For entrepreneurial consultants seeking more recognition, more serenity, and more money – be it as a start-up, in an established company, or to surpass the milestone of 1 million in revenue
“Do the right thing, the right way, and actually do it.” This slogan was passed on to me by Sam Brunner. Sam is an exceptionally gifted management consultant with a wide range of clients. Passionate. Analytical. Tough. And fully booked. I first met him in 1992 during my first serious crisis as a consulting start-up. One year earlier, when I was 28 years old, I quit my very well-payed position as a senior financial analyst at a renowned Swiss private bank and started my own company as a financial consultant. It was time to bring an independent voice for evaluating private equity and stock investments to the market.
I started out in the consulting business for investors charging per daily or hourly rate. Later on we decided to grow the business with periodicals, i.e. monthly print publications in the pre-digital world. Together with Norman Rentrop’s publishing team, my team and I worked hard seven days a week to establish the first independent research service for institutional and private investors, a printed informational product, periodical, covering over 430 international publically traded companies on a monthly basis. Despite the effort, I was running out of cash. I was in the middle of hundreds of pages of research manuscripts, building a gigantic database of company data, and employing a dozen people.
The only thing that I instinctively realized at the time, “If it doesn’t work, I just have to increase my input, cash, and time.” Being an entrepreneur requires a dream and stamina, at least that’s what everyone says. Sure, but Samuel taught me to focus on something else. When you’re under stress, breathe deeply through your nose four times and reflect on these questions for ten minutes: “Am I doing the right thing? Am I doing it in the right way? Am I actually doing it?” I had to increase prices dramatically. The value-price-relationship was out of order. The deal with the publisher was re-negotiated.
This led not just to a doubling in revenue to a higher six-figure amount within the year, it also prepared my company for a merger, which turned me into a temporary millionaire.
But there is more I want to teach you, then just increasing prices. I believe that every self-employed management consultant, entrepreneur has the right to discover a reliable, repeatable system that brings the recognition, the safety, and the money that he or she deserves.
So, let’s have a look at the success critical themes: Over the course of your career, you have collected great amounts of know-how, expertise, and experience. However, when you approach your potential customers, you are competing against dozens of consultants with regard to your positioning. To better differentiate yourself, an approach may be that “my services / solutions have to differentiate especially through ‘technical competence’ and ‘ability’. I will present these strengths at every introductory meeting, bolstered with PowerPoint slides and more.” This was my approach for a while. And it was a big mistake.
And then there are the price / fee negotiations. “My potential clients calculate their target price for my services like this: How many hours / days will he / she need, multiplied by a certain hourly rate that one has heard from friends in c-level positions, equals expected execution costs, plus profit margin, equals price. Everyone does it like this, so I am doing it correctly.” You may consider: This limit to your profit is as high and thick as a dam wall in the Swiss Alps. Insurmountable.
Let me briefly comment on the topic of marketing & sales. Regardless of whether you are the sole proprietor or if you are building a company with a revenue of more than 1 million annually with the goal of later selling it (this was my aim). As a start-up, we wanted to grow to reach a crucial size. As an established entrepreneur and founder, I had to at least replace the completed projects. At the time, I hated sales. I only “did” sales & marketing when the last projects were settled since it was high time for a fresh supply of projects. Since everyone else was doing the same, I was convinced that I was doing it right. A big mistake that limited my company to triviality.
Another topic that often sparks controversial discussions in forums: When I began being self-employed, I decided to work alone, without the burden of managing people and paying monthly salaries and other fix costs. However, I still needed additional know-how or simply resources to optimally fulfill the customers’ requirements. My “leadership principles” at the time were as follows: 1) “People who work with me, be it as freelancers or as employees, should know themselves what they should be doing when. It cannot be my daily routine to follow-up. 2) If it’s of high priority, I will rather take the task myself and deal with the client directly.” Does this sound familiar?
Even as a graduate financial analyst, CIIA, and with a degree in business administration, I had – in retrospective – a funny approach regarding finances as an entrepreneur. “Planning, measuring, optimizing using calculations with regard to marketing, sales, and liquidity planning are tools for big companies. I don’t have time for this bureaucracy, so I will do it later when the company has grown.” Now, the relationship between the marketing plan, sales channel, and liquidity plan helps me stay relaxed during stressful times. Who to do it?
The two Excel sheets that support your planning are updated every Monday morning before the team meeting. In this meeting, you may discuss the client projects with your staff. In case there are some delays, these are immediately considered in the liquidity plan. The updated marketing and sales plan is incorporated in the columns for expected revenue. This way, you have an overview of probable incoming payments from existing clients and the values from newly acquired customers that are exposed to risk. Possible changes with regard to costs are also considered.
I would like to once again ask you “what is the right thing, what is the right way to do it, and what is actually important” with regard to positioning and sales. You have probably heard that people’s purchasing decision is based “90% on emotional reasons” rather than objective reasons.
As a consultant with in-depth expert knowledge, you will quickly fall into a sales trap when you tell your potential client the following at the first meeting: “We are reliable, experienced, have a long history, and work for these clients.” Then you look out for “purchasing signals in his or her gestures and few words.” However, presenting such a “sales pitch” is not at all interesting at this point in time! My sales coach from Chicago, Gene Rosendale, founder of nonselling.com, brutally demonstrated this. Every statement of this kind leads your counterpart responding with a natural defense mechanism. “I have to think about it” is the mildest form of your sales effort that just fizzles out. No response, and decisions are delayed. This is a common sales efficiency killer, isn’t it?
Prospective customers hate salesmen, because they always assume that their offer is so good that it must fit the customer. They talk too much. They ask investigative questions. They do not seem interested in the person’s environment and situation, their views, perspectives, emotions, and priorities. If you could stop selling like this, your sales efficiency would increase by 100 to 300% with the same effort. That means more recognition, less frustration, and more money for the same effort.
Here is a trick that could help you not to sell. You could start every initial meeting with an assumption, your view to find out more about your counterpart, his or her surroundings and work. It’s about him or her. No small talk. No elevator pitch. No selling. No branding.
People love responding to your assumptions and correcting your point of view. For example, “…nice to meet you. I saw on your LinkedIn profile that… the company is respected by the market as a reliable supplier… you have done a lot to establish yourself…” PAUSE. It is almost guaranteed that your counterpart will pick up the conversation and start a dialogue.
In the following minutes, you will actively steer the dialogue. Your remarks and questions always refer to what your counterpart previously said. It’s all about him or her, not you. For example, “Interesting. What do you mean by that?” or “Could you explain that to me again?” or “You haven’t mentioned XYZ, what does that mean?” This way, you can gather relevant information (about time, money, problems, market) as long as you like without giving your counterpart the impression of being interviewed by purpose.
Then you move on. You can summarize what was said at any time and then insert a 15 second advertisement. For example, “With all these issues, you have a really exciting position. You have achieved this and that… maybe I can contribute towards achieving this and that…” PAUSE and wait for an answer.
The prospective customer will then probably ask you, “What is the price” or “What are next steps?” He or she is in the lead. In dialogue, not through sales talk. By the way, you should never bring a PowerPoint presentation to the first meeting since you cannot know the customer’s detailed needs in advance.
This dialogue model allows you to strongly distinguish yourself from the competition! The effects on your business can be manifold: Trust is built up more quickly. You have control over the conversation at any time without being controlling. You don’t feel like a salesman. You receive information that you previously didn’t have. Prospective customers regularly tell you that “we had an interesting conversation”. Voila!
Now on to pricing. My position is, that prospective customers only wants to see a price in relation to his or her benefit in order to satisfy his or her reasoning. Emotionally, the prospect has already decided on you since you didn’t sell.
What is the meaning of benefit-based pricing? If you can change your client’s strategy in a way that increases his or her profit by USD 253.187 annually in just one hour – based on your experience and knowledge – would you charge just one hour?
There are two alternatives to this scenario. You could charge a ‘flat rate’ for the completion of the assignment based on the expected results. Your risk: the effort can explode beyond the planned scope. To get an o.k. to a ‘flat rate’ you shall consider the calculated expected financial effect (the result) is shown first, the remuneration last. Another option is to ‘share the future result’ (often called “success fee”), but to charge a fee in case the project is cancelled (a “cancellation fee”). It you are brave, you can offer a guarantee: “no remuneration without success.
All business people will tell you that getting more customers, increased prices, and higher purchasing frequency are the only three ways to increase revenue. However, you should also consider the closing rate in your sales process. How many meetings can you schedule out of 10 important contacts (by phone, e-mail)? 1 out of 10 = 10% or 2 out of 10 = 20%? This constitutes a difference of 100% while exerting the same effort. How many meetings lead to how many deals? Improving this performance indicator, the conversion ratio, has a huge impact since more revenue can be generated from the same input.
I simply measure this and other performance indicators on a piece of paper in my paper notebook. No software necessary!
Finally, let me return to the topic of leadership. “People who work with me have to know what they should be doing.” Don’t leave the future up to chance! This will cost you a fortune in terms of health (negative stress), recognition (customer satisfaction), and money (cash and hours spent). Every freelancer and employee needs a clear job description, clear-cut and unambiguous assignments at the beginning of the week and controlling at the end of the week. This is a simple planning and leadership process that you shall apply to your own work. Every Friday, you may recapitulate for 15 minutes to note down what went well, what has to improve, and you communicate these notes at the beginning of the following week! If people regularly deviate from targets set? Make a change. The weekly review is a scheduled meeting in Outlook or any other calendar you may prefer.
Before you start a new week, you should think about and consider the following seven action steps:
- 20% talking, 80% listening = trusted advisor
- Sales without selling increases results by factors, shown by the sales elite
- Use the system of benefit-based-pricing to increase your profitability
- Tie liquidity planning together with marketing & sales planning
- Leadership = communicating clear, measurable, and achievable goals,
- Leadership = Evaluating achievements in review, optimizing and drawing consequences
- Increase your conversion rate rather than scheduling more meetings