Selling Professional Services. Before good to great
As either a disclaimer or a risk disclosure, whichever might apply, this cautionary note that the following is intended for companies that are new entrants in professional services.
It is cheap to get a company to achieve escape velocity and expensive to get it to maintain an orbit
Introducing a new technology and/or process is expensive once you get past the early adopters. This requires disciplined asset allocation including proper staffing ratios, client/prospect education, sustained visibility into channels, managing staff, training, endless engineering and continuous internal process improvements.
At the earliest stages, as a product is being introduced into the wild, there are several dynamics that push and pull and frequently the first evidence of mechanical failure is decoupling between seed investors whose primary obligation is to get to liftoff and later stage investors who need to get a company to operate at capacity. I am the latter.
As I play Chess and Scrabble it is helpful for me to use those visuals as devices to get my points across at times. If this inhibits your understanding, you should play more strategy board games. Synapses will connect.
Those games have only two outcomes, Win or Lose. There is some consideration of the quality of the play and the strength of the opponents, but a game is recorded as a either a win or loss for a contestant.
Startups have tremendous more gradation of win (and loss) and those definitions are contextual.
Often when I speak with founders their definition of winning is achieving what I think of as a momentary positional advantage. They rely on the winds to be favorable and move their boat to rich lands.
In chess speak they develop their pieces recklessly. In Scrabble speak they compromise their future plays for a quick score.
Over the duration of a complete game a superior opponent (the market leaders and other new entrants) will benefit from weaker adversaries poor choices.
When doing a post mortem of sorts, the winners allowed their competitors to make a mistake. They seldom confuse motion for progress. And, if the market leaders are wrong they can pay the premium and buy their way to a fix.
One of the leading killers of swimmers at beaches is they swim too far out, exhaust themselves and do not have the physical resource needed to make it back to land. Happens all the time.
A proper and rational assessment has to occur. What is winning?
This simple question has to be worked thru very early in a company. Whatever the end is must then be reverse engineered so that each essential action is optimized to that end.
Market industry leaders are rarely the innovators. But, they are the survivors. These companies have the operating leverage to connect dots, exploit installed assets, resources and create value across an entire system.
Common errors that I see in younger companies:
1. New entrants often look to small/mundane process improvements. The problem is that then they must keep innovating and will be endlessly dealing with short cycle times for new products and hopeful upsells.
2. To get the product into the market they employ sales ‘brute force’. Sales compensation is a form of profit distribution. Companies that are not profitable and/or have not exactly calibrated profitability, should not apply brute force. Client and employee attrition will be high, morale low. You will be staffing your competitors and supplying them with prospects.
3. Creating a benefit defined (discretely) by price. Compressing industry margins will hurt you the most. You must strive to preserve margins.
4. You cannot cater a staff lunch every day. Eventually there will be a bloody correction.
5. Only going to one point of sale as opposed to building a utility that collects a value across all the users. Silo by going after one link in a value chain system will create a system failure and weaken the company.
So then, at the post conclusion and having been explicit in describing the problem(s), what is the solution, what is winning?
To me there are two principal iterations of winning, they are:
- Becoming outsized (to an industry norm) profitable.
To align to this, usually legacy pricing is wiped and a whiteboard is informed with all the components of profitability. Engineers make/install the tools to surveil profitability in the client/prospect mix in real time. Be disciplined and say ‘no’ a lot more. Build an efficient assembly for disciplined and profitable client selection/ acquisition and servicing.
- Spec to precisely complement a market leader (see Yammer). Build a company to sell. easier said then done. Youve gotta knoe the secret sauce
Bluster doesn’t win games. Tactical proficiency wins…