] for the top option and they're getting sticker shock. They're like I can't even ... I could not deliver this with a straight face because it's only going to taking me this long to do it and I'm like "Yeah but you're forgetting about risk, you're forgetting about stress, you're forgetting about capacity, you're forgetting about urgency, you're forgetting about all these other things that are super important to the client." You hammer hard on the uncertainty one so let's drill into that. Maybe you could ... you've already started talking about it but could you kind of define that and then maybe help people a little [00:41:30] bit with the black magic that you would use to kind of try to calculate that. Blair: Yes so there's a chapter in the book on selling risk and sometimes uncertainty is risk or risk mitigation and sometimes in the sale it makes sense to have that bit this very kind of overt on the table discussion. You might say I've got three options here for you Mr Client three different ways you can hire us, price tied a low I've [00:42:00] got kind of like the low risk option to you is the most expensive one and then I've got the higher risk it's more affordable ... it's the cheaper one, I wouldn't say more affordable, it's the cheaper one but you're taking on more risk and then the one in the middle is kind of a more balancing of the risk between you and me. You phrase it that way to the client and just think when you're constructing your options for your proposal, just think of it what's the most that we could do to take [00:42:30] the most risk away from the client and the risk free pricing, the ultimate risk free pricing would be contingency based pricing where it's you don't pay until we deliver on the desired future state. We hit, we deliver the objectives, we hit the measurements that we've identified and we create the value that we said we would help you to create. That's an example of that's the low that ... that's no risk [00:43:00] to the client, you take all the risk. So, if you chose to price an engagement that way and a lot of people are cringing thinking well we'd never do that, harden off, never say never. I'm not trying to make the case that developers should price this way but I am trying to make the case that you should be open minded about all of these engagements when you're pricing them and you might decide this thing is a sure thing on your end for whatever reason and I want to make a whole bunch of money and I want [00:43:30] to make all the client's risk go away and I know they're willing to pay to make that risk go away. You might consider taking an engagement like that from time to time. I don't think it should be a habit, I don't think you should have more than one client like that generally speaking at any one time, but everybody's risk profile is different. That's one way to think about the ... that's the lowest risk option to the client, the highest risk to you therefore the highest price to you. Jonathan: Yeah, and it should [00:44:00] be a very high price. Blair: Yeah very high, way beyond if you priced it at hourly, multiples it's really about the ... it has nothing to do with your input, zero. At the other end of the spectrum, if the highest risk offering you have to the client which is the lowest risk option to you is to sell time. Sometimes I think I favor selling time where you strip out all other forms of value and put it in front of the client. When [00:44:30] you're what Reid Holden author of Pricing with Confidence and Negotiating with Backbone, what he would call negotiating with a poker player. We all know what a value buyer is, a value buyer somebody who really is interested in the return on the investment. We know what a price buyer is, a price buyer someone who just wants the lowest price and they'll do whatever they can and they'll forego all kinds of other forms of value just to get the lowest price. A poker player according to Holden is a value buyer [00:45:00] disguised as a price buyer so when you suspect that's the case you might put this ... the client might be bluffing, might be just playing poker with you saying, "No, all I have is $50,000." And you might say, "Okay, heres option number one the expensive option, and it's $200,000," and he reacts "I told you I only have 50." "Yeah, I'm getting to that. Here's option number two, it's $85,000," so it looks a lot more affordable next to the first option, "Here's what we can do for $50,000, [00:45:30] I can sell you one block of time, X number of hours of one developer and it's $50,000. Am I going to get to project completion? I've no idea, I'm just selling you a block of time." It's paid in advance, so you communicate all of the things that the client doesn't get in that option by including them in the others. One would be terms, so there's no terms, one might be project management the involvement of a project manager, access [00:46:00] to principles, some sort of reporting, knowledge transfer, you name it. There's just all these other things you would do in the more expensive options, you just make sure that they do not ... they show up in the expensive options and they do not show up in the cheap option. You put it forward and you say to the client, "Well here's what we can do for $50,000, it's the riskiest option to you because frankly I don't think we can get it all done in $50,000 worth of hours. I think [00:46:30] at the least you should take the eighty five thousand dollar option." Jonathan: That actually might be a good segue into driving people to option two. Blair: Yeah, which is usually your goal so anchor high is one of the rules. You lead with the high price and the science behind anchoring is the first piece of information that you get on a subject matter skews your thinking about it as you make adjustments through kind of a second way of thinking. You never adjust fully to compensate for the first piece of information [00:47:00] so you make sure the first number they hear is a high price. It also makes the second price, the middle price seem far more palatable so you anchor high that's one of the rules, deliver the high price first. If you think of the low prices maybe where the client thought the budget was going to be, the high price is the anchor, most of the time clients will choose the middle one it's called extremist avoidance. They stay away from the extremes and they choose the safer [00:47:30] middle comfortable option so you want that comfortable middle option to the client to be in general I'm making generalizations here but more than they anticipated spending but it's less then the really high anchor and you have to remember the anchor is not there to be bought. It will get purchased from time to time, it's there to make the second option the middle option where you want them to buy look more palatable. Jonathan: Excellent, we are getting to time, man this went by fast. Can [00:48:00] we just do one last question, could you describe a little bit ... because I do not do this. I know a lot of people that do this I do not do it but I do believe it's a good idea just more out of ... just to sort of optimize my sales process to the point where I don't feel the need to do this but the presenting the proposal life. I write it up and I send it and if they want to buy they buy if they don't I don't care. Perhaps in there's sort [00:48:30] of a luxury position there where I can just not care that much but now let's say that I did care and I really wanted to maximize my odds of closing a deal and someone has their three options on one piece of paper as you described, how would you actually execute that conversation in the real world? Would you go there, is this over the phone, is it a screen share, what do you talk about, how long is the meeting, could you just give me and the listeners a picture of what that looks [00:49:00] like? Blair: Yeah, it really doesn't matter the format of the meeting whether it's a face to face meeting a web meeting or a phone call as long as if it's a phone call somebody has got access to email if they're on the phone unless they're on a landline phone and those don't exist anymore. You can send the one page proposal over once everybody has convened so proposals, we used to think of them as most people still do as these big rambling things that you stay up all night creating. You [00:49:30] kind of lob them in over the fence via email and then you sit and wait back to hear a response and that's like your clients putting you in the proposal writing business. How many firms out there whether they're creative firms or they're developer shops, how many firms out there just crank out, take on all of this extra work that's largely unnecessary to create these proposals then they lob them over the fence and now they have no power they're just sitting there waiting? It's really ... you should deal with it [00:50:00] this way, I will create, you the sales person, I will create a proposal for you Mr client. In exchange, you will assemble all of the people who need to be ... all of the what we would call on the sale side decision makers, you would assemble all of the key decision makers on your team for a brief phone call, web meeting, face to face meeting, whatever it is for us to review it and I'll share it with you once we all get together. That's the trade, [00:50:30] there's no inherent reason why the client should expect that they can put you to work creating a proposal and then disappear on you. If you just stop and think about it for a couple minutes you realize that's absurd. You wouldn't let other people treat you this way. You're putting together a proposal in exchange for them getting together to consider the proposal and then agree at the end of the meeting what the appropriate next steps are and you've got everybody you say all right so you recap [00:51:00] the value conversation, these are the objectives you're trying to hit, what we call the desired future state, these are the measurements that we talked about that we'll use to know that we've succeeded, this is the value we hope to create for the organization, I said I would come back with prices in this range of X to Y, I have three options here. I want to start with, actually it's Y to X, I want to start with Y the most expensive one, and you might say we first began by asking ourselves, "What would we [00:51:30] do if money was no object?" What would we do, what's the most we can do to take away is much uncertainty from the outcome is possible? Jonathan: That's great. Blair: Here's the solution we came up with and here's the price. Then you can go to the middle one or you can go ... I really fill it out from situation to situation but you can go to the cheap one and say at the low end of the spectrum, here's the ... you said you wanted us to come with a proposal that was at the seventy five thousand dollar mark so we ask ourselves what could we do for 75,000. We're not [00:52:00] huge fans of this one, we think you take on a whole bunch of risk there but maybe if that's a trade you're willing to make then you know maybe that's the option for you. In the middle we've got something that's somewhere in between and it's 125,000 or whatever it is. That's just an example of how you would frame that conversation. Jonathan: I absolutely love the if money were no object line. It's just so good. We could probably talk all day so let's wrap it up there. Thanks so [00:52:30] much for coming on the show Blair, where can people find out more about you? Blair: Thanks Jonathan, my pleasure to be here so I'm on winwithoutpitching.com and they can buy the book Pricing Creativity: A Guide to Profit Beyond the Billable Hour at pricingcreativity.com. It's available only on the website and then after you buy it and read it I'd like you to go back to that page and see how many of the principles in the book were used in the pricing of the book. Jonathan: Awesome and when is it available [00:53:00] for purchase? Blair: January 10th. Jonathan: January 10th ladies and gentlemen, pricingcreativity.com. Thanks again Blair. Blair: Thanks Jonathan my pleasure bye bye.
Monetizing Technical Expertise By Selling Sponsorships with guest Corey Quinn
Corey Quinn is a consultant who helps companies fix their horrifying AWS bills. In this episode, Corey explains how he monetized his technical expertise by selling sponsorships for his weekly mailing list. Links Last Week in AWS Quinn Advisory Group Corey's Twitter Corey's sponsorship page
Donations As A Revenue Stream with guest Brian Dunning
Former software consultant Brian Dunning talks about transitioning from hourly billing for dev work to donation supported content production. Description My guest today is Brian Dunning. Brian is an old friend who I met back when we were both building FileMaker solutions for clients who we billed on an hourly basis. Over the years, Brian has transitioned away from trading time for money to the most purely value-based model I've ever encountered: he now runs a donation supported non-profit called Skeptoid Media. As a former dev, I wanted to have Brian to hopefully inspire you to consider packaging up and selling your expertise in an novel way. Enjoy... Links Skeptoid podcast Brian's personal site Brian on Twitter Closing The next time someone asks you for your hourly rate, this is what you should say: "I don't have one." To learn what to say next, visit http://valuepricingbootcamp.com to signup for my free email course. Again, that url is: http://valuepricingbootcamp.com
Monetizing Technical Expertise By Selling Sponsorships with guest Kurt Elster
Shopify guru and former Wordpress developer Kurt Elster explains how he monetized his technical expertise by selling sponsorships for his podcast. Links Kurt's press page Kurt's Twitter Kurt's sponsorship page