Category: Management

Pricing

~ C.O.R.E. Beliefs ~ Leave a comment

Happy Tuesday.  On Sunday, we had brunch with some good friends Jordan and Whitney at Tommy O’s in downtown Vancouver.  Kubae and I split a delicious Kahlua Pork Quesadilla and had a great time with conversation about firing ranges and civil liberties.  We then spent the rest of the day driving around contemplating if it is time to move to another spot as we are fast approaching our 2 years in downtown.  How time flies when you are having a great time.

One of the things I think that worry small business owners is what price to charge.  And since most small business owners start their small business after leaving their employer, they typically follow the model they were taught there.  This works, but I think there may be a better way.

When I was working with VSource in the startup of Argentstratus, I decided to approach the pricing model differently.  Instead of first saying, “here is our price”, I suggested the sales team start by asking what the prospective buyers budget was for things like

  • Server replacement
  • Desktop PC replacement
  • Software updates
  • System security
  • Downtime for server maintenance
  • etc

The typical response was a blank – deer-in-the-headlights- stare because most small business owners don’t stop to think about those things.  Depending on their answer though, the sales team could help create a frame of reference for the costs of doing everything in-house versus outsourcing their entire IT.

This had two benefits: First we avoided having the investment discussion too soon and second we ensured that the prospective buyer understood what they were really purchasing.  In essence, we established the value of the offer and then provided a price which was dramatically lower than that value.

To be clear, there is no such thing as the right price.  What the small business faces are buyers with absolute maximum and minimums to their pricing decision.  Many start-ups are willing to pay legal counsel several thousands of dollars: Some will not pay a dime.  Established businesses are willing to pay a million dollars to buy out a competitor but won’t spend $100,000 on an advertising campaign.  Each party perceives the value differently but I honestly believe the main point of differentiation is how the investment is packaged to the buyer.

By the way, I intentionally use the word investment over “Price” or “Cost”.  For most of us, especially in the service industries, we are often considered a “Cost of Doing Business” – an expense.  I go out of my way to explain that using my services is an investment.  By paying my firm you get access to some of the best business, tax and accounting minds in the area.  By deliberately removing loaded words we can continue the conversation in ways that benefit all parties.  If I say your tax return is going to cost  you $1,800 you will try to shop me.  If I say that your investment in assistance in running, managing and reporting on your business is $1,800 and I will throw in a tax return for free… you see my point.

So some guidelines I have learned along the way when it comes to pricing.  Where I can remember the source I will give credit and if I do not actually remember the source I apologize in advance and if you can send me a message with the actual source I will update this post for that information.

  • Do not charge by the hours worked, but by the years it took to get you to this point. Harry Beckwith
  • Price high and offer amenities – it is easier to remove add-ons than raise prices
  • It is always easier to offer discounts than to raise prices
  • Determine what your customer can pay and then figure out if you can service the client profitably.
  • Offer tiers of service (Bronze, Silver, Gold or the like) with very clear differences between them so you can cater to a larger audience
  • Ask the prospective buyer their budget and try to hit it.  Jeffrey Gitomer
  • People hate to be sold but they love to buy.  Help them buy.  Jeffrey Gitomer
  • Your number one competitor is apathy, price accordingly.
  • Your costs are not your customers problem.

What these guidelines suggest is to be open and creative when it comes to pricing your solution.  You are offering a solution to someone’s problem so don’t be afraid to be creative about what they pay for their investment.  As a general rule, if you are looking for new or more business opportunities, look at how your competition is pricing and then do something different.  Make your pricing easy to understand and consistent for a set of prospective buyers.  Test your price and if you are getting 100% of prospects saying yes, realize your price may be too low.  If you are getting 100% saying no, your price is too high.

Somewhere in between is that sweet spot for that group.  You can find it.  If you are interested in thinking about ways to create new pricing models, try talking with your current accounting professional about ways to make your solution and pricing more effective.  If you are looking for a new accounting professional or would like a second opinion, feel free to contact me for a free no obligation consultation.

Have a great day and enjoy the challenge of charting a new course on pricing your solution.

Thoughts on change

~ C.O.R.E. Beliefs ~ Leave a comment

Happy Friday.

Have you noticed that many people are afraid of change?  That somehow the way it was is good enough and so should be continued into the future unnecessary.  Or worse, because it didn’t work before it can’t work today.   While looking back at history is a decent guide to making a decision, it cannot be the only tool we use when deciding how we should do things today.  Or tomorrow.  Things are changing and small business has to get on top of this or suffer the consequences.

Last night Kubae and I had dinner with Wes and Dianne – good friends for many years.  We got onto the topic of change – technically we were discussing the Brexit and the Trump issue – and the things that both sides had in common.  Dianne pointed out that that the supporters of both movements lived in fear of the change that is happening.  Kubae then pointed out that it isn’t just the change but the pace of change that is possibly a driver.

The pace of change. I think they are onto something.

Look at the last 100 years. in 100 years we have gone from being essentially foot-mobile to autonomous vehicles.  We have gone from handwritten letters to text messages.  We have gone from biplanes to space shuttles. All this in 100 years.

Look at the last 50 years. We have gone from 3 major automobile manufacturers to 15. From leaded gasoline to electric and solar. From princess phones to Bluetooth.  From large global mass manufacturing to 3D printing of single pieces.  Amazing changes in my lifetime.

As an accountant, I am a trained historian.  Historians look at the past and try to make sense of it.  All accounting is really is ensuring that the business history (its transactions) are recorded clearly and concisely for future use.  History is useful but I have found that history alone is insufficient to help chart a course of action.

As a business developer, I am a futurist.  A futurist looks at today and asks how it might look tomorrow.  A futurist needs history to provide a starting point and trends that can help guess what tomorrow will look like.  Guessing about the future is fun, although it is often seen as science fiction or worse a waste of time.

And yet, a futurist is a planner.  Businesses must plan what their future is going to look like and then remain flexible enough to adapt to the unforeseen changes and also record things so that the historical reality can be compared to that future guess.

And this is the rub isn’t it?  I have often joked that I think most small business owners are frustrated accountants. They love the history of their business -how hard they’ve worked, how much money they’ve made.  But when asked what the future holds for their business, the response is typically, “same as last year but add 10%”.  That might have worked in 1960, but I don’t think this is going to hold true in 2020; and that is only 4 years away.

That’s right. four short years.  Are you asking yourself what your business is going to look like with

  • Drones doing delivery
  • cars that drive themselves
  • trucks that drive themselves
  • equipment that warns before it malfuctions
  • a printer that can make parts by adding and not subtracting raw materials
  • energy without being connected to the power grid
  • food grown locally instead of on large farms and trucked
  • and a million other things

This is the easily predicted future because most of this is here now.   What about the things we haven’t even dreamed of yet?  Are you positioning your business to be part of these changes or are you going to defiantly wave your buggy-whip until the end?

Typically, I would sign off by suggesting you have a conversation with your accountant, but not today.  Take someone two generations removed from you out to lunch and ask them these questions.  Find a good science fiction book and read about what their vision of the future looks like.  Let your mind explore the fascinating potential that your business has before it and start thinking about your future. Because it doesn’t have to be about fearing the change – it can be about embracing it.

Have a great weekend.

 

 

 

Thoughts on Weekends

~ C.O.R.E. Beliefs ~ Leave a comment

Good morning and Happy Monday!

I hope everyone had a fun and memorable 4th of July weekend.  Attached are some pictures of the fireworks display held at the Fort of Vancouver.  This is from our condo downtown Vancouver.  We always have an incredible view and it is one of the things we love about living downtown.    The pictures are a little blurry as we were sitting inside (it was a cool 63 degrees out there) and I was using my Samsung phone which is really not suited for night photography.  But we still had an awesome viewing experience.

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Are you a small business owner who ended up working all weekend?  I imagine most of your efforts involved paperwork.  From emailing quotes to entering bills, you likely have forgotten why you wanted to work for yourself in the first place.  If your business is consuming all of your time, perhaps you should rethink your efforts.

Working harder in your business doesn’t really save you anything – not time, not money, not effort.  But what exactly do I mean by that?  Well, first thing is doing a job you have hired people to do.  You have a customer call on Friday for special work for delivery on Monday and what do you do?  You don’t want an employee to do it because it is A) the weekend and B) it will cost you overtime so you spend your weekend doing the work.  Why did it happen this way?  Inertia.

You are used to being the chief problem solver.  Whether you have 2 employees or 20, you cannot get over the inertia of you starting your business and trying to do everything.  The problem with you being the only solution is that your Company doesn’t grow, even as you add new employees.  Think about it… has your workload increased or decreased when you added new employees?  I bet your workload increased didn’t it?

The one thing your business needs is you.  No, it doesn’t need you doing the technical work that you hired competent employees to do – your business needs you to think clearly about how to grow, how to succeed.  How are you going to land that new contract?  Who is our target customer next year?  These are the things your business needs you to work on.

If you hired good employees and you have given them effective written instructions, you will get a good result. But hiring well and not having effective written instructions leads to poor results.  You don’t even want to think about the mess that happens when you combine hiring the wrong people along with not having written instructions.  Sadly, we have seen all too many of these situations.

So, set a priority to take weekends off.  This means work on your business, not in it.  Rethink how people work to reduce the paperwork and emails and questions.  Spend your time creating the “How we do it here” manual so that you can eliminate most of the verbal instructions that go on.  Start simply and let your employees finish the rest of the manual. I bet that in no time you are actually able to enjoy a Saturday off and not feel buried when you come back in Monday.

I strongly encourage you to talk with someone who can help you create effective work processing documents and checklists.  Believe it or not, your accountant actually follows many checklists in doing their work so start there.  If you do not have an accountant or are looking for a second opinion, feel free to contact me to schedule your free no obligation consultation about how you can once again enjoy the weekend.

Have a great week.

 

Interview with Tim Seivers

~ C.O.R.E. Beliefs ~ Leave a comment

Good morning and happy Friday!  It is going to be an awesome day and we get to enjoy Brendan and David this weekend!

Earlier this week I had the opportunity to meet with Tim Seivers with Floyd Watkins & Associates.  Floyd Watkins operates out of Vancouver Washington and specializes in business and personal insurance.  My relationship with Tim goes back several years working with clients jointly on business and key person insurance.

Tim is a very easy professional to work with as he does not try to dazzle clients with “insurance-eze”.  He speaks their language and always looks out for the best interest of the small business owner.  Don’t get me wrong, he cares about the employees as well, but he is primarily driven to help protect the business owner and the value of the business.

This includes not only insurance products but retirement plans which are focused on the business owner.  One of the things I appreciate most about working with Tim is his use of the “Grocery Bag of Savings.”  It is worth contacting him to find out more about how he helps your employees deal with savings for retirement!

I asked Tim what three things he would like a reader to take away from our conversation.

  1. Floyd Watkins carries more than one plan.  When asked to explain he pointed out that he can offer many different types of insurance plans, not just Kaiser or Blue Cross.  His team can craft a compliant plan that maximizes the benefits to the owner and key employees while also offering fair coverage to all the employees.  He pointed out that one of our mutual clients from a few years ago has a policy which cut health insurance in half and provides much greater benefits to the key employees.  This plan was designed to address the fact that most of the employee base was under 30 and unmarried while the management team was over 45 and had dependents.  The plan was designed so that the Company picked up the first $1,000 of medical expenses; and since the younger employees didn’t go to the Doctor, the Company saved huge.  Plus, this policy actually refunded premiums if claims were below the threshold.
  2. Business owners need to plan their exit strategy or face a fire sale.  Tim told the story about a partnership he was working on recently.  The partners were debating if they needed a $1.0 Million or $3.0 Million policy on each partner.  This went on for over six months.  About two weeks before they were to meet with Tim, one of the partners called to say he was diagnosed with lung cancer.  This partner passed away 2 months later and not only did his family receive no value from the business, they actually had to repay money to the partnership because he had personally guaranted loans. This risk can be reduced by using appropriate types of insurance.  He stresses that the paperwork to suport a buy/sell agreement is important but that it isn’t worth anything without the means to pay for it.  Let’s face it, most businesses are worth far more than the cash they have on hand so anything you can do to ensure you protect your family and your business is worth considering.
  3. People should consider this “Money at a discount”, not life insurance.  Let’s face it, you are not going to get the benefit of any of this insurance (in most cases – although Tim knows of products which can allow you to access some portion of the insurance while you live) in the event a pay-out is required.  So he suggests thinking about this as paying money out today for a payment of money in the future. By asking yourself, “How do I make sure that my family has what it needs to go on without me and what is that investment today?” This is especially true for small business owners who potentially put their family at huge risk if something should happen. Investing a stream of cash payments today to receive some greater future benefit to protect them may be worth it.

Finally, Tim wants everyone to know that he likes being the Second Opinion Professional.  He strongly encourages you to have this discussion with your business insurance professional and then he encourages you to have a conversation with him.  The consultation is free and there is no obligation but it will give you peace of mind in knowing that your current plan recommendation is meeting your needs now and in the future.

You can find out more about Tim Seivers and Floyd Watkins & Associates here.  I strongly encourage you to think about getting a second opinion on your benefits and protection and think Tim is the right person in the Clark County area to talk with.  Thank you Tim for the time and great information.

Have a great Fourth of July Weekend everyone.