Success through preparation and hard work

One of my favorite blogs is CPA Success from the Maryland Association of CPA's. This post by Bill Sheridan talks about how football hall of famer Raymond Berry used preparation and hard work to build a legendary career despite his mediocre physical attributes. Every once in a while I meet these types of people in the business world. They are never unprepared and they're not afraid of hard work. Not surprisingly, they make a habit of coming out on top regardless of their financial backing, education or the state of their industry. Sheridan's post has some good lessons in it, take a look for yourself.

Spending Time in Your Sweet Spot

In last week's blog we talked about finding your sweet spot, that area of the business that represents the greatest area of satisfaction and as a result the area of greatest earnings potential in your business. In this entry we'll discuss spending time in that sweet spot. Usually a business is already spending SOME time in its sweet spot. There are generally a few customers that the business really enjoys working with and that represent where the business wants to expand.

If I can get the client to identify the sweet spot the next question I ask is "Give me the customer names or a description of the type of customer you're talking about, AND tell me how much revenue you are deriving from that customer." It's usually the case that businesses only have 5% of their customers in their sweet spot. This 5% will generally be responsible for 10-15% of revenues. Our goal is get this group up to 20% of your clients and 80% of revenues. The first part, increasing the number of ideal customers, we address with targeted marketing efforts. The second part, increasing revenues, we address with pricing.

Marketing is often said to be more art than science. I can understand that. True marketing geniuses possess an insight into the customer psyche that is very valuable. However, we're not trying to assembly a marketing plan that will turn around General Motors. Often the only questions my clients need to answer to get great marketing returns are "Who is my ideal client" and "Where am I most likely to run into them". Knowing those two answers enables us to spend time wisely to reach the people that will be receptive to our pitch. That's it...even a CPA can do it.

Pricing is very much an art when it comes to generating maximum revenue. It usually turns out to have as much to do with branding as it does with product or service delivery. Most businesses under price their ideal clients because that's not where they perform most of their work. Ideal clients represent a fringe group that they would like to spend more time with but because it's not their core client base they don't pay as much attention to pricing as they should. To price effectively you really need to understand how much value you are delivering to the customer. Customer interviews and pricing experiments are most effective in determining this.

Once you understand your sweet spot you really need to take it to the next level and measure how much of the business is focused on that group of customers. Then use the 80/20 rule to set a goal for new client business in your sweet spot and total revenues for that segment of the business. That is pretty much it. There's nothing much new here. However, you must execute to achieve success.

Execution is most often a bi-product of accountability. Once you do all of this measuring and planning you need to let some people know about your plans for your business. You need to put it out there so you'll be embarrassed if you don't make some progress. Then you need to find someone who can hold your feet to the fire. We do this for clients all the time, but sadly we're usually the only people who care enough about those plans to hold them accountable. It requires time, it requires effort and it requires a level of honesty most of your friends and family will find uncomfortable. Finding your sweet spot may turn out to be easy. Figuring out how you'll spend more time there can be a little more difficult. Making the changes to actually pull it off may seem nearly impossible. Just make sure you have some good people in your corner to help you get there.

Finding Your Sweet Spot

Most businesses have one of two problems. Either they don't know what their sweet spot is or they fail to spend most of their time in that sweet spot. The first part is usually pretty easy. Ask yourself "Who are the customers or types of customers that I enjoy working with." Not too long ago I had a conversation with a real estate broker who told me she really enjoyed working with commercial clients more than residential buyers and sellers. I asked why and she launched into a ten minute monologue on all the things she loved about commercial real estate deals. That confirmed it, her sweet spot was commercial real estate. A little more probing revealed that her true sweet spot was commercial deals where more than one property needed to be assembled into a portfolio to be sold to a development group. Prior to that another realtor had related his sweet spot as commercial deals where the long term business prospects of the deal needed to be proved out to a potential buy and hold real estate investor.

So here you have two examples. Both people are doing real estate, both want to do commercial, and both have vastly different sweet spots. Finding your sweet spot is simply a matter of asking the question "Who do I like working with most?" After that you need to be able to explain in detail WHY you like working with that type of client or customer. If you can't answer the WHY you probably enjoy that kind of work more as a hobby or distraction than an actual business pursuit.

A good example of a hobby pursuit as opposed to a true sweet spot came to me in the form of a client who wanted to branch out into a new product line. The client owned a furniture store and wanted to start her own line of upholstered furniture. When I started asking WHY we quickly found out that she spent her down time re-upholstering furniture at home. She was very good at it, but the demands of owning a business meant that she didn't get as much free time to enjoy her hobby. Bringing the hobby into the business was her answer.

The more we talked about the business aspects of this hobby the more she found out it probably wasn't a good fit. She didn't like the idea of building furniture to customer specifications. She didn't like the prospect of stocking a new line of inventory. And the thought of working with furniture craftsman was something she didn't feel like she would enjoy.

As it turns out her real sweet spot was interior design work. Her favorite customers were those that asked her opinion regarding the types of furnishing that would fit a particular space. She loved making house calls and often found herself accompanying the delivery staff and chatting up owners with ideas for other areas of their home. The idea of a design oriented business also helped address her loathing of inventory and purchasing generic furniture brands. What she discovered is that she enjoyed purchasing much more when she could "see" the space where the furniture would go.

So ask yourself "Who do I enjoy working with most?" and find your sweet spot. In our next blog we will address the problem of knowing your sweet spot but not spending enough time there.

Professional services marketing

Today I was following up after one of my regular consulting appointments. After writing the email to the client I was involved in another conversation regarding the same topic so I thought I would recap it here in the hopes that it can be useful to a broader audience.

The basic background is this...very few people know how to market professional services. Selling the intangible is about selling relationships. And selling relationships is about contact. Most people involved in delivering professional services (accountants, consultants, attorneys, bankers, realtors...) run into more people in a day than they realize. Some percentage of these contacts are prospects. A friend of mine believes they're ALL prospects and he has a point. If you're not keeping track of these contacts and making a conscious effort to followup in a proactive way you are losing sales...I guarantee it!

I had previously sent this particular client an excel spreadsheet I use to track prospects through our sales cycle. She is very good at what she does and as a result very busy. The idea of putting everything in a spreadsheet just seemed like too much work so in the email I laid out the low tech solution I have used in the past to track prospects and other people I want to stay in touch with. Here's the text of the email (names changed to preserve confidentiality)....

Debra,
Going over my notes I came back to your comments regarding the marketing followup and how much work it is. I recognize that the level of structure in the spreadsheet isn't for everyone but I would encourage you to track your prospects in some way. One very simple format is a list showing the date of last contact, name, and description of what happened. For instance....

1/15/08 John Way took phone call regarding possible new accountant (never)
2/23/08 Lisa Haron email followup from networking event, interested in lunch sometime (1/4/08)
2/27/08 Gary K? Neil's friend, starting a new business in the summer, talked about business plans (never)
2/27/08 Kristin L Modern Photo, sent new client marketing package (1/31/08)

This is the method I used early in my practice. At the time I used a little black notebook that I would carry around and then I migrated to a spreadsheet. To be honest the notebook was a little easier. Each time I would followup with a prospect I would make a note of the new encounter and cross through the previous encounter. In parentheses I would put the previous contact date so that I could trace back what had been done before. Using the notebook I could tell at a glance who I had not followed up with in a while. Here's what I learned...

1. It takes effort but not a lot of time to track your conversations and encounters, not all of them, just the important ones. But once you get in the habit it's automatic


2. I referred a LOT more business to people on my list. This is often the best way to get referrals. Refer first and do something for the other person. Because I was always looking back at my list and being reminded of people I was much more likely to think of them when I ran into someone else who had a need.


3. There are more prospects than you'll ever need. Our window for recall is about 3 days. I don't remember the people I met last week so I don't think to followup with them. However, if I see someone a month later I will probably remember who they are, what they do, etc. But if it's two months later I have probably forgotten their name and other details. So there's this sweet spot between 3 days and 30 days where a list really helps me stay in touch and in front of people so I know they'll remember me and I'll remember them when we run into each other months down the road.

I would go through my list and when someone got to 30 or 45 days since the last encounter I would make an effort to touch base. This is the same thing we do now, we just have more structure to it so that it can be run automatically without my personal involvement all the time.

Give it some thought and maybe try it for a couple of weeks. Unless you're already milking your personal network for all it's worth you should see some immediate returns. If you're curious about a tool that could help grab a moleskine notebook. It's what I still use. I've been through dozens of them and have probably "sold" dozens more to clients.

Best,
Joey

A word of advice for QuickBooks users

It seems like 99% of the world uses QuickBooks. That's not necessarilly a bad thing, but the majority of QuickBooks users are not accountants and that can cause problems when it comes to getting accurate reports out of the system. One of the problems I run into a lot is that people don't know how to use the reports in QuickBooks. It might be more accurate to say they use TOO MANY reports. Here's a little piece of advice I give my clients. When you open QuickBooks the first thing you should do is bring up the balance sheet and the profit and loss.

That's it, don't bother with quick reports or even open the chart of accounts. Don't run transaction reports or sales by customer or any of that stuff. Just work off the financial statements. Once in a while you will need to review vendor or customer payments and you can use the aging summary reports. Everything else can be handled from the balance sheet and profit and loss. The reason I favor this approach is that the financial statements present the actual fiscal position of the company. Using the drill down feature and the financial statements I can get to ANY transaction in the company, and I'm doing by starting from the proverbial 50,000 foot view.

I'm not just advocating a simpler method of accessing data. I'm trying to get my clients more accustomed to looking at their own financial statements. Somewhere along the way most business owners have become convinced that the only person qualified to review their statements is an accountant. That's just not true. You should be looking at your own statements every day or every week. And when you're in there every day drilling down to discover what's behind your numbers you will have a much better understanding of your financial statements and what makes them tick. That's not only more efficient, it's just better business.