Think about the time that you spend working with the bottom 20% – 30% of your workforce. What are you getting back for the time you are spending? What’s your return on investment with that time? If you aren’t getting substantial performance improvement why don’t you let them go? Most business owners tell me that they hold on to marginal talent because are not sure they will get anyone better. They don’t create a big enough pool of qualified candidates and they aren’t being selective enough when they are hiring so the are settling for “good enough” people.

I was thinking about this as I read about one of The Container Store’s “Foundation Principles” called 3=1 in this article by Mike Jagger. He was at a conference and sat next to Garrett Boone, one of the founders of The Container Store where Garret explained the concept:

“Garrett explained to me that 1=3 means that one great person equals three good people. When you have a great employee, you get three times the productivity and can afford to extensively train them, communicate to them and pay them much more than what a competitor could afford to pay. Garrett argued that if you’ve hired appropriately, you could pay your people double what they’d get somewhere else while still keeping the overall payroll numbers consistent with, or lower than, competitors. Dead weight is expensive.”

I was really struck by the truth in this. We can all pick out those top performers in our organization that make the whole place work. What if we held out for the top 5% – 10% of the talent available in every position in the company. We aren’t talking about hiring MBA’s to be your office administrator, but looking for only top notch talent for that office administrator position when it is open.

How does The Container Store do that? If one great person is worth three average people, they can afford to pay double the going rate, provide terrific benefits and training and still come out ahead. Where could you do that?  What would it do for your business?

Photo courtesy Dave Fayram via Flickr

OK, what started out as a week long series on pricing has stretched to 10 days, part one, and two, discussions on hourly billing, project billing, and alternative billing, along with a post on creating information products have gone before. My final thought when it comes to pricing for professional service firms is: Your price is probably too low!

How can I say this with such certainty?

Who tells you about your pricing most often? Your prospects, right? What do they say? They tell you it’s too high, and from their perspective it is. But let’s look at this from your perspective.

If you are a service firm with a cost structure where you have 50% sales going to pay staff, 25% of sales paying for overhead, and the rest going to partner profits, then a 10% price increase provides a 40% increase in profits. (If your profits as a percentage of sales are lower, then the profit increase from a 10% price increase is even more dramatic.) So far, increasing prices is a really good thing, right?

“But wait a minute, Brad – if I increase my prices, I lose some of my clients. My sales will drop.”

That’s true – so how much would your sales have to drop to reach the same level of profits? If you are billing $2M, with profits of $500K (25% of sales) and you increase your price by 10%, you could bill $1.43M and still make $500K. Wouldn’t you rather do 25% less work and earn the same amount?

Also, who would buy your services at that higher price? Only those companies who knew they would really benefit from your work. Only those companies who really needed you and would do anything to improve their situation. Do those sound like clients you want to work for, ones who follow your advice, get great results, and tell their friends and colleagues how great you are? You bet.

So what’s stopping you from raising those prices? In my experience, what stops most people is confidence. You know that if they raise you prices, people will expect more from you. You will, in fact, have to deliver more value and that scares you. But I want a service provider who is confident in the value they offer, has a boatload of clients who agree and has the confidence to ask me for a price that makes me gulp (Looking for that kind of confidence? Maybe The Business Owner’s Champion is for you!).

So what could happen if you raised your prices? You could make more money; or you could make the same money, but just deliver better work for fewer people who love you more because you are making a HUGE impact.

Are you priced right, or is there room to charge more?

Photo Courtesy of a4gpa via Flickr

It’s ok. We all did it. When things got tough, our mindset got pretty tactical. We weren’t thinking about taking over the world anymore – we were thinking about making it through to lunchtime. Instead of looking for where we wanted to go, we started looking for how we could survive. Where once we were building our dream team, for the last year or so we’ve been holding onto whomever we can.

But the clouds are starting to break up, the wind is dying down and we are starting to feel a little better. It’s not all better – our bank balances are still a little lower than a comfortable level, customers are still pushing for better deals and demand is still uncertain–but it’s getting better, slowly.

The tactical work that we have been doing has made it possible for us to survive, but it’s not the work that’s going to help us to get healthy again – we need to start thinking some bigger thoughts, and dreaming again.

Tactical thinking is good for keeping things the same, for making small changes to keep us on a path – but during the “great recession” things have shifted, and unless we can step back from the day-to-day, assess the situation, and make a new plan we are going to miss the many opportunities out there. Whenever there are major shifts, opportunities are created. Change creates new market opportunities, and products and services have to be created that can meet those new opportunities. If we spend every day with our nose to the grindstone and our hand on the tiller, we are not going to do the THINKING that we need to do to find those opportunities.

Am I suggesting that you launch out in a new venture, or invest a ton of money in a new campaign? Not necessarily, but I do think it’s time to step back, do some review, and press the reset button on your strategy. That means taking some time away to review three key areas:

1. What does my competitive environment look like? What has changed for my clients and prospects? How is their mindset different than it was 18 months ago? What are they worrying about now that they weren’t worrying about then? Who else is in their ear?
2. How have we changed? What have we learned or developed while in survival mode? What have we jettisoned? How have our competitors and strategic partners changed? Where do our strengths lie now?
3. Based on our competitive environment, and our current situation, what things CAN we commit to that will start to move our business forward? What things can we try, experiment with, or test out that could be the next big move for our company?

Once you’ve answered these questions, you can dig in and make a plan – specific tactics that you can commit to that will make your dream into a reality.

Building a plan like this shouldn’t be work you do all by yourself, your team needs to start thinking big again too. I doubt that they joined your company to be a “survivor” or grow by 3% year on year.  They want to know that they are on a mission with you; and if they aren’t, they are going to start looking for someplace else to work.

What are you doing to think bigger?

Photo Courtesy "The Unamed" via Flickr

When I talk to business founders about why they made the leap to working for themselves I often hear them talk about the draw of entrepreneurial freedom. I sometimes reply with a lame joke about how entrepreneurial freedom means you can set you own hours, work any 100 hours of the week you want to… But the truth is that being your own boss does bring freedom; but that freedom means different things to different people.

To some Freedom means….

• Saying no
• Never having to worry about a merger, or buy-out making you “redundant”
• Being able to decide what your time is worth
• Being able to set your own priorities, tea party with the toddler on a sunny day, or time in the office
• Choosing who to work with, and being able to work only (or mostly) with people you like and respect
• Taking the vacation of your dreams while you’re young
• Being home for dinner every night

What does entrepreneurial freedom mean to you?

Sometimes when I have this conversation with a business founder it can be kind of a downer. They made the leap to have freedom, and they may have had it for a time, but they’ve traded some of that freedom for more success and business. Some of the work I do is to try to help businesses continue to grow so that the founders can get more of the freedom back.

Are you living the dream? What enabled you to stay with the dream, or what’s keeping you from living in the freedom you had in mind when you started out? I’d love to hear about it in the comments.

There’s a lot of flux in the business world right now, people are changing jobs, customers may be renegotiating deals with suppliers, and the “way we’ve always done it” is pretty much out the window. As a result I’ve been in a lot of negotiations lately, and I’ve seen a few ways that we can make our deals stronger with good negotiation skills.

First get the Facts
There are always some facts in every deal, and we need to know the facts to be able to make a good deal.  There are facts that we know, but the other side doesn’t; facts that they know, but we don’t and facts that we both know.  The best deals are built by teams that have all the facts on the table, so sharing some of what you know (but they may not) can build trust and help us to reach a better agreement. We can’t share all our facts if they aren’t reciprocating, so try offering up one of yours and see if they will respond with one of theirs.

So for example, the longer lead-time in our proposal may be due to some turnover we’ve recently experienced. Sharing this could help alleviate concerns that we can’t deliver, or that this is a normal lead-time. It also could signal that we aren’t likely to drop the price because we have a good backlog right now. Of course it could create other concerns…

Next there’s the Story
Facts aren’t the only thing that influences our negotiation, there is also the story that we tell about the facts. Stories are about the emotions that the facts evoke. When we don’t have all the details (which is all the time in a negotiation) we tend to fill in the blanks with stories. The truth is that the stories are usually more about US than they are about your negotiating partner. So when someone doesn’t call back right away, we might worry that the deal is off, or that they are talking to someone else. These stories reflect our uncertainty and anxiety about the deal. It could just as easily be that they got distracted, or had a deadline on another project.

In our example our revelation that we’ve had turnover could initiate a story about whether our firm is stable. Why are so many people leaving? We may need to calm those fears before they run amok.

Lastly, there’s the Deal
We really have to get the facts on the table, and deal with the stories that we (and the other side) are telling about the facts to come to a compelling mutually beneficial deal. There’s lots of advice out there about how to perform the “horse trading” part of the negotiation. I have two tools that have really helped me. The first is a table that lists all the issues we are discussing (and yes, there is always more to discuss than just price) with a column for “their position” and another for “our position”.  It helps me to keep my eye on the big picture and understand where I can ask for them to give if I’m going to give in on an item that’s important to them.  It also helps me to keep track of how close we are to done; and how many items are left open.

The second tool is an intermediary. It’s so helpful to have someone who can help with the negotiation who won’t be around to service the account or work with the employee long-term. Sometimes you need someone who can deliver the harsh truth, or press hard for your advantage and in doing so they may ruffle a few feathers. That’s OK, once the deal’s done you can come in and play “good cop”, apologize, and go back to delivering exemplary client service, building a great team or otherwise creating good feelings for the life of the relationship.

So don’t let this time of flux catch you unawares. Find the facts, separate the facts from the story that’s being told and then get down to the business of making a deal.

How do you keep your head and get the deal done?

Image courtesy of jean-louis zimmermann via Flikr

When you are in a service business and you are selling your knowledge, talent and creativity a big hurdle you have to overcome is skepticism. How does the prospect know that what you have to offer is really relevant to them and their situation? We’ve all heard it, “My business is different…” (but we know it’s not, right?) How do they know that you can help them. Unfortunately, you aren’t the most credible source of reassurance for them – since you stand to gain financially, they assume you will tell them all about how credible and reliable you are. It’s much more powerful to demonstrate your expertise than it is to talk about your expertise. This is why case studies, testimonials and articles are such powerful tools for service firms. These are situations where you aren’t directly selling, but you can help people to understand who you are, and what you are all about. They are opportunities for your prospect to get to know you before you even meet them. If they find you relevant to the challenges that they are facing; if you are credible in the advice and solutions you offer, they will believe that you can help them.

Seven years ago I started writing an email newsletter about leading and growing your business. When I first started out I had a backlog of ideas I wanted to write about, but as time went on I had to work harder to find material. Until I realized, any time I’m having conversation I’m having with a client or prospect for the second or third time, is a topic that I could write about. These are the things that my clients are dealing with now, so other business owners who are in the same situation might like to hear those things too! You can’t get more topical or relevant than that!

Since then my newsletter has been one of my best sources of leads. Nearly every lead or referral that comes from the newsletter says the same thing, “I swear you are writing about my business.” I don’t have to listen to all the reasons that their business is different, they know I can help them and we can just get started.

If you are doing a good job of writing material that is relevant to your audience it should also attract a search audience. When you solve one person’s problem there are likely thousands of others out there with that same problem. Writing a case study or and article describing your advice or solution should attract many more who are searching for that same solution. These are leads that are coming to you that you haven’t done much to attract, and they are coming knowing what you do and how you do it; they are pre-qualified to be looking for what you do! The only thing that’s left to decide is price. That’s a pretty good lead.

Once you’ve been writing articles or blog posts for a while, you can start to reuse that same content. Take 4-5 popular blog posts and turn them into a speech or presentation. Create a short video with some of the highlights from a popular post and upload it to YouTube. Or gather a larger number of articles together to form the basis of a book. This kind of content, that’s relevant to your target audience, reveals that you know their challenges and opportunities and presents your opinion, your angle on the potential solution has got to be the most powerful form of marketing for any service business.

If you want to hear more about this topic, I’m part of a panel discussion on June 10th where Andy Crestodina and Kevin Masi and I are going to each talk about our takes on how this kind of content strategy can build your business. To find out more, or to register visit: contentstrategy.eventbrite.com I look forward to seeing you there.

I’ve been writing my monthly newsletter for over 7 years and each year my editor and I compile the best articles into a longer format white paper to use as a marketing piece for the next year. Last spring I thought, “Why not compile an even longer work and market it as an eBook?” Sounds like a simple project. We have done something similar several times, it should be a snap! That snap you hear is actually caused by a rift in the universe when I monumentally underestimate the time and effort that a task is going to take. Yes, I started my ebook last spring, it’s launching this week, roughly a year behind schedule. So I thought that I’d share some of my “lessons learned” with all of you.

1. Writing a book is hard. OK this might not be such a revelation to most people; but writing a book is a lot different from writing a blog post, article or even a white paper. It really takes a lot of work to sustain the reader’s interest in a single topic or theme through multiple chapters. I can usually sit down in a couple of hours and pound out a 750 word article without a lot of thought; but a successful book needs a good plan from the beginning. I didn’t have one of those.
2. Writing a book takes twists and turns, ups and downs. Despite starting without a plan or clear theme, I had a lot of good material that I was starting from. I knew there was a book in this material – but it just fought with me as I was trying to work it out. Sometimes the book won’t go where you want it to. I worked for a long time on one angle and it just didn’t work; so I had to scrap that and work from another angle. I also went through so many moods. I loved the material, I hated the material, I thought the book worked, I couldn’t believe that anyone would read this crap. It was so helpful to have an outside editor who could help me see what really was good and cut what wasn’t.
3. The title is so important. I think I had over 1000 titles for this book. I’m not exaggerating, 1000. My editor wanted to kill me over the title. I think it could have been easier if I started with a title, but the title was really the last thing I finished. This is a problem. Once you’ve written the book there are only so many titles that make sense. Start with a title, make it catchy, unique, creative, all the things you want your title to be. You’ll probably change it later, but at least you have something to go back to.
4. Writing is only half the battle. Once it’s written you need to edit it (a tedious task), design it (fun, but also perplexing, too many choices), and figure out how to distribute it (which turns out to be harder than you think). THEN you get to promote it! Yes, it’s a terrific $25 business card, and that may be enough; but if you want people to read it you are going to have to spend time promoting it. One formula I heard is that you should spend one hour writing and 4 hours promoting what you write. If that’s true I’m going to finally be done with this book in 2012!
5. Write a book you will really love. Because you are going to spend a lot of your life with it.

Still interested in seeing the book? Hop over to www.BusinessOwnersChampion.com and check it out. You can buy it right there for $24.79 or there’s a free sample of the first chapter that you can download to see if it’s for you.

Do you have a book you’ve been itching to write?

Image Courtesy MrVJTod via Flicker

I’ve been doing a series of talks on compensation and I usually start them off by asking the audience, “Why do you pay people?” or put another way, “Why do people want to get paid to come to work?” There are the obvious reasons; they want to feed their families, they don’t like work as much as fishing, so they have to have a reason not to go fishing. But I want to go beyond that. Why do people want to get paid more than other people? Why do employees want to make more money than they need to feed their families? Again there are reasons of comfort; a nicer house, send their kids to college, etc. Sooner or later I get some more interesting answers, “because they create value – so I want to share some of that value back to them”, or “because it’s a measuring stick – the one who creates the most value gets paid more”. This is where we get to the core of what compensation is all about, it’s about recognition. People work to get paid so that they can feed their family, and take care of their kids –  but they work harder to get a nicer house, or car; to take a better vacation or buy a cottage. Those are all symbols of status that say to the world, “I’m worth something, what I produce is valuable.” Once we’ve meet the basic needs of food, shelter, warmth, etc. then humans have a desire to produce something of worth and be recognized for that. Looked at in this way salary, bonus and other compensation is just a big recognition program, a way to say “Thank You. The biggest and most expensive recognition program that you have.

So if the primary purpose of compensation is to recognize people, to thank them for creating value in your company, what does that tell us about our compensation program?

1. We’d better be recognizing the right behaviors. When people earn more we are rewarding a set of behaviors – Are we recognizing behaviors that we want to see reproduced?
2. Recognition is most powerful when it’s tied to actions that people are taking but salary is somewhat different.  We set salary levels not so much because of what someone does, as who someone is. We don’t want to have to pay-per-decision, we want to set a salary based on what we expect will be their day-in-day-out performance. This is why it’s essential that salary be reviewed regularly. Is this who I thought they were? Is it what we need in our organization now and for the foreseeable future?
3. If salary is a recognition program, are there other ways that we can recognize people that will help us to retain people who even if we aren’t paying top dollar? If we do a good job creating status with the kind of work we do, or other rewards will that make up for some discrepancy in salary?

Thinking about compensation as recognition can help us to stay on the same page with our people, can help us to design compensation that makes people feel great and doesn’t cost the company an arm and a leg.

How do you view compensation? What do you do to recognize your key people?

So the Bulls fired Vinny Del Negro today. Given the recent events and “dust up” among the Bulls management I would have liked to be a fly on the wall during the meeting that Jerry Riensdorf had with Vinny, John Paxson and Gar Forman. The higher up you get in any organization the more you have to deal with problems, and while I hope that your executive team doesn’t start shoving each other and pulling on their ties, if you run the place it’s going to be your problem. Sooner or later you are going to have to fire someone, perhaps several people; in fact you might get to where you are kind of good at it. If your not to that place yet here are my 5 tips for saying, “You’re Fired”.

When the time comes when you have really given up on one of your team members, you know it’s time for them to go, that sense of dread starts to set in. Maybe you are dreading the actual conversation, or maybe you are dreading having to search for someone new, but we all tend to procrastinate having this conversation. To Jerry’s credit he didn’t – as soon as possible after the season ended he sat down and had a conversation with Vinny – and we should too. Any time that you spend avoiding the conversation is only going to make it worse. More time would have just left Vinny hanging in uncertainty and a cloud over your head.

Once the decision has been made, have the conversation. The conversation you are going to have should be brief; “I’ve made a decision, we are going in a different direction. Let me review this paperwork for you about what this means for you…” This isn’t a time to recount what went wrong, or a list of their failings. To do that just invites a conversation and a debate, when in fact you are delivering news. If they want to go over reasons for your decision offer to make an appointment next week to sit down and do that, but the purpose of your meeting is to inform them of your decision and it’s implications (e.g. turn in your keys, your health plan is… Your severance is…) By all accounts Jerry didn’t do this, but wanted to rehash all that lead to this point. As a result Vinny made his pitch for why he should stay, when in fact the decision was already made that he would go. This is a waste of everyone’s time. Just deliver the news and move on.

Helping your employee to move on should be a key part of the goal of your conversation with them. They are fired, that’s a fact, and no amount of rehashing (with you or in their own head) is going to change that. In the Bull’s situation any time that Vinny spends trying to defend himself, or recast the story of the firing is wasted time. He needs to concentrate on where he will be coaching next season; and the Bulls should do everything in their power to make that happen. This is why some companies will supply outplacement, the outplacement counselor’s job is to move the employee through the transition as quickly as possible. I thought Gar forman did a great job of not dwelling on what was wrong with Vinny and instead looking at what the Bulls need to do going forward. He did a great job of that and so should you.

Terminating an employee is a bad day for everyone; and no one wants to be an “expert” at it. But if you are going to lead a team, enforce standards and build an environment that fosters success for everyone you need to be ready to have conversations that eliminate the poor performers. If you do it well it’s not less painful, but the pain doesn’t last as long for you, or your employees.

Photo Courtesy "alx-chief" via Flickr

When I was starting my business my accountant recommended that I name my business after myself, “that way if someone writes a check to you, you can still deposit it in your company account.” As I reflect back that is perhaps the worst advice I’ve ever received. The name of your company is significant for many, many reasons, and depositing checks is not one of them.

Naming a business after yourself does have a sort of logic to it, in the beginning (and for some time) the primary product that you have to sell is you!  Clients will hire your “company” only if they find you compelling, intelligent and competent. At the beginning of your company’s life it’s hard to know what sort of name or symbol will represent you well. In truth you don’t even know exactly what line of business you will thrive in or what types of customers you will succeed at attracting. So for all these reasons, many people default to using some version of their own name in their business name.

After nearly 10 years working with business owners I have gathered a number of reasons NOT to name your business after yourself.

1. Don’t name your business after yourself if you want to eventually have someone else sell to new clients or perform work directly with clients. When a business is named Maureen Mac Caully Consulting, people naturally want to talk to Maureen. When someone else comes to sell them something, they know that person isn’t the ultimate decision maker, and there’s always one more person to negotiate with, Maureen.
2. If you name a business after yourself you will get more cold calls. It’s easy for me to cold call Maureen Mac Caully, I know she’s the owner of the company. I can call Maureen Mac Cally Consulting and ask for Maureen and know pretty clearly that she’s the one I want to talk to.
3. The founder’s personality is often dominant in the culture of a small company, but when the company is named after him/her it’s even harder to establish a separate culture. Her/his personality will always define the culture, after all her/his name is on the door.
4. It’s hard to “fly under the radar” when the company is named after you. Sometimes I just want to be a fly on the wall. People don’t have to know that I own my company, I can have a conversation with them as if I was the sales guy, or the consultant. I can defer a decision to my “boss” to give me more time to consider it.  When your name is on the door you can’t do that.
5. When you own your own business it’s so easy to have your ego tied up in everything that you do, business, personal, it’s all one big ball. Having a different name for the business makes it easier to have some separation for you and for others.
6. If you want your business to be more than just you, then naming it something else helps you, and everyone else think about it that way. When another professional joins the firm he/she knows they won’t have equal standing in a firm named after the founder.
7. It’s hard to bring really talented people into any small firm, why exacerbate it by putting YOUR name on the door. If you are lucky enough to bring in people more talented than you are, you want them to know they can have a “seat at the table”.
8. A brand is too powerful a thing to waste.  With a name you can create connections, pictures or references that are evocative in your target audience. Unless you are well known to your target audience a company named after you just says small-time.

Obviously I have a pretty strong opinion on this subject, maybe you disagree; I’d love to hear your thoughts!