Category Archives: Finance Matters

Posts in this category are related to the financial side of strategy and operations

Finance Matters, Get Clear, Manage to Lead, People Matters

Know the definition of strategy to help everyone stay on the same page.

The following are definitions of phrases that use the word strategy. They provide a useful way to think about the term and matters directly related to it:

  • Strategy is what people in an organization plan to do in order to “win” whatever game they are playing.
  • Strategic thinking is how decisions and actions are made in the immediate-term in a manner that is mindful of long-term implications and consistent with a strategy.
  • Strategic planning is the structured process that management uses to periodically engage leaders in advancing their strategy.
  • Strategic plan is a description of an organization as it presently exists and where it is to be in the future along with how it will go from where it is today to where it will be next on the way to achieve a long-term vision.
  • Strategic initiatives are projects identified as part of strategic planning and documented in the strategic plan that are to address what is most important to change next in order to increase the odds of winning.
  • Strategic management is what is done to deliberately operate and develop the organization in a manner that is entirely consistent with its strategy.
Finance Matters, Manage to Lead, Sales Matters

Three Steps to Selling a Work Plan

Follow the three steps below to prepare and present a professional services workplan for a prospective customer. Those who hire service providers should also study the steps to understand how the best providers think through what they propose to do for you.

To calculate a price for a body of work, first prepare a plan that spells out:

  • Tasks: what exactly will be done.
  • Personnel: who, with what skills and experience, will do what.
  • Time: how long it will take assigned persons to complete their tasks.
  • Cost: the number of hours for each assigned person multiplied by their billing rate and summed.

When the service provider presents the work-plan and the price to the prospective buyer, haggling  often ensues. The result is usually frustrating for both parties with the provider getting a lower price for the same work effort and the prospect feeling gouged.

The prospect wants the work at a price they can afford and the contractor wants a fair price given what it will take to perform the work. The problem is that both parties experience tension from their own frame of reference, and try too hard to close the deal in one step. Fortunately, there is a straightforward process to slow things down and, if followed to-a-tee, markedly increase the odds of a smooth progression to a signed contract.

Start with the list of the tasks required to accomplish a prospective client’s specific objective. Then follow these three steps precisely to maximize the chance of landing a project to perform the work at target rates:

  • STEP 1 – Agree on the tasks to be completed: Arrange a time to sit down with the prospective client to review: their objective, the value of achieving it, and each task required to secure it. Discuss each task thoroughly and without regard to who will perform the work and without any mention of billing rates or price. The focus at this point is entirely on what must be done to achieve the desired result and the enormous value of so doing. Get your prospect to add/change/delete tasks so that they develop a genuine sense of ownership of the taskplan.
  • STEP 2 – Agree on who will perform each task: Once the task-plan is agreed to, review the resources required to perform each task to completion with excellence and how long it will take a qualified person to perform them. Point out that less qualified people will take longer and not do as good a job but will be less expensive per hour. Do not dwell on rates or price at this point in the process. Only once the allocation of resources and durations are agreed to is it time to proceed to step three.
  • STEP 3 – Compute the price: Share  a schedule of hourly billing rates for the selected resources. Note billing rates for each person should be supported by evidence that other customers have paid the rates quoted for similar work by the same person. Multiply the hours required for each person to perform their assigned tasks by their billing rate and sum the result to compute the total price of performing the complete set of tasks.

    If the client balks at the overall price, revisit steps 1 and 2. See if there are any tasks that can be revised or resources that can be adjusted to reduce the scope and total cost, rather than just lowering your rates. Consider offering a one-time credit, but avoid permanently reducing your standard billing rates.

    Throughout the process, keep the focus on the immense value the work will deliver to the prospect. Position the cost as a small fraction of that value.

By methodically working through these three steps, you can build a strong, mutually-agreed upon foundation for the engagement – maximizing the chances of a successful sale at your target rates.

Prepare a separate exhibit for each step and go through them one at a time incorporating the edits from the preceding steps right then and there in the meeting. If the edits are too extensive, stop the process and go back to the office, make changes to what has been covered, and arrange another time to meet again to complete the three steps.

Throughout the process make sure it is clear to the prospect that  there is great value to the output of the planned work effort. Express the value in the form of a specific dollar figure. Get the prospect to share their perception of value before discussing the work plan so it will be easy to point out in step three that the cost of doing the work is but a fraction of the value.