One is to focus on your niche; the other is to standardize the way you package your products.
Finding your niche is really important. Sharpening your focus on what you are truly excellent at delivering is an extremely positive thing to do.
Make sure all your sales and marketing messaging comes together, because customers will come to you if you can explain your niche in a succinct way. And they’ll stay with you if your products are standardized.
Standardization of your packages drives scalability
At Add1Zero, we specialize in working with tech-focused B2B services companies who are looking to scale up from the mid-six figures in revenue to the mid-seven figures.
You can get to the point where you are taking $500,000 in revenue each year by customizing every deal you do with a client. That is a great way of making sure you capture revenue… But there is a catch.
What you will find is that around that half-million mark, you can’t scale any further because you have no standardized delivery method for the things you offer.
The process of standardization goes hand in hand with niching down. What you need to do at this point is examine the things you offer in particular combinations and make your packaging and pricing really tight.
This is a lesson we learned from software. Nobody is surprised when you go to a SaaS website and you find three packages – silver, gold and platinum, or similar. And as a customer, you don’t get to negotiate with those companies. Because they are designed for scale.
What we want to do is provide that standardization around your entire revenue program, including the packaging, pricing and delivery.
Now, suddenly, all those things become much more scalable. When I sell Package A, I know from start to finish what the customer’s experience is going to be. So do the onboarding team and the delivery team. All we have to say is that we sold Package A – and everybody goes into motion.
The customer experience becomes more fluid because your operation is standardized. We design a system that can be scaled – and we fund it by closing deals for our clients.
Focus on the value you deliver, not your features
This process is labor-intensive in its early stages because every business founder is convinced their product is special. Interestingly, what they think is special about the service they have developed is always the features. Always.
We have to learn about those features to be able to sell for that client, but what really matters to us is the value.
From a packaging standpoint, our first step is to unpick precisely what it is that our client does for their customer – and you’d be surprised how difficult it can be for people to describe that in a compelling way.
So we ask people what it is they do, why they do it – and how the customer actually benefits from that. This process reconfigures how people talk about their business because it’s no longer about their features. It’s about the value they deliver.
Ultimately, that value can be expressed in two different ways. My preferred option is to be able to tell a client’s customer that the service in question will make them more revenue.
If that is not possible, we will follow the other option of demonstrating how the product will drive down the expense of their operation and increase productivity, which means greater profits.
I prefer to focus on making somebody more revenue because that is what founders worry about more than anything else. Revenue is a force factor; you cannot change anything in your business if you don’t have revenue coming in, so money in the bank matters most.
If we cannot do that, we will focus on areas such as cost mitigation and additional profitability but, make no mistake, those are harder to sell.
Revenue has to be your number one priority
By creating an organized revenue function, we force the rest of a client’s company to be on point too. They need to design, or redesign, systems for customer delivery, operations, finance, marketing. If we are going to make sales, that has to happen so that everybody is aligned.
Sometimes, however, people are stuck in their ways and do not want to take the steps necessary to make them more money.
You can have all the vision and passion you like, but revenue simply has to be your number one priority in business. Otherwise, all you have is a hobby.
If I had one piece of advice for founders it would be to think seriously about what they do. You can have a lofty vision, and that’s wonderful, but if you don’t make any sales, it really is all for naught.
Negotiate on payment terms with larger customers
When you do start selling to larger companies, it is always worth negotiating on billing terms. If you say, for instance, that you can lock in your service for several years and assure your customer that the price will not be raised, that guarantees you revenue for the foreseeable future.
Similarly, if you can bill a client up-front for a whole year – possibly in return for a discount – you have just obtained, effectively, an interest-free loan that you can use to build the rest of your service.
I’ve known clients who have obtained a $350,000 check up front that they then used to develop the service they were delivering.
Obviously, you still need to deliver on the contract – but moments like that can really make a difference to your business.
Beware of the pitfalls of scaling too fast
However, I have one strong word of warning to smaller companies: step your way up gradually through the size of the customer you are working for.
If you are used to delivering a service for $10,000 a month, be careful jumping to $100,000, because you might damage your company. It sounds great to say you’re going to land Coca-Cola or Ford, but are you prepared to operationalize a larger client like that?
There are three particular pitfalls you should watch out for:
i) Check the contract. People will go the extra distance to be able to say McDonald’s is their client, for instance. It feels like a fantastic thing to do because if another company sees a big logo on your book, they will feel better about doing business with you. But when you’re going after those big logos, make sure you read the contract. Large companies sometimes insert clauses forbidding you from telling anybody you’re working for them. Negotiate to have those clauses removed or toned down.
ii) Check the payment terms. This is particularly pertinent when you’re dealing with government departments that have 90- or 100-day payment terms. How are you going to finance the work you are doing? I’ve seen companies end up in a deep cash-flow hole as a result.
iii) Scale everything: People get excited when we bring them ten new clients, but they then have to scale their billing operation, or their delivery. You can get upside down in your cash flow if you grow sales too fast, because you actually need to deliver the things you are selling. There are times, when our systems are working well for clients, when we sometimes have to pump the brakes!