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Employees Leadership Management Project Management

Have you tried managing?

If you talk to someone who complains that their company is out of control, the reason is not always obvious. Once you pin them down about the reasons for their problems, you’ll find that they aren’t managing. We rarely think we’re doing enough managing to deal with these issues. If pressed about whether we’re managing the cause of these problems, we’ll own up to it. We often know the problem and the solution. Despite this, we aren’t putting the effort into managing the root of the problem.

Managing is work

Don’t get me wrong. Managing people is not easy. It can consume a ton of time. Yet we all know the repercussions if we don’t manage. We do know those things, right?

So why don’t we do more of it? It’s not that we don’t care.

Even profitable, “well run” small companies doing $10-15MM ARR suffer from a lack of managing. While it’s obvious, we have a way of being terrible at dealing with the obvious.

A few questions to inform whether you’re managing:

Cash flow – Do you have a resource that tells you at a glance your cash needs are under control for the next 30-60-90 days? If not, you’re not managing cash flow.

Projects – To find out the status of all active projects, can you look at a single resource? Doesn’t matter if it’s a whiteboard, software, clipboards, or a spreadsheet. Or do you have to ask each lead for the project? Can you see which aspects of a project are on schedule and which are behind? Or do you have to ask each lead? Are you aware of the risks of each project and how the leads are mitigating them? For that matter, are the leads aware of them?

Hiring – Do you have a hiring process? How many hires do you make that you’re happy about after six months? What percentage don’t work out? How many start their own company after leaving you? What percentage of your non-leaders take leadership roles after leaving you?

Training – What routines are in place for new employee training? Is there a way for you to review every staffer’s training progress? What about the progress of senior staff?

Service – Can you review your customers’ happiness with your service? Without someone complaining, can you identify service opportunities that didn’t go well? Without asking someone, can you review the outcome of a sample of service calls over the last 30 days?

Sales – Which salesperson produces the least (or most) refunds? Why? Whose sales are the most profitable? Which one produces the longest-lasting customers? Who makes the most calls? Who makes the most of their calls? Is it the same person?

Marketing – Which ad medium has the best ROI for you? Which ad source produces the most profitable customers? Does customer lifetime value vary from ad source to ad source? Which ad source produces “bad” customers?

Managing – Without asking, can you tell how your managers’ teams projects are going? How are their people are doing? If you can’t do these things, neither can your managers.

What managing isn’t

Why are we bad at managing? For some of us, it’s because we learned managing from the wrong kind of manager. Some of us learned it by the seat of our pants. There’s nothing wrong with either method, unless you’re learning the wrong way.

One of the wrong ways is thinking that yelling at your team is managing. Do you or your team only think you’re managing when you’re angry? As an old friend used to say, “You’re doing it wrong.”

Micromanagement is a good example. It is not managing. While micromanaging is good for two year olds, it’s ineffective for employees. It’s not good for you or your company.

It’s not uncommon to see micromanagement at companies with management problems. Instead of managing they’re micromanaging.

You might be micromanaging if you’re:

  • Tracking time, not to track progress, but from a “butts in seats” perspective.
  • Not tracking time now and then to find out “how long a process takes so we know what our costs are” perspective.

I bring up micromanaging because it’s a good example of what managing isn’t. The worst part is that we micromanage and think we’ve been managing. Problem is, we still haven’t managed our team or the problem we want to solve.

Photo by Jan Szwagrzyk on Unsplash

Categories
attitude Employees Leadership Management

Nothing is impossible

Back in ’95, I talked to my employer at the time about working for them from another location. Not from home, but from a different state. At first their response was a muted “Yes”. In retrospect, I should have drilled down a bit more into that reply. I didn’t because sometimes we hear what we want to hear. A few months later, I was ready to make that move, so I asked about firming up the details. As you might imagine, the “Yes” soon became a “Sorry no, that’s impossible for us.” Us meaning them, of course.

That “no” began my business journey. Sure, I’d cooked up a few small side hustles in years prior, but this was different. This had to be full-time. I needed the patience to build something real. I needed a plan. A random side hustle wasn’t going to feed the bulldog.

It seemed impossible.

Life advice

A few weeks before the “No”, I received one of my favorite nuggets of life advice from an older guy in Jackson Hole. He said “If you want to live here, you’d better bring your own job and your own woman because we don’t have enough of either.

When you get advice like this, it’s easy to wave off. We tell ourselves “Oh, it’ll be different for me.”

I was fortunate because he took the time to tell me his story. The short version: He’d moved his wife and kids to Jackson in the early ’60s. When their station wagon pulled into town, they had $200.

35 years later, he was doing pretty well, so I took him at his word.

We have trust issues

Distributed work has changed a bit since 1995. In early 2020, it was still “Sorry no, that’s impossible” in the view of many. Not because the technology wasn’t ready, but because we still have a lot of trust issues.

“It’s impossible to know if our employees are doing their jobs if they aren’t right in front of us.”, they said. We’ll circle back to that.

Add COVID. Stir. While our trust issues remain, we did what was necessary to get the work done.

Firms and services that never imagined succumbing to distributed work’s temptation (evil?) did so. They made it work. They struggled some, then figured it out. I watched my wife have Zoom-based doctor appointments.

Such things were “impossible” months earlier.

The impossible things

“Mark, there are lots of jobs that **are** impossible to do from home.” Indeed. It’s hard to take a CNC home. You can’t smelt iron in your backyard – at least not at scale. It’s tough to harvest crops from a distance. There are many more jobs like this.

The point of all this is not yet another rant about the pros and cons of distributed work.

It’s about how easy we whip out the word “impossible”.

We’ve convinced ourselves only Steve Jobs and Elon Musk can do the impossible. By the way, Steve’s been dead since October 2011.

Are those two guys are the only ones who can do the impossible? Or is it that they’re the only two who don’t give up before they get started?

While inertia and friction are contributing factors, the biggest issue is human nature. We convince ourselves something is too hard.

Or is it that we don’t want to do the hard things?

Are distributed workers working?

“We can’t allow distributed work. It’s impossible to keep track of what our people are doing”, they say.

Said another way, “Unless they’re at their desk, I can’t be sure they’re working.”

If you can’t be sure when they’re somewhere else, you can’t be sure when they’re at your shop. This isn’t about them. It’s about you.

Is it enough for someone to be visible to you for eight hours? That’s not work. It’s control. Except it isn’t, because that control is an illusion.

If your team’s work isn’t measurable, it doesn’t matter where they are. Butts in seats don’t change that. The folks wasting half their days can do that for months before anyone figures it out – and do so right under your nose.

It’s not impossible. It’s a choice.

Are you sure?

What else did you used to think was “impossible”?

What isn’t getting done, built, invented, or conceived because it’s “impossible”?

Photo by Alex Guillaume on Unsplash

Categories
Customer service Leadership Management

When obvious is invisible

Have you ever had an interaction with a vendor that you don’t understand? As in, “How could they be this clueless?” I had one of these conversations lately, and suspect I’ve been the subject of them as well.

Missing the obvious

A few weeks ago, a nice lady asked us if we would stop sending mail to her deceased husband. His account already showed “retired/deceased”. This was odd, since we’d not sent direct mail to anyone in over a year. We wondered if a recent email reminded her of a mail piece from that period. We send automated reminder emails when something’s about to expire. Since we filter retired and deceased people out before sending reminders, we wondered if we had a bug.

She didn’t call for no reason, so we started digging. We guessed someone had used an export from our customer system to create a mailing – and used the wrong export. One of our exports is for generic use. Mail / email work shouldn’t use that export, yet it happened.

Exports designed for that use automatically exclude people marked as retired or deceased. They’re not going to buy anything and they don’t want us to bug them. This intent wasn’t enough to avoid the problem.

Since a generic export is useful at times, we took a more assertive step. After the change, address info moves to a non-exportable location when this situation occurs. Ideally, this change allows us avoid this type of problem in the future – without deleting the info permanently.

I then asked the business office to reprocess everyone marked as deceased or retired. So we got that cleaned up and feel comfortable it won’t happen again.

You might be thinking this situation doesn’t apply to your business. It’s possible. It’s also possible you have a different flavor of the same problem.
For example, consider companies that do home improvement. They re-roof homes, (re)carpet them, or replace old carpet with hardwood floors. Do these companies send offers to addresses known to be rental property? Apartments, for example. Wasteful. Annoying. Obvious.

What you don’t ask

Last week, a group of long term customers (25+ years) were discussing a product from a vendor common to them. They were wondering aloud about fundamental aspects of the vendor’s product. The vendor has never documented or explained them, despite requests for that info.

As the discussion ended, I asked a rhetorical question. “How many of us have customers who are as confused about our products as we are about (vendor’s)?”

No one answered. We all knew the answer wasn’t one we’d like. Even so, what could have become a complaint session morphed into a valuable question.

Asking ourselves what’s right in front of us that we’re not seeing.

Wondering what our customers don’t understand about our company and our product. The reason is obvious. We’re too close to understand what we’re putting our customers through.

Question their obvious

I’ve listed some suggested questions at the end of this piece. I hope the questions are useful to you from a tactical angle, but they aren’t the point.
The point is that we need to be aware of how easy is it for leadership to miss issues obvious to our customers.

Suggested questions:

  1. What are we doing well?
  2. Is there anything we do that doesn’t align with the rest of what we do and how we do it?
  3. What annoys you about our business?
    Note: Some answers may identify intentional business components you don’t plan to change. That’s OK. Ask anyway.
  4. Is there a reason you’d hesitate to renew our service?
  5. Is there a reason you’d be uncomfortable recommending us to a peer or a friend?

My favorites are questions 2, 4, and 5.

The last two feel like they’re asking the same question. They are. The interesting thing is that they often get different answers. The first question brings answers specific to the customer’s situation. The second question produces more serious issues – often big picture items. These are often things customers accept as an annoyance they’ll tolerate. The price of doing business with you.

The only way to learn of these issues is to ask.

Photo credit: @Ev at Unsplash

Categories
Management Sales

Follow up to make the sale

This weekend, we drove to Seattle to look at a camper. Why? Because the only salesperson who followed up was in Seattle.

As I mentioned here a few months ago, I’m looking for a camper. I knew there was going to be some lead time due to current market conditions. I started placing phone calls back in December. I called people in Missoula, Boise, and Seattle.

At first, I got a few follow ups. I got a text message follow up from a guy in Missoula who offered to arrange a time for a tour of a unit. From Boise, I got a similar offer by email. Seattle emailed and left a phone message.

So a few weeks go by and it’s time to get things moving. The guy in Missoula said he’d be in touch about the date and time for a tour. He never called back or texted or emailed, so the tour never happened. After an initial few replies from the guy in Boise, he went silent as well.

But the kid in Seattle – and by kid I mean 30-ish – he kept following up. When he got something on the lot that matched what we were looking for he called and left a message. And then he emailed. That he did both is important.

Some people see emails every five minutes. Others see emails every five days. Some are in the middle of those two extremes. Some people don’t take unscheduled phone calls (like me). I didn’t tell him that.

He made sure that I got his message by leaving a message and emailing.

Consistent persistence

Because of his consistent but not annoying persistence, we drove all the way out to Seattle. Sure, it’s an easy drive and it gave me a chance to see Junior while on the way, but it was unnecessary, until it wasn’t.

We were going to go last weekend, but Snohomish got a ton of snow, which tends to turn Seattle a little crazy. So we backed off for a week. He still stayed in touch.

The day we showed up, his company was starting the move to a new location. While there was a bit of chaos from an entire company packing to move – he was there to help when we arrived.

I guess it seems obvious by now: Salespeople have got to follow up.
I checked back with the guy in Boise since he had followed up a few times a month earlier.

It turned out he didn’t have any stock. I expected him to circle back every couple of weeks. “Hey, we haven’t forgotten about you, but we don’t have anything right now” is enough.

His sales manager should expect that too. The prospect needs to know you’re still working to help them, even if you can’t help them right this minute.

Working to help customers is what salespeople do. They help people solve a customer’s problem, or their need or want.

I get curious.

This sales guy is no older than my boys. He’s been selling for five years. I told him he’d become the only one following up with us and that’s why we drove all the way to Seattle.

I asked him, “I suspect you have lots of people calling you because of the current lack of inventory. What do you do to manage all the different contacts, wants, and needs?”

I wasn’t sure what to expect.

“Well, I used to keep it all in my head. But then I figured out that didn’t help me very much. And it didn’t help our customers very much. And it didn’t help my sales at all, because there’s only so much you can remember at one time.”

“Now I have an Excel spreadsheet of all the people who are looking for a unit. It has their contact info, when I last contacted them, what kind of unit they want… that kind of stuff. When we get a new unit in, I can sort the list and figure out who to contact. It only takes a few seconds.”

“So that’s what I did with you when this unit came in. I sorted my list and you came up. So I gave you a call and sent you an email.”

Simple.

Since he started using this system he said he’s been much better at staying on top of prospects. People don’t fall through the cracks.

Your salespeople can do that too.

Photo by Jelleke Vanooteghem on Unsplash

Categories
Employees Management

A loss you can’t afford

Have you ever lost something you couldn’t afford to lose? When asked this question, most of us think of a favorite dog, our wallet, an heirloom (like that folding Sog pocketknife… sigh), or similar. While a personal loss hurts our heart or wallet – business people often point to a bigger pain. The loss of a critical employee.

We’ve talked before about taking care of these people re: finance and opportunity. Those are easy fixes. Where you run into serious trouble is the loss of senior leaders and front-line employees. The former are already enjoying some level of financial and opportunity success. The latter often aren’t, unless you’re paying attention.

Losing senior leaders

Sometimes you’re going to lose them anyway. No matter what compensation you offer. No matter what opportunities you have to offer. It happens. People leave.

Sometimes, the compensation is so far out of your budget, there’s nothing you can do but say “Congrats”. In others, the opportunity is one you have no way to counter. In the rarest of cases, someone finds both. You suffer a big loss.

This points to the critical need to always be developing new leaders. Obvious, sure. Now ask a few friends who own businesses how they are developing new leaders. If they aren’t, think about what the loss of a critical leader would hurt them. You’ll see why that’s a weakness for them before you recognize it in your company. Once you see why it’s their weakness, it’ll be easier to accept you have one too.

If a lot of people leave your business and get great gigs, it’s often a sign your company is a great training ground. That’s good, though it does mean you need to work harder to keep people, unless you “enjoy” losing them.

Losing critical front-line people

The loss of critical front-line employees can hurt worse than the loss of a senior leader. I know – that seems counter-intuitive. Adept seniors leaders are critical to your success – and they can be difficult to find.

Even so, there’s someone who binds everything together. In my experience, they’re the one willing to take on anything. A tranny, a computer, a fussy stuck valve under the building. They’re the one who says they’ll give it a try when a customer is stuck – even if they haven’t a clue what the problem is.

They hop in and learn on the go. They have a great attitude. They’re good at 100 different things. Sooner or later, someone will recognize that in them. If the right firm makes an offer this critical person can’t refuse, they’re gone.

Often, it isn’t because of you. It’s because they want more. They’re driven. And sure, they have kids to feed, or similar.

People with many capabilities and a willingness to do anything are gold. You might find that it takes two or three people to replace them.

Be very intentional about avoiding this kind of loss. Don’t guess at what they want. Ask. Make sure they understand how important you think they are to the company. Don’t make them guess about that either. Find out what’s important to them and their family.

What are these people doing?

When you take a loss like the ones we’ve been discussing, you learn what they were doing. No, not what you thought they were doing. I mean the work that was actually getting done.

The work these folks do can fall into cracks. Important, but not noticed. Ever drive past a garage sale that’s unreadable? Sure, the print is always too small, but the key is that you’re moving to fast to read it. You miss it, if you saw it at all. Your eyes were on something further down the road.

Their work is often like that. There’s no spotlight. No glitter.

It takes work to find out what they do. One way is to promote one of these folks or migrate them into a more important or better role. That’s when their team figures out that this person did more than anyone knew.

Watch what happens when they take vacation – and make sure they’re left alone while they’re out.

Asking them to write job descriptions doesn’t usually cut it. The advice they leave for their peers when they take vacation, have surgery, take care of a parent or sick kid. That’s often what you learn from.

Take care of these people. Look harder for them.

They’re everywhere.

Photo by Alev Takil (Unsplash)

Categories
Management Software business

Follow the paper trail

Everyone has heard the phrase “follow the money”. There’s a reason for this – it leaves a trail to the truth. Similarly, business processes reveal themselves and who is involved when you follow the paper.

Yep, I’m referring to software estimates. Software people are generally terrible at creating estimates. Or at least, creating accurate estimates.
Software people know this, of course. You’ll hear “double or triple it and add four” as a joke. Except it’s not a joke when you’re paying the bill.

Do you have a process?

Software people need a process for creating estimates – but most don’t have one. Typical result: Estimates that are often inaccurate.

“Do you have a consistent process for creating estimates?” is a good question to ask someone you’re considering for such work.

Estimates created using a consistent process may still be wrong. A process lends a consistency to them. Over time, an attentive team will notice the consistent inaccuracy and work to fix it.

When we don’t have a process for coming up with an estimate, our estimates will lack consistency. A consistent process should create consistent estimates, even if they’re inaccurate. That consistency allows us to learn over time how to adjust them to make them more realistic.

Customers “lie”

Bad estimates have other roots.

I say “lie” because you hear this from software people, but that isn’t what they mean. They mean that what customers tell them isn’t what they need, but the customer doesn’t know that.

Customers unwilling to provide a detailed description of the problem cause bad estimates. Being unable to describe what you need produces the same result.

The right software people can make this process easy. Those who do this make it clear they understand the importance of this part of the process.

Signs of trouble

A bad process sends signals. Someone makes assumptions. Things get glossed over or ignored with comments like “Oh, don’t worry about that, we’ll take care of it later.” There’s a resistance to digging into the details.

Would you hire a drill press operator who says “Oh, I know where the holes belong”?

Would you hire a loan officer who says “I can tell who pays their bills by looking at them”?

I doubt it.

If they won’t take the time to immerse themselves, they won’t understand the work you do. They won’t know what questions to ask. They won’t “find out where the bodies are buried.” (ie: essential knowledge)

A bad process results in more work after project completion.

We’re not talking about good ideas discovered. I mean the original work isn’t what you needed.

If I’m McDonald’s software guy and all I know is that they sell burgers, what I create will have gaps.

What’s a good process look like?

I like to follow the paper, or in today’s world, the paper’s surrogate.

When the phone rings, a piece of paper appears.

When a customer walks in the door, a piece of paper appears.

When you get a lead or a sale online, more paper appears.

Of course, there might not be an actual piece of paper, but there will be something. It might be a new record in your CRM. An email. A text message. An order on your system that needs pick and pack. A PO appears.

Something provokes the next action you and your staff take – and it leaves a trail.

Do they follow the paper trail?

Your software people should be asking about these things. They should be following the paper trail – at least those pertinent to the project. They should be asking about things tangential to the assets and processes involved.

Everything touches something else – including things we may not consider important.

Describing the reality of your business workflow requires following the trail. In businesses with no paper, something leaves a trail.

Following it will help you explain the roles your new software must fill. It will show the gaps that software must bridge. It will tell the software people things you don’t know to tell them.

Whose responsibility is this?

It’s yours. And sure, to some extent, it’s theirs.

If their actions don’t make it clear they’re the right team, you have to be strong enough to look elsewhere. The last thing you want is the wrong people on the bus.

Photo by Richard Burlton on Unsplash

Categories
Employees Management

How to keep a job

Most of the time, I’m writing to employers – business owners – because most of us need some sort of help at one time or another. One of the things they sometimes struggle with and rarely discuss – particularly with their staff – are things like hiring, making payroll, figuring out who is making things happen, etc. All managers need help that they haven’t asked for.

What’s frustrating them?

If it isn’t already obvious, ask. Yes, ASK. If it’s obvious, see what you can do to take care of the problem. Find a way to ask that shows you care – assuming you do. If you don’t, maybe you’re what’s frustrating them. If you don’t care and it’s because of something going on in the shop / office, don’t they deserve to know? Don’t assume they do – because managers don’t see / hear everything.

If any of these things are your sweet spot – the things you like to do and are good at – offer to help and tell them why – **because** they are your sweet spot.

Who picks up the socks?

What I’m referring to here is little things left undone around the office. If you take care of these things, it will usually get noticed. If it doesn’t get noticed after a week or so, ask if it’s OK that you take care of those things when you have a few minutes at the end of your work day.

There are people who notice these things and people who don’t. Of the people who notice them, there are those who walk past them and those who pick things up and put them away, etc. Be the second person. It’s a little thing but it sends a message that you care about the place. In some cases, you might be eliminating a safety issue that keeps a co-worker from being injured.

This may seem like a little thing, but injuries to someone can impact production, potentially cause missed deadlines, and perhaps result in additional costs for your company. If the injured person is a key employee due to their skill, knowledge etc – the impact might be more significant. Despite those things, none of us want a co-worker to get hurt on the job – and we don’t want that for ourselves.

Create additional value

I know, “create additional value” seems a little buzzword-y, but think about the things you do from A to Z. Little things make a difference to your employer, but also to your company’s customers. Small touches take only a moment, but can make a difference. You know how this feels when it’s done for you.

A good way to create additional value is to notice things that can be improved AND do something about them. Duh, right? All of us can probably think of projects around the office or shop that seem to get hung up for reasons clearly within our control – yet it happens anyway. What’s the cost of a delayed project? Do we have to refund all or part of a payment? Do we lose a job? Does it cause us to lose a customer? Maybe all three.

Someone sees what’s causing the problem, even if it isn’t you. If you’re that person, make an adjustment if you can do so without creating drama. If you don’t know, ask a co-worker. Someone probably has a theory about what the problem is. Why wait until some manager notices – IF they notice?

I know these are simple, obvious things. If you think that, you’re probably already doing these things. If you aren’t, ask yourself why. Solve problems even before you’re asked – unless that can cause other problems.

Might help you get a job

Interestingly enough, these things are also good conversation during an job interview. Hiring managers and owners want to be sure that you’re the right person. Those who have gotten good at hiring have usually gotten that way by initially being bad at hiring.

Ask them what’s frustrating them, what isn’t getting done for unknown reasons, what’s taking too long. Do so from a place of curiosity, not ego. You’re trying to find out how you can help, not reminding them of their shortcomings. If the things they bring up are strong points for you, say so. Tell them how you think you can help. Tell them why you like doing those things and what your past experience is in fixing those problems. If you can discuss prior outcomes from similar work, do so.

Photo by Nate Johnston on Unsplash

Categories
Management Pricing Product management

Is it time to raise prices?

I recently received a question from someone who was curious about how to raise prices. They have service customers paying a monthly fee going back almost 20 years. All their customers are on the same price plan – and they’ve had always been at that price. They were concerned that they could not raise prices without losing a bunch of customers – a legitimate concern since they hadn’t changed their pricing in close to 20 years.

There’s a couple things to look at here. First off, if you’ve had customers for 20 years, you’re probably not going to raise prices by such an egregious amount that you’re going to lose a bunch of them.

One possible exception to that – you’re seriously under charging now, losing money and what some might consider an egregious increase is actually what you need to get your margins right. However, this seems extremely unlikely after 20 years unless losing money on this product is a recent development. What I usually find when I see someone’s books is that they’re doing OK, but could be doing a lot better if their pricing made more sense.

While this conversation could have a lot of variables, the raise prices question comes up fairly often. Many times “How do I raise prices for existing clients” ends with “… who have been paying ‘nothing’ forever?”

Customers going back almost 20 years who were all on the same price plan, so the company didn’t know what to do. They were concerned that they could not raise prices, without losing a bunch of customers.

There’s a couple things to look at here. First off, if you’ve had customers for 20 years, you’re probably not going to raise prices by such an egregious amount that you’re going to lose a bunch of them unless you’re seriously under charging now and actually losing money.

If you’re still losing money after 20 years. it’s hard not to wonder what’s wrong with you, or whoever is funding you. I’m guessing that’s unlikely. I didn’t look at this company’s books, but if I had, I suspect that they’re doing okay. And could be doing a lot better if the pricing and their price structure, made more sense.

It’s a bad time to raise prices

The first reaction to get out of the way is that now is a universally bad time to raise prices. It’s COVID time. It’s October. It’s 2020. Winter is coming. My competitors haven’t raised prices recently. Sales are down. We can find many reasons why the time is bad to raise prices. Some of them may be true, but that doesn’t mean it’s a bad time.

Of course, raising prices for existing customers isn’t the same as raising them for new customers. While you’re focused primarily on pricing, keep in mind that “the price” is but a single component of “pricing”. Pricing includes volume, service delivery, packaging, price tiers, timeliness, value proposition, and other things.

How you sell this new pricing needs to be carefully thought out, particularly if it involves a restructuring of delivery, service structure, etc. Sometimes customers you’ve had for 20 years commonly have different needs and bought for different reasons than those who bought recently. Sometimes not. You should know.

A common thought is “What features can I add to the existing product so that I can raise the price for existing customers?” While that’s useful – do your existing customers want the new features you’re dreaming up to add to the product?

Negative margins? Nope.

The company with the question sells software as a service, but the conversation applies to almost any service that has a recurring service model. Sure, there are some exceptions to the “any service” thing, but there are an awful lot of parallels across industries.

First off… these customers don’t expect you to lose your shirt just so they can do whatever they do with your product / service. If they expect that, they’ll disappear when you make these changes and frankly – that’s a good thing. No one needs customers who buy a product with a negative profit margin. Sure, you might say “Well you know with the whole COVID thing, I can’t afford to get rid of customers.” Tell me, how many customers do you want if you’re losing money on each one? Do most businesses really want even one more customer that costs them more than they charge that customer? In almost every case – no. The exceptions are by design.

If I raise prices, I’ll lose customers

Almost everyone I talk to about these things feels this way when they prepare to raise prices. We know we might lose a few, but sometimes people get this wild idea that they’re going to lose 80% of their customers because of a price increase. Are you really providing that little value to your customers? I doubt it. I suspect you know your customers better than that. In my experience, it simply doesn’t work out that way. You’ll probably lose some but the math will probably work out with you doing less work and making more – even if the increase is small.

So how do prices get like this?

There are many reasons, including an addiction to coupons, not paying attention to margins, missing the impact of step costs as volume increases – among others. The two reasons I see most often are “we can’t do it now” and inattention. When I say inattention, I don’t mean anything specific. It’s as simple as not taking a regularly scheduled look at prices, costs, margins, etc – and then doing something about it when you find something wrong.

Back to the person who asked the question. They indicated that their customers had been paying $29 a month for between 15 and 20 years with zero price increases during that time. I don’t know how many customers they have – I didn’t ask because it doesn’t matter. I assume they are at least marginally profitable at that price level – or were until recently.

Given that customers have been paying $29 a month for 15 to 20 years, they either see $29 as a no-brainer value-wise or they are the type of person who never looks at their bank statements. If you have 1000 of them and 10% leave, you’ve lost $2900 a month. If you raise the price to a mere $32, you regain more than the $2900. But we’re not going to do that.

Stop the bleeding

First off, you have to keep things from getting any worse. Start by determining a fair price with a reasonable margin for new customers. If this is your entry level pricing – figure out what can be removed from it and remove it from that lowest tier. Do it now – before lunch. You should know what can be removed after 20 years.

Your entry price still needs to be a no-brainer, but it shouldn’t include every single thing you do. If you aren’t sure, ask whoever deals with customers all day. Sales, support, service – whoever. Ask them specifically. What portion of our services do our new customers rarely use or not need? Of the things that remain, are there any that create a significant hassle? Pull that one too. Your entry level customers should not have high support costs – and you should work on that next if they do.

Change that price and the explanation of accompanying services right now – before you do anything else. Once you do this, you know that whether you get 10, 100 or 1000 customers in the next month – it won’t be making things worse.

It doesn’t matter how the old price compares to the new one. It simply has to make sense to new customers. Maybe the old price was one percent of what the new price is. It doesn’t matter. What matters is that your new customers see value in what you deliver for that price.

The hard work

Before we worry about the old customers and their $29 price, we need to finish setting the new pricing. Get together with your team and see if you can group the customers you’ve gotten in the three years into a few segments. Don’t get complicated here. You can always do this again later – and you might.

Maybe you have customers new to the industry and for them, the entry service level (and price) is ideal for them. What other natural groupings do you have? Your people will know if you don’t. Ask them questions and do not interrupt. Listen. Take notes. Say “tell me more” or “is there anything else” until they’re done. Let them empty their minds on the table. They’re on the front lines. They may not know your costs or margins, but they know your customers.

Discuss what those groups need of the service levels you offer. Don’t make things up. Use data and conversations to drive decisions. Review the decisions with the team to make sure the grouping of services to a particular customer segment makes sense.

Once you’re done with that, look at your numbers, whether they are in some fancy software or on a chalkboard in the shop. Figure out a price that makes sense for each tier. Not a price relative to the 20 year old price, or even a price that tries to “look right” when compared to the entry price. Make the price a good value that preserves your margins.

Update all your prices and service information to reflect all of this work. Ask for feedback as people buy. You’ll want to know why they chose tier A instead of tier B. What’s different about the customers who consistently choose A over B, and vice versa. The value… the economics must make sense – but the mix of services at that level must also make sense. You wouldn’t give a teenager a Tesla X on an icy winter morning. You also wouldn’t send them out without studded snow tires on their 15 year old sedan.

It’s time to raise prices. Finally.

Tell your existing customers the truth about your unsustainable pricing and what you’ve done about it. They’re going to figure it out eventually anyway. Explain your new tiers and tell them what you believe is a good process for identifying where they belong. Don’t get all sales pitchy. Tell them how it is, tell them when the old price disappears and tell them specifically what they need to do and when. Make it as easy as possible – then make it easier. You’re not punishing them for the last 20 years. You’re setting things up so you’ll be around to help them for the next 20.

Some people will not understand. They will leave. Thank them for their time with you and let them go. Don’t argue with them. It’s their decision. A small percentage will be angry. Let them be. You can’t change that about people. It’s their decision. Thank them and move on.

So you raised your prices and the world didn’t end, but you know the problem isn’t completely solved.

With the new pricing, the economics of your business will change. Pay attention. You may have to go through a price exercise like this more often. You may find that assumptions about you customers will change – or maybe they won’t. Either way, you need to stay on top of it.

Don’t do anything that’s not sustainable. It was a lot of work to get out of the mess you were in. Let’s not do it again if we can avoid it.

Explain the economics

Some will wonder why your prices are what they are. It’s their nature. Your costs are usually none of their business. People don’t buy stuff from you because your costs are $x or $y. They buy because they want or need something and the value is acceptable.

If you need to explain your prices – do it as a value proposition. For example “We charge $1200 per month for our service, while allows our customers to save an average of 47 work hours of labor (for example) per week.” Buy or don’t buy becomes simple math at that point.

Sometimes, this is harder than it sounds, but you may as well do it because they are absolutely going to do it – and they may miss something because they don’t know your service or the follow on benefits as well as you do. There are times when all of the benefits are simply not obvious. Make them obvious.

Even if they choose not to buy your stuff, make it easy for them to assess their decision. If you need 90 minutes on the phone and 13 finance questions to close a sale, find a way to make it easier to understand.

This doesn’t mean assume your customers are dumb or lazy. They are busy. They don’t have time to mess around with spreadsheets and deep research and thought about your service. Make it like the buffet. Lay it out in front of them so all they have to do is choose – even if the choice is “not now”.

Photo by Bertrand Borie on Unsplash

Categories
Entrepreneurs Management

Are you keeping up?

Are you keeping up? Gotten a bunch done over the last few months? No? What’s wrong with you? It’s not much of a stretch to think it may have riled up your imposter syndrome or maybe a small bit of regret at your lack of productivity vs. “the hustlers”. Take a look at what some people have done. If you make the mistake of adopting it as your standard of what you should have done during that period, then surely you should’ve done more. Taylor Swift created an entire album over a 16 week period.

What’s YOUR story?

Seriously, it’s OK. You don’t know what’s behind their curtain. It’s not the same as yours. You can work on that, but it isn’t the point.

If you read this somewhat often, you may wonder how you’ll get that week’s suggestion done (when pertinent). You might still be working on implementing something from a month ago. How are you going to keep up? Thing is, that isn’t the goal of this for either of us.

Have patience

When these things are discussed, my thought process is “I ran across this and/or I do this and it works. If you’re in a similar situation, it might help.” Perhaps you’ll use the info. Maybe you’ll implement some of these things in the future when you’re ready or when they’re pertinent.

Some of the things we discuss each week can’t be done quickly. No one, least of all me, expects you to do them all. Pick the things that make the most sense for where your business is at that moment (if you have time at that moment). Once you start one, keep at it. Don’t take your eye off the ball when seven more weeks of suggestions float by and you haven’t touched them. They don’t matter until they do.

Start fewer things and finish more. There will always be time to start something else once your current tasks are done. You aren’t the only one dealing with occasional chaos.

Many large businesses have the same problems yours has. Maybe the scale of the problem is different – but relative to them, the problems are the same, more or less.

They aren’t perfect either

Let me give you an example. There’s a software as a service (SaaS) vendor we use. As a SaaS vendor, the presumption might be that it’s a reasonably “modern” business that has its act together.

They didn’t bill us for 13 months. Yes… THIRTEEN MONTHS.

This is a large company compared to most small businesses. Yet simple things like getting an invoice out every month somehow failed them for 13 months (and not for the first time). Statements? Nope. Never. Not once in five years.

We were allowed to catch up with those invoices over several months since the lack of them was their fault. Eventually, everything got back to normal.

Before long, they were bought by a public company. Presumption: well-organized company. I mean, by definition, a public company has to have accounting under control, right?

16 months goes by. Still no statements. Most months, we get an invoice. At first, cashing our invoice check takes months, then things smooth out. Because we’re working on a new contract, they recently figured out that three invoices from last fall had not been paid. In fact, the checks had been stopped because they weren’t cashed after several months. We thought they were lost and eventually forgot about them (see, it happens).

They can’t start the new contract until those invoices are paid. We hadn’t received notice about them & soon they were forgotten. $40K of accounts receivable doesn’t typically get ignored when they go unpaid. Neither you or I would do that, but… it happens. We worked it out so everything’s fine. We really like the vendor & they provide quality service.

Stay focused

I tell that story because we’ve almost all had invoicing / follow up issues. You might’ve thought “we’re such a mess I’m never going to be able to do this right” etc.

Yet, the things you beat yourself up about are the same things a publicly held company sometimes does. It happens.

Maybe next week’s suggestion helps. Read them, think about (if) they can apply to your business – but don’t lose sleep over them.

Do the best you can. Improve consistently. Slow is OK, just keep improving.

Photo by Jukan Tateisi on Unsplash

Categories
Entrepreneurs Leadership Management

React, respond or rebuild

What’s on your agenda these days? Whether your business is scraping by or flush with cash, you’re probably spending a little bit of time thinking about the future. Which future would that be? Next month, post-tourist season, post-COVID, or some other future? You might be thinking about how to react to this or that, or how you’ll do business until COVID is over, or something else more specific to your business and how things may have changed since mid-March.

React vs respond

The difference between react and respond has been on my mind a lot lately. The challenges businesses face don’t change all that much, until they do.

Remote work is a great example of this. For decades, “managers” insisted remote work couldn’t be done at their business. Suddenly, in the space of weeks, remote work somehow became possible. To be sure, it’s a challenge when you have a house full of kids, but a lot of people have made their way through that maze to a productive place.

When someone who manages people working (most) desk jobs says “We can’t do remote work”, it’s usually a reflex reaction to a perceived threat – the loss of control (as if they have ‘control’). Control is rarely what anyone thinks it is, if it exists at all. “How will I know if they’re working?” is another decades-old symptom of this.

Getting back on track, when you react, it’s typically a reflex. A reflex action logically gives control to whatever stimulated that reaction. While there can be a measured reaction, for the purposes of this discussion, I’m calling a reaction something you do that’s driven by instinct or reflex. In other words, the fight or flight amygdala is driving based on a perceived fear, even if you aren’t escaping physical danger.

When you respond, it’s something planned, measured, and (hopefully) well considered – again, defined for purposes of this discussion.

The future’s on our minds

The future might be on your mind. Is your business facing challenges that could kill it in the next quarter? The next five years? The next 20 years? Your company’s ability to deal with the speed of change might be involved, or it might be something simple like a technology you depend on that’s likely to be displaced over the next decade.

You might not care about that when it comes to forecasting next quarter’s revenue, but it could definitely impact the valuation of your business for sale in a decade. It’s easy to wave that off today when you’re worried about making your nut this month. Trouble is, these things can’t be planned for or implemented overnight. They require consideration well in advance, particular for the large number of business owners who view the sale of their business as the source of funds for their retirement.

Assumptions vary in quality

The quality of your consideration before a response occurs is everything. A lot of our consideration during this process is based on assumptions. Your assumptions might be good, true, dated, false, dogma-driven, ego-driven, and so on.

Question every single assumption that drives your plan / direction for the future. It’s painful when you find one is no longer true, but it’s better to learn that today than five years from now.

Is something still profitable? Prove it to yourself. Is something not profitable? Prove it. What should you stop doing? Does the data back up these assumptions?

Take everything down to bare metal. Make it prove itself true or false, valuable or not.

Once you arrive at what you think are your truths about the business / market going forward, it’s time to assess your current solutions and decide if they get to come along as you move toward the future.

What about rebuild?

One thing we haven’t discussed is rebuild. Going back to the assumption discussion, what if all your assumptions, experience, and knowledge are signaling a future much different from today? What’s your next step? It might be rebuild.

A rebuild is a form of response, and it’s also a longer term effort requiring even more consideration about what is, what no longer is, what never was, and what your forecast as what will be.

This thought process can be useful when things get tough, really bad, or perhaps a little weird and you’re trying to figure out how to move ahead given your forecast of whatever you think life looks like around the next curve.

Photo by sangam sharma on Unsplash