Sales in the Online World

There are two general attitudes toward sales, one which has its roots in the history of the industry, the other which was developed as a result of changes in technology. Unfortunately, despite the knowledge available that the old system is fundamentally flawed, there are still many people who will tout its merits.

The Old System

Under the old system, the salesperson would provide you with [biased] information, then try to convince you why you should buy it. A sense of urgency was often created, as though the sole opportunity to make this purchase at this fantastic price is about to go away. The salesperson was concerned solely with the idea of making a sale.

Over time, however, it has become clear that the concept of a special deal never did really exist, that the prices were always on special, with various modifications of the exact terms. The last opportunity is just one in a long line of opportunities. Additionally, with the ease of doing your own research, it has become more difficult to sell patently false information.

Despite this, such marketing techniques still exist, and are the subject of expensive courses claiming wildly [false] stories of success with the system.

The New System

The new system came from the idea that people are able to judge for themselves whether or not they need a product. The idea of a sale is to reach out to as many people as possible to identify their needs, and then to sell a product that solves a real problem. With this mentality, the vast majority of the people you communicate with DO NOT BECOME CUSTOMERS! Rather, you are providing information to thousands in the hopes that you’ll be able to help a few dozen.

As a result, what you end up doing under the new system is focusing not on the product or service, but on the relationship. While you don’t hide what your angle is, you also don’t focus on it. You don’t subject your audience with a sales pitch, but with discussions about real issues they face. As your credibility grows, they will approach you to find out if you can help them.

Dissention

I’ve been accused of being naive with this approach, that in reality, if you don’t try to sell people something, they won’t buy. As such, I would like to reply as follows.

If you look on this site, you will see that I do not sell any products or services directly from the site. I do have sections of the site that talk about the types of services I offer, and I encourage people to get in touch with me. People do contact me, and I’ve worked and continue to work with many of my readers. That being said, I don’t think I have something to offer every reader in terms of work for me. But I do continue to provide advice and information in the hope that it will help you in growing your business.

Will this system work for you? I can’t promise that.

But if you focus on content and relationships, then you will end up growing your network, and perhaps bringing it into your next venture if the first doesn’t work out. Focus on the hard sale, and you’ll find yourself being ignored by people who don’t want to be sold to, and you will make it more difficult to try to start a second venture on the success or failure of the first.

Gen Y and Authority

In an earlier article, I discussed Generation Y and its questions, or its attitude toward questions. Recently, I was exposed to another difference between Generation Y and X, or, more generally, those of us who grew up in the world of mass exposure to information and those who did not.

When reading information from any source, we all have a bias toward accepting the information as being accurate without any further research into the topic. In the past, a newspaper or magazine might be considered to be a provider of accurate information. While these sources are [silently] acknowledged to be biased, it was accepted, and rather than dispute the facts, the emphasis was placed on interpretation. As a result, the facts themselves were generally being presented accurately, and a critical reader could distinguish between fact and opinion.

In recent years, the availability of information has changed the landscape of information dissemination. The lines between fact and opinion are rapidly blurred, opinions are being presented as facts, while blatant ignorance of truth is being hidden behind walls of lies masquerading as reality.

Generation Y is used to this type of information presentation. While some are better than others at recognizing the differences, we no longer put faith in the written word. Just because an article has been peer-reviewed does not make it accurate. We look for differing opinions, and want to do our own analysis of the reality (whether or not we’re any good at that is debatable).

When someone from Generation Y hears about a new technology that has neat applications, we run to Google to see what people are saying. We check Wikipedia as a basis for our “factual” information. We rarely assume that the presentation was the truth.

That’s not to say we produce better or worse results than assuming the speaker or writer is honest without verification. But it does make for a more critical reader, and with the large number of scams and garbage information being distributed, that can’t be a bad thing, can it?

Twitter – Boon or Bane of Business

For any of you who have yet to join the site, Twitter is a micro-blogging site in which each post is 140 characters or less. People “follow” the posts of other people, and have their own posts followed. Coupled with the ability to search for topics of interest and to share and filter information quickly, this site has seen itself applied to a variety of uses.

Business Boon

Some businesses have applied Twitter to increase their revenues. Pushing out information in an easy-to-share manner, new products and services can be promoted quickly and easily.

One ice cream cart in Toronto used Twitter to post the special flavor of the day each morning. Another mobile business used it to update their location on a regular basis (though now there’s another service just for this feature).

Another typical use is for customer service – Twitter provides a very public way for customers to connect with a company and get issues resolved rapidly. Because the feeds are generally public, a good customer service response can gain a lot of positive publicity.

The search functionality as well is beneficial to businesses. Needs can be identified, and potential customers can be found by looking through posts and filtering by a variety of keywords. Posting questions to the public can gain interesting feedback as the crowd weighs in on the issues.

Business Bane

Of course, no system is perfect. A large number of the posts on Twitter are completely inane, not to mention those generated by bots. While choosing who to follow, as I do, can limit the amount of complete rubbish entering your feed, there’s never any complete escaping it (unless, of course, you just don’t visit the site at all). From a business perspective, having employees spend time on Twitter can result in large amounts of wasted time as people click through links, read posts that have nothing to do with their work, and potentially post information damaging to the business (although this last point has more to do with trusting your employees to be responsible than Twitter in particular).

As such, the time spent on Twitter in the business world can be something that drains time from other, more productive tasks.

Summary

Personally, I use Twitter, and have found it to be quite useful for sharing information, getting answers to questions, and engaging with people I would otherwise not interact with. However, like most things in life, the issue here is not black and white, but one of responsible use and moderation.

How about you? What do you think of Twitter, and what are some of the issues you see businesses facing with the now massive micro-blogging engine?

Book Education vs. Job Training

I have a degree from university, for which I spent 5 years taking a variety of courses on several subjects. Taking about 10-12 courses per year, that works out to about 50-60 courses. That’s quite a bit of education when you think about it: about 2000 hours of education in class. As a rule of thumb, about 3 hours were spent out of class for every hour in class, bringing the total to about 8000 hours.

I then worked for an insurance company for three and a half years. At 2000 hours of work per year, that’s about 7000 hours of work. During those years, I continued to learn, though not at the same pace. The learning was different from school – while school tended to focus on theory, work focused on the practical. Where school focused on diversity of knowledge, work was concerned with specific topics.

The difference is very fundamental, and neither would suffice without the other. School is about teaching you how to learn, providing you with the basics in a given subject area to get you started. Work is about getting a job done, requiring more detailed knowledge in highly specialized topics. By having a solid education, you will learn how to gain the particular knowledge you need to complete a given job.

That being said, it would seem that I value school knowledge over work training.

That would be the wrong impression. I learned more from my on-the-job training than I did in school by a major factor. But it was significantly aided by the fact that I had a formal education. That being said, what I learned on the job is not taught in school, nor is there an easy way to do so. There is no replacement for hands-on training, which is, perhaps, the reason that there is such a focus on employment history and little on education when it comes to hiring.

Personally, however, I would prefer to hire someone with a formal education and little/no work experience over someone with the reverse. Why? I would rather have someone who’s been taught to learn over someone who may or may not be able to learn new skills easily.

Project and Hourly Pricing

One of the most difficult parts of my job is how I price projects for prospective clients. The benefit of project-based pricing to the client is quite simple: they can easily budget for the project with some level of confidence that the price will not change. Combine that with my attitude of sticking to the quote throughout the project, and the client will be quite happy.

From my perspective, though, this creates something of a problem. While the client wants to know the price in advance, I often cannot accurately predict the amount of time I will need to spend on the project, and ergo, the price I should charge. Part of the reason for this is that often at the early stages of the project, the scope is not well-defined, and cannot be until the project begins.

When possible, of course, I will bill in increments, with certain milestones ending the various stages, at which point I estimate the cost for the next component. But this is not always possible, and often is not acceptable to the budget-conscious client. When billing like this, there is little difference between project and hourly billing, and so the client would often be better off being billed by the hour directly.

One strategy I’ve tried, with some success, is what I term exclusion billing.

Exclusion Billing

Basically, I look at the project and break it down into large components. I then exclude certain components from the bid, because I expect them to be harder to estimate until more information becomes available. I then recurse into each large component, and break it down further using the same system. When I give the quote, I detail which large components are included in the quote, and which smaller components are not. I also explain why I’ve excluded items, but it gives the client an idea of what I’m prepared to put into the project under the quote without haggling.

The problem with this is scope creep, and that’s for the simple reason that since I quote by exclusion, if I haven’t explicitly excluded something, I am usually required to include it under the original quote. What I’ve found is that while some clients abuse this to try to include as much as possible, many will work with me to determine what’s fair.

What’s Fair Billing

This is perhaps the most arbitrary system, and it really only works when you have a solid relationship with the client. Basically, you give them a price, and tell the client that it’s based on a reasonable expectation for what will change during the course of the project. Perhaps the original estimate was for 200 hours, and you quoted at 240 hours (20% contingency for scope creep and unexpected surprises). The official contract says that you’ll work on the project and complete certain pieces. It excludes certain items from the quote.

It also says that items not mentioned will be dealt with fairly – that is, if it’s reasonable that the client should expect you to have included it under the original quote, then you’ll include it. If it’s reasonable for the provider to assume that it would have been excluded from the quote, then it will be extra.

Naturally, this system is incredibly hard to get working in real life, unless, as I said, there’s a good relationship between the two parties, and both are trying to be honest and fair.

Inclusion Billing

This system works both for and against the provider. Basically, the quote will only include those items listed explicitly. Anything not in the original quote is extra.

This sounds great, except that in most projects, you can’t predict everything that will need to be done before the project starts. As a result, if you stick to this system, the client ends up being billed for many items that should have been included on the original quote. Also, the client will now need to haggle over every last item, since the billing is being done at that level.

How about you? What have you found to work when writing quotes for large projects? How do you ensure that you quote your clients accurately so that the ultimate cost of the project is fair to both parties?

I Won’t Steal Your Idea

As a consultant to various small businesses, I’ll be approached by people to discuss their business, and ideas for how they might expand. Since I’m also in the business of application development, I’ll also hear about their ideas for new websites. Sooner or later (usually sooner) they’ll raise the question:

How do I know you won’t just take my idea and build it yourself (leaving me out of it)?

A valid concern, unless you’re actually in my business.

A typical day for me is as follows:

  • Get to work by 8:30 AM
  • Work for 8-12 hours for various clients – this is what I get paid for, so I have to work on projects that I’m being paid for or I won’t be able to pay my bills
  • Get home, eat dinner, spend some time with my wife and daughter – this time is strictly family time, so no working on projects
  • If I feel up to it, put in a couple hours on writing articles here and on my single pet project
  • Sleep

First, there isn’t really any time for me to work on your idea unless you’re a client. I won’t get paid for it, so the only slot left for it is during my project time. I already have a project that I would like to complete, so even if I decided your idea was better than mine (and many times this is true), I would still want to finish my current project before starting another.

Second, there are all the reasons to keep you involved. You thought of the idea, and probably have some vision of how the entire project will work. Building an application is only part of it – you still need to define your target market, and reach out to them. I could spend time figuring out an angle, but you are likely far ahead of me in that direction. You also have likely thought of how the business will grow, something you haven’t told me about. So I can only guess in that direction.

Third, it’s not my business model – at all. I’m in the business of helping clients build their ideas into realities, not running those businesses for them. A perfect client to me is one who has a good idea, needs some help getting it off the ground, and plans on running the project themselves once it is built. Running an online business can be more than a full-time job, and it’s not what I’m interested in doing. That’s what my clients like doing, and I help them get the technology they need to make it happen.

Fourth, it’s really bad for business. If I took even one client’s idea and executed it on my own, word would quickly get out that I stole the idea. I would lose the trust of all my current and potential clients for a potential momentary gain. It’s not even a guarantee – no matter how good the idea is, there’s never any guarantee that it will be profitable.

Am I saying that an NDA (Non-Disclosure Agreement) is unnecessary? No. You should still have one signed. But it’s not so much as to enable you to protect your idea as it is to inform the other party that you intend to execute the idea, and whatever you tell them about it should be considered proprietary.

Is it enforceable? Probably not, in most cases. But it does make it clear that you consider the information given to be privileged.

Complete Without Documentation is Not Complete

There are several components to every project, and there’s one particular component that will cause many participants in the project effort to groan, and that’s documentation. Having worked for a company where the effort to document could often exceed the effort to implement, I’m quite familiar with the feeling of frustration when it comes to documenting work.

That being said, I still believe that it is absolutely necessary to document projects at some level, though the effort should be such that it’s relative to both the amount of work in the project and the nature of the work being documented. A change to some wording on the company’s website would not require the same documentation as a complete overhaul of the approval process for making purchases over $100,000. Both, however, should be documented.

There are several reasons for this.

The first is to provide a way of keeping track of what changed. For this, a simple email, or filling out a brief form, could suffice in most cases.

The second is to ensure that those who need to know about the change are kept informed. This is not so much what is documented as much as it is about ensuring that the documentation is stored appropriately, and includes requirements to notify the appropriate people.

The third reason is for accountability. By having a person, or group of people, sign a piece of documentation, they take ownership of the contents of the document. In case an issue comes up, you will know who to discuss it with (this isn’t about blame, it’s about open and effective communication). The side effect is that people will become reluctant to sign documents without being aware of the contents.

Fourth, it helps you organize your thoughts about the project, and to make sure that items are not missed, or are explained as to why they were not completed.

Is your project done? Only if it was documented.

Get Some Skin in the Game

There’s a fairly well known rule in propositioning to potential investors – make sure you have some personal investment in the business or you risk losing all interest up front. The reason for this is fairly simple – the investor wants to see that you believe in the idea enough to take some risk before putting their own money behind you.

I discovered today that not all investors are actually aware of this rule, and that it applies in reverse. A proposal I had heard about consisted of 100% introductions and connections, but no cash. This was actually the second time I had come across such a scenario, and it surprised me.

As a business owner, when looking for an investor, you are generally looking for some cash. While the investor usually brings more to the business than just their bank account, the business owner will still want to see some cash in the deal. The reason is fairly simple – the investor too should have some skin in the game.

Take a business worth $100,000 before the investor arrives (we’ll leave the derivation of that value alone for the sake of argument). The investor requests 10% equity in exchange for performing various services for the business (which do have a value, perhaps quite large). The business owner will likely retort with a request for $10,000 in addition to the services, and a deal might be struck somewhere in between.

There are two reasons for the money, though.

One is to get the investor to part with cash, showing that they truly believe in the company and are willing to take a risk. Having them provide a service at no cost is an investment of time, which may have more value in terms of dollars, but doesn’t have the same emotional connotations.

The second is to get a more widespread investment in the form of cash that can be used for a variety of reasons, instead of time, which can only be used for the particular expertise of the investor.

A message to investors – if you want to be taken seriously, include at least a token amount of cash in your deal. You can request more equity in exchange, or a particular service in exchange. The offer of cash shows that you trust more than your time with the business, but also your hard-earned dollars.