One of the more interesting aspects of my business is the reasons which motivate a client to seek business coaching. For some it is simply a business that is not making enough money or not growing. For others it is quite clearly a feeling of not being in control of the basic business aspects of their practice. One client I enjoyed helping, exhibited all these issues. I soon realised that the practice was not growing, was only making enough money to cover its overheads and it seemed to me that the partners were not in control. However when I initially asked what the key reason for talking to Summit Partners was - I was told – “we have too much business to cope with and therefore we need help to organise the practice”.
Now when starting out with a client we look to assess their business as it exists. And in this case it didn’t take long to identify a key problem.
The client had a lot of ‘C’ & ‘D’ class clients that took time to service, were difficult, paid late and accounted for a large proportion of the fees being generated.
This in turn meant that what should have been a well staffed practice, in comparison to gross fees, simply could not cope because of a poorly proportioned client base. And this simply compounded the problem of poor profitability.
Having identified and agreed on the problem we began developing a plan that would see our essentially competent group of professionals given a client base that contained a greater proportion of ‘A’ or “ideal clients” with which to work. Ideal clients are those which generate a high level of fees and who because of their own professionalism are pleasant to work with and understand the benefits of efficiency and transparent relationships.
That said – we were not suggesting that the practice immediately fire clients and perhaps reduce staff. The idea was to gradually develop a better client base and move on problem clients over time. Our first objective was more ideal clients – and in doing that create what I call controlled profitable growth.
This obviously required change in the way the business was being run and very specifically a change in direction on developing new business.
The key to this change was the building of “strategic alliances” as a method of finding ideal clients at very little cost while building worthwhile relationships in the wider business community.
What are strategic alliances?
This is the development of a wide range of relationships with other businesses, groups or individuals who are in a position to warmly endorse and refer you to their clients who maybe in the market for your particular professional services. Sometimes they are related to your business – a surveyor for example will be involved with engineers, architects, lawyers, town planners & real estate agents to mention just a few.
It also becomes a win-win situation when you are able to recommend a ‘strategic alliance partner’ to one of your clients or friends.
I believe this strategic alliance approach is the no.1 marketing leverage strategy for most businesses seeking quality clients.
That is, one source equals multiple referred clients at little cost.
Clients referred to you are generally pre-sold, more open to advice, more pleasant to deal with and more profitable. If they are those things then they are also very likely to be highly professional in their own areas of expertise. At this time they become more than clients but rather potential strategic alliances.
So how valuable are strategic alliance partners to your practice?
Let us say we develop 5 strategic alliance partners (i.e. an engineering firm, an architect, town planning firm, real estate agent and a legal firm). Now, if after building the relationship each one refers 1 ideal client worth $20,000 p.a., and then if these new clients use your services for the next 5 years then the value is half a million dollars - a very effective marketing strategy that employs a little of your time.
How to find the right strategic alliance partners.
To gain quality referrals we recommend you seek to establish alliances that exhibit desirable core business values such as sound ethics, a good business reputation and have a positive attitude.
While the rewards for you (and your alliance partner) are significant they may not be easy to find. Certainly in a business sense they, like you, will need to take some time to develop the trust that is required to refer a client to another organisation. An excellent place to start is to consider those business you are already working with eg town planners, architects etc who you currently have a relationship and maybe under service or take for granted but where trust has already been established. Next, look to those businesses where you are already working together such as you your own lawyer or accountant.
The Approach
When I introduce this concept to many clients they will often say “We have great relationships with clients and associates and we are sure they would refer us if they had the chance”. My response is to ask how many times they have recommended you or an engineer or a lawyer to someone else. The truth is that many people are reluctant to recommend or in a business sense, don’t recognise the power of strategic alliances.
It is also true to say that the instinct to recommend, like many other good habits, needs to be worked on. With this in mind you will soon see that we need to approach the building of strategic alliances in the same way we organise other parts of our business dealings.
Firstly establish a list of candidates of ideal related services/firms who have the profile to have these ideal clients you’re looking for. Consider a brief phone call to introduce the subject and confirm a letter will follow with a more detailed proposal that could help both businesses grow with referrals (both ways). Mention this article as the instigator of your idea if you think it will help broach the subject.
The proposal should be brief and avoid explaining the alliance concept in detail, rather outline the benefits and to set an appointment to mutually build on the relationship and the concept. Certainly the letter should suggest a meeting between you to discuss the benefits of a strategic alliance for both parties.
The appointment is to develop synergy and confirm how you could add value to each other’s services. Perhaps you could leave them with a simple overview of what your company offers & how you could help them & their clients. For example your lawyer or engineering partner will probably not have a very detailed idea of what you offer your clients and benefits.
Most importantly educate your strategic alliance partners on the value your recommendation could have to their business.
This then becomes a win for your partner, a win for the clients and a win for you.
Do strongly consider follow up meetings to develop “top of mind” awareness & building that trust & confidence to refer you.
That firm we talked about earlier has grown in a controlled manner over the past 18 months. While they had many issues to address as part of a coaching program, this one marketing leverage strategy has made a decided difference to their business. They still have some of their C and D clients – to suggest we only have ideal clients is simply not a real world scenario for most of us. However the client base has a far great number of the A clients and overall the practice is more profitable and more in control of the new clients they take on board. They are also focussed on upgrading their C and D clients through more active credit control and operational systems.
Sunday, September 9, 2007
Professional Relationship Pricing
When Summit Partners first began working with surveyors on improving the profitability and equally, developing the opportunities of their practices I was immediately surprised at the low pricing for professional services being charged in the industry. This was even more apparent when I factored in the value that surveyors brought to their clients projects. It seemed to me that the fixed percentages of real estate agents and architects or the far higher rates per hour charged by solicitors and engineers were more appropriate to the benefits they delivered their clients.
As highly trained professionals it seemed that surveyors often found themselves in ongoing discounting situations. We also noted the general style of clients and their buying habits – developers and builders who are driven by profitability and time pressures and, separately, individuals who are more price driven in the absence of any other criteria. We couldn’t see how your importance could be underestimated.
We found that the more surveyors ‘discounted’ the more clients continued to expect cheaper prices and, separately, the more the clients subconsciously questioned the quality of your work. When such ‘discounting’ took place, together with the general introverted personal profile of surveyors, this presented a continuously downward spiral of: lost profitability on jobs, time pressures on staff, and generally unhappy business owners and often their clients.
The more we worked with surveyors the more we understood why discounting on price was rampant throughout the profession. We discovered that the reasons why prices weren’t more commercial was largely because of 3 principal factors:
1. Fear of a complaint
2. Fear of losing a client
3. Competition – particularly from small 1 person firms
This led to poor fee paying clients, poor profitability and a poorly paid team and owners.
Then after completing numerous client surveys, it has become clearly apparent that clients essentially wanted 2 clear results from surveyors: a quality & timely product, and, also, a relationship. Equally we found, if there is no relationship, price will reign supreme as the most important criteria to evaluate on.
Finally we reviewed how surveyors price their services and we came to the conclusion that suggests pricing was set on: firstly, surveyors own beliefs on prices; the guide for fees in the handbook (which we understand is based on historical costing methods) or, thirdly, competition. All these were based around our fears.
So how do we go about building a more commercial professional fees structure?
From our experience and through our pricing model, a successful adjustment to your prices can clearly be made if you follow a trusted and proven formula.
First, enhance your self belief by questioning yourself about how many complaints you get from the quality of your work and the price on your invoice. Maybe a conclusion you might have is that if we get 5 complaints out of 100 that maybe we’re too cheap.
Secondly, consider delivering quality work in advance of expectations.
Thirdly, and this is the key to this article, build strong relationships preferably with your ‘A’ and ‘B’ clients. When was the last time you had a coffee or lunch with an ‘A’ or a ‘B’ client just to see how you could help them more?
Next consider setting new prices and payment standards and test.
Finally, continually review and improve.
This model has had significant success, however, a word of caution, if you believe you can’t move your prices (which are justified by the odd complaint or poor success on quoting) then your right, you can’t.
But if you believe you can, then read on.
How do I present my new prices?
(Incidentally notice I used the word ‘price’ which has some perceived value, as opposed to ‘fees’ or ‘charges’ which is perceived as a cost with no value)
For phone enquiries – develop a model of seeing how you can help a new enquiry by asking, what, when, why and discuss benefits to the client.
(From our experience, quoting prices on the phone will more often than not succeed or fail based on your sales process and not the price)
For written survey design proposals (not ‘quotes’ i.e. price based) clarify not only the technical requirements but also include clear benefits of the product and service you will provide and features of your firm or ‘why I should use you’. Consider a range of prices to cover obvious unknowns.
For current clients – a superbly worded letter and call model should go a long way to reassuring and enhancing client relationships.
Finally consider your invoices which should be very detailed as to all work completed and the layout is also critical to send a good final message of quality and the volume of work.
What prices do I charge?
If you’ve followed the above relationship formula, consider adjusting your prices by % for 1 month and test the clients’ reaction.
Don’t take exception to the few complaints (i.e. price shoppers etc), focus instead on the vast majority who don’t complain and who understand and still really want to do business with you.
I do understand it takes time, particularly if you haven’t adjusted your prices for some time – hang in there, it does work.
Bill with pride, being content in the quality of your product provided and the timely nature of the service given.
So the message is develop strong client relationships and then sell on value not on price. If you do, I guarantee price will be less of an issue and the positioning of your firm will be more that at the quality end rather than that at the discount end.
As highly trained professionals it seemed that surveyors often found themselves in ongoing discounting situations. We also noted the general style of clients and their buying habits – developers and builders who are driven by profitability and time pressures and, separately, individuals who are more price driven in the absence of any other criteria. We couldn’t see how your importance could be underestimated.
We found that the more surveyors ‘discounted’ the more clients continued to expect cheaper prices and, separately, the more the clients subconsciously questioned the quality of your work. When such ‘discounting’ took place, together with the general introverted personal profile of surveyors, this presented a continuously downward spiral of: lost profitability on jobs, time pressures on staff, and generally unhappy business owners and often their clients.
The more we worked with surveyors the more we understood why discounting on price was rampant throughout the profession. We discovered that the reasons why prices weren’t more commercial was largely because of 3 principal factors:
1. Fear of a complaint
2. Fear of losing a client
3. Competition – particularly from small 1 person firms
This led to poor fee paying clients, poor profitability and a poorly paid team and owners.
Then after completing numerous client surveys, it has become clearly apparent that clients essentially wanted 2 clear results from surveyors: a quality & timely product, and, also, a relationship. Equally we found, if there is no relationship, price will reign supreme as the most important criteria to evaluate on.
Finally we reviewed how surveyors price their services and we came to the conclusion that suggests pricing was set on: firstly, surveyors own beliefs on prices; the guide for fees in the handbook (which we understand is based on historical costing methods) or, thirdly, competition. All these were based around our fears.
So how do we go about building a more commercial professional fees structure?
From our experience and through our pricing model, a successful adjustment to your prices can clearly be made if you follow a trusted and proven formula.
First, enhance your self belief by questioning yourself about how many complaints you get from the quality of your work and the price on your invoice. Maybe a conclusion you might have is that if we get 5 complaints out of 100 that maybe we’re too cheap.
Secondly, consider delivering quality work in advance of expectations.
Thirdly, and this is the key to this article, build strong relationships preferably with your ‘A’ and ‘B’ clients. When was the last time you had a coffee or lunch with an ‘A’ or a ‘B’ client just to see how you could help them more?
Next consider setting new prices and payment standards and test.
Finally, continually review and improve.
This model has had significant success, however, a word of caution, if you believe you can’t move your prices (which are justified by the odd complaint or poor success on quoting) then your right, you can’t.
But if you believe you can, then read on.
How do I present my new prices?
(Incidentally notice I used the word ‘price’ which has some perceived value, as opposed to ‘fees’ or ‘charges’ which is perceived as a cost with no value)
For phone enquiries – develop a model of seeing how you can help a new enquiry by asking, what, when, why and discuss benefits to the client.
(From our experience, quoting prices on the phone will more often than not succeed or fail based on your sales process and not the price)
For written survey design proposals (not ‘quotes’ i.e. price based) clarify not only the technical requirements but also include clear benefits of the product and service you will provide and features of your firm or ‘why I should use you’. Consider a range of prices to cover obvious unknowns.
For current clients – a superbly worded letter and call model should go a long way to reassuring and enhancing client relationships.
Finally consider your invoices which should be very detailed as to all work completed and the layout is also critical to send a good final message of quality and the volume of work.
What prices do I charge?
If you’ve followed the above relationship formula, consider adjusting your prices by % for 1 month and test the clients’ reaction.
Don’t take exception to the few complaints (i.e. price shoppers etc), focus instead on the vast majority who don’t complain and who understand and still really want to do business with you.
I do understand it takes time, particularly if you haven’t adjusted your prices for some time – hang in there, it does work.
Bill with pride, being content in the quality of your product provided and the timely nature of the service given.
So the message is develop strong client relationships and then sell on value not on price. If you do, I guarantee price will be less of an issue and the positioning of your firm will be more that at the quality end rather than that at the discount end.
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