Some clients want to squeeze every last drop from their budget and if we are on the back-foot there is a danger we give in to every price challenge. There’s bad news, I can’t see it getting better anytime soon!
I was chatting recently with a prospective client who runs a small business. They are finding business continuing to be really tough – as it has been for the past three to four years. Their overall sales are down and their individual clients seem to have less to spend on average. They were chasing twice as many opportunities worth half as much as before. The risk is they become more and more desperate plus we exhaust ourselves chasing after these smaller opportunities
If clients have smaller budgets there is a danger our profits are disproportionately squeezed unless we consciously take action. Many sales people are focused simply on top-line sales rather than on profitable sales. Typically as sales people, winning the deal can be more important than the profitability of the deal. In our rush to run faster, work harder and longer we allow client relationships to become buyer-supplier rather than peer-to-peer. Our business relationships become increasingly transactional rather than based on our expertise and the value we provide. We can find ourselves over-dependent on a small handful of clients. If a client is more than 20-25% of our business there is a tendency to be fearful and give in to their demands.
The more this continues, revenues decrease and profitability shrinks, the more pressure there is to win that next deal. We take more decisions, which simply exacerbate the situation. Clients can sense or smell our desperation and are likely to take advantage of the situation.
One easy mistake is to wait until we have a 'burning platform". We have to act because there is no alternative. Act before that when you have choices. Notice how the market leader cannot see the step-change in a market unlike the newcomer. Having created the Walkman, Sony should have developed the iPod. As a leading book retailer, Waterstones should have invented Amazon and as the leaders in traditional directory search, Yellow Pages should have invented Google. Take steps well before it's too late to re-invent your business for the future. Markets are changing faster than ever. The longer you leave it, the harder it becomes to re-invent.
Take Blockbuster, Comet and HMV. We look from the outside and ask ourselves “how come they couldn’t see it coming?” Sometimes when we are in a declining market we cling on to an optimism that things will get better or that it’s miraculously going to change. The riskiest thing is doing the same thing over and over and playing safe.
The great thing about tough times is that they are tough for competitors and if we are better we can turn tough times to our advantage. As they say "what doesn't kill you makes you stronger". Churchill once said: "We have no money, we shall have to think." Take time to think about possible solutions and to think laterally about how to prosper in challenging times. Here’s how:
- The rules of success and failure in most industries are being rewritten. Think how the future is likely to change over the next two-three years and what impact that may have on your business.
- Firstly develop a plan. What do you want to achieve, how will you get there and what needs to be done differently? Don’t try to do too many things. Focus on the small number of actions likely to create biggest impact.
- Identify priorities and focus on those. Focus your time on your most profitable or potentially most profitable clients. Avoid being ‘distracted by the next shiny penny’, which may keep us busy but not necessarily effective.
- Think about how you can deliver more value to your clients and how you can be the best in your sector or industry. If you are the best, are well differentiated and have what your clients want, you can charge a premium price.
- The best new business is existing business. It is five-six times more expensive selling to new clients than it is selling to existing clients. Focus on retaining and growing your existing clients. Think about how you can increase your share of wallet with your clients. How can you cross-sell to clients?
- Seek referrals. Your existing clients can be your best new business weapon. Referrals are typically less price sensitive and often easier to convert into a sale. Seth Godin said: “The safest thing is to be risky and conversely the riskiest thing is to play safe.”
- Find ways to achieve standout. How can you and your work standout more?
- As better questions to understand your client’s needs and challenges. Then listen actively. Dig deep and discover those opportunities just below the surface.
- Deal with decision makers, not messengers.
- Become mission critical to your clients. Ensure that whatever you deliver impacts your client's top three critical goals.
- Don't simply accept a client's budget. Subtly see how much flexibility there might be. Often clients keep back a little budget as a safety margin.
- Get a second pair of eyes on your challenges. Often someone less involved can see opportunities and solutions more clearly than we can, especially when we on the back-foot.
- Be more strategic with your pricing. A common mistake is not thinking through how to optimise your price. I have developed seven different strategies to optimise your pricing to be more profitable.
- Know how to negotiate more effectively, how to hold your price and how to respond to price challenges. In my negotiation and sales workshops we look at how you can be more profitable without working harder and be more valuable to your clients.
- Be optimistic but also realistic. Pessimism seems to attract more negativity.
How will you sell more to your clients?
About the author: Chris Merrington is the author of Why do smart people make such stupid mistakes?, a practical guide to more profitable client relationships for marketing and communications agencies, sales teams and the professional services. Chris regularly runs workshops with directors and teams in the areas of Negotiating more profitably, Selling consulting services, business prospecting and pitching to win. He can be contacted at email@example.com