Saturday, November 25, 2006

Do You Buy?

One of my non-computer hobbies is collecting records.

Yes, records. Old, plastic, vinyl, and much older materials.

I have about 2,000 LPs and about 1,500 78's.

In the days before everything was posted to the web or catalogs were available electronically, vendors used to send out paper catalogs. This cost them money, so they usually asked for $1 or $3 for a one-year subscription to defray the cost. If you ordered records, then they would send you the catalog for free the next year.

But if you didn't order for awhile, your catalog would come with a message written across the front:

"Do You Buy?"

It wasn't really a "communication" that required a response. It was more of a communiqué to let you know that you weren't going to get another year's worth of catalogs.

December is a great month for asking your clients the same thing: Do You Buy?

Most small consultants do not cull out their mailing lists/client lists very often.

The process is quite simple. We run a report in QuickBooks and sort all clients from highest to lowest sales. At the bottom of this list is the guy who bought a battery for $29.99 and the woman who attended a seminar for $49. Not far up from there is a group of people who think they're our clients, but really aren't.

If someone only buys labor, and only buys 1-2 hours a year, they're really not our client.

Some of these people are officially handed off to other consultants. This happens when they call us and we tell them that they really don't fit our model any more. We refer them to one of the consultants in our user group and everybody's happy.

Others haven't bought anything since we put them on the list of clients to be passed on. So they get a letter, nicely worded, that says that we can no longer support their needs. It invites them to call us if they need a referral.

Then the important house cleaning takes place: We take these folks (both groups) off our mailing list. Our newsletter, with materials, labor, and postage, costs about $1.50 each per month. But aside from the cost, I don't want these folks to call us.

They never have a big project, they'll never sign a contract, and they buy a new server every seven years whether they need it or not.

Too many of us spend too much time and energy chasing micro-customers. Perhaps it's because, when we start out, we need work. So we take what we can get. But over time you need to move past this. There are three primary reasons for this.

First, these customers take a lot more time than your "normal" customers. Before you can sell them something, including services, you need to come up to speed on their systems. Since the last time they called you, they bought an educational version of Office and installed in on the receptionist PC; they changed ISPs; and they bought three new laptops. Since you were not consulted or involved in any of this, you have to spend time that's normally not billable. And all that to get 1-2 hours of labor. In my opinion, this is not worth your time.

Second, your time has value. Yes it does. Now you need to start acting like it does. Your 2-3 hours spent getting an hour's wages out of this customer could be more profitably spent doing many things. You could read a good book. If you need recommendations, let me know. You could study for the 70-282 exam or another MCP exam. You could even give away your time to one of your larger clients. They'll love it. But make sure you let them know what you're up to. You could even give away your time to prospects via free network analyses that might turn to "real" jobs.

Third, you need to determine whether the client will ever be above the threshold you require for an engagement. Here's what I mean:

Major projects and all clients should have a threshold. If a client or project can't get over the threshold, then it's not worth your time. This might be a profit of $1,000 or of $5,000. Or, it might be some other messure, such as having one server, five workstations, and the intention of buying a new server.

It takes some getting used to. But you'll see that your top ten clients produce a huge percentage of your revenue -- certainly 80% and perhaps even 90%. The next ten clients product 90% of the remainder. And all the clients after that don't amount to 5% of your revenue. Look at them really hard. Let's be honest here. They keep saying they'll spend money. They're well-intentioned. Etc. Etc. But the truth is: these "clients" take more than their share of time and they return little or nothing.

So ask the simple question "Do You Buy?" If the answer is no, take them off your list.

Thursday, November 09, 2006

This Lane is Ending; Merge Now

Have you ever noticed that some people think the signs don't apply to them? They drive in the lane that says "Lane Ends / Merge Left." As their lane gets narrower and narrower, they eventually find themselve driving between the shoulder line and the crease in the pavement. Eventually, when the lane really does end, they don't have any choice except to merge and join the rest of the traffic.

We have analogies in our business.

The other day I deleted a fold labeled "W2Kupdates" and had to defend my actions. "What if we need that?" You don't need it. Windows 2000 had four service packs. Add Windows XP and two service packs. That's seven generations. Vista will mean eight generations since your precious Windows 2000 came out.

The lane has merged. It's dissappeared. You're either driving on the side of the road or you need to get in the lane and drive properly. Eventually the side of the road leads to some obstacle.

Merge Now.

Sunday, November 05, 2006

Niche the Rich

We hear the message again and again: find a vertical or a niche where you can be successful. The idea is that having a specialty will make you more profitable.

I have no argument with that, but want to recommend a variable you can add to your equation. In all businesses, there are owners willing to spend money and owners not willing to spend money. You need to find clients who are willing to spend money.

Some people say "I don't like lawyers" (or doctors or real estate agents or whoever) "because they don't spend money." I say there are lawyers and doctors and realtors who want to spend money and those who don't. The key is to differentiate between them.

One of the great books on building personal wealth is _The Millionaire Next Door_ by Thomas Stanley and William Danko. If your net worth is not yet a million dollars US, invest in this book. If you're in the $1-$3 million range, it's still a good read. If you're over that, take some time and write a book to share your insights with the rest of us.

In the meantime, here's an interesting thought inspired by the book. Stanley and Danko define what they call Prodigious Accumulators of Wealth (PAWs). This group is discussed at some length in the book. On a personal level, "the millionaire next door" drives a used car, prefers beer over champagne, has lived in the same house for twenty years, and avoids financing a personal lifestyle at the expense of a comfortable retirement. In other words, PAWs can be quite frugal.

So what makes a PAW a good client? One would think a PAW would be "cheap" and unwilling to spend money. And that's their tendency.

When do PAWs spend lots of money? According to Stanley and Danko, they spend money when they see it as an investment. So your success in appealing to these people depends on your ability to convince them that they are investing in technology.

This fits particularly well with a managed service model rather than a break/fix model.

After all, think about how you place these services. Break/fix work fits particularly well with clients who are willing to react to problems rather than pay for pre-emptive support. Pre-emptive support -- managed support -- is an investment in the future. It is for business owners who see a bigger picture.

With your current clients, you probably have a sense about whether they're prone to viewing technology as an investment or simply a purchase. For prospects who are not current clients, think about the kinds of "surrogate measures" you can find to determine their attitude. You're looking for someone who saves money as a general rule, but buys a higher quality product when the long-term finances make sense.

One other tool is the technology roadmap. See

I believe that, if you can get a prospect to buy into the technology roadmap process, then you've found someone who can see technology as an investment.

In the long run, this will be a great client. They won't be every new toy that comes along, but when it's time to buy a new open license agreement, they'll be onboard.

Important note on technique: Add the following phrase to your vocabulary. "We don't recommend every update just so you can have it." Consider when and how YOU would view technology investments in a given situation.