Reboot Your Culture Through New Business
Blair frequently tells his clients, “You reinvent the firm one new client at a time.” So looking ahead to the new year, he has five areas where principals can be looking to upgrade their agency’s culture through the next new client.
Links
Tim Williams, The Unscalable Business Model
Jim de Zoete, Don't Pitch Your Mental Health
Maintaining the Expert Position...After the Sale
Slapping Down Your Childlike Glee
Everything Can Change in One Conversation
Mastering the Value Conversation
Transcript
David: Blair, I love this topic. We've talked about every one of these things, I think somewhere in earlier episodes, but you're bringing all these things together. The topic is Rebooting Your Culture Through New Business. I just love the idea of renewal and just thinking differently and owning where you are and deciding to fix it. This is a very inspirational topic.
Blair: Thank you. I love the fact that I've run out of things to talk about. I just sift through past episodes, take pieces from each and repackage them into a whole new theme. It's like I could go another five, six years like this.
David: You only go back through your episodes, not mine. [laughter] There's a lot of really good stuff in mine.
Blair: I don't listen to those. When I'm interviewing, I'm not listening. I'm doing Wordle.
David: This is fun too because we just saw each other at a friend's wedding, and our spouses were there, so we got a chance to walk and eat some nasty food and-
Blair: Good nasty.
David: -just have conversation. We don't see each other as much as we used to because of travel. It was nice.
Blair: My next trip, I should be seeing you at NYOB. By the time this drops, NYOB will have happened. I'm going overseas, but I'll see you in December.
David: This is a fantastic topic. Just set the table for us. What's the overall theme?
Blair: You do what you do long enough, there are certain lines that you repeat dozens, maybe hundreds of times. One of those lines I have repeated hundreds of times, is you reinvent the firm one new client at a time. This idea that when I'm working with somebody in a training or advisory capacity, at some point during the training, I'll say, "All right, there's a line in time that is today. Before today, it's old attitudes, old behaviors, old prices, et cetera. After today, it's new attitudes, new behavior, new prices. This idea that if we do the basic math on how long on average it takes you to turn your client base over, we see that-- Most of this math is math that I got from you years ago. We'll do a quick run-through of it.
We see that in three to four years, your firm can be whatever you want it to be. In the average firm, if you're handling this right, you should be turning over your client base every three to four years. The quick math is, let's say 10 to 15 clients on your roster. I know that's not the norm. Maybe you want to talk about that in a minute. Your average client turnover should be about 25% to 33% per year. You need two to five new clients per year. A lot of people listening to this are thinking, "Wow, that high turnover." That few number of new clients every year, and I'd be surprised if we haven't gone deeper into this in a previous episode, but the net of it is, in three, four years max, you've turned over your entire client base.
If you take that line to heart of reinventing the firm one new client at a time, and if you have a strategic vision for where you want to be in three years' time, then the path to getting there is the next new client. If you are 10 to 15 new clients from realizing this vision, if you adopt this idea of reinventing yourself, of adopting new ideas, behaviors, attitudes, prices, et cetera, with your new clients, so you're building this new firm as you're letting the old firm get smaller with the established client basis, as those clients go away. If you adopt that idea, then you will see every new client as a crucial decision. You'll ask yourself, "This next client, does it take us closer to our strategic vision of the firm we want to be or further from?"
You should start to get far more discerning about the clients that you take on when you realize that every new client represents a step in the right direction or a step away from that right direction.
David: Man, I feel a rant coming on, so I'm taking over for a minute. If you need to go get some water-
Blair: I'll go get a coffee. Go ahead.
David: -I'll just take your time. It'll probably be five or six minutes. There's so many thoughts that are just running through my head thinking about this. It's not as if you have to wait for three to four years before you start enjoying your firm. You're going to start enjoying your firm with the addition of that first client, and the decision going to better and better.
Second is, you said a second ago, you can create a firm in any way you want. That statement just washes over people. I don't think they really know what that means. The enemy is within. It is not about your clients or about your team or about the economy out there--
Blair: Or your competitors.
David: Oh, yes. Or your competitors. The enemy is within. You have the power to create most anything you want. If you fail at it, then just knock yourself in the head, close it and go do something you're better at. You have all of this power at your fingertips. You say often that you reinvent your client base or your firm one client at a time. The other thing that I've heard you say many times is that you need to think about your client base as a stock portfolio. If you don't like your stock's performance, you're not going to go change every one of your holdings at once. You're going to pick the shittiest one, and you're going to exchange it for a better one. Slowly over time, you're going to be patient with it. God, I have so many more things to say, but I'm going to stop because I just realized again that this is your episode. Sorry.
Blair: Thanks. Full credit to Ron Baker for that idea, that you should view your client base as you would view your investment portfolio with high risk and low risk investments that balance out to an overall risk profile that matches your risk profiles that lets you sleep at night. I forget which of his books I got that from, but it's a really profound idea, and I think it really does apply here.
You're turning over your investment portfolio, you're turning over your client base. I think the profound point here that resonates with both you and me, David, is this idea of reinvention. When without pitching, we go into a firm, when we're working with them deeply, usually our goals, our ideas of what they can accomplish are far beyond what our clients are initially thinking. They're thinking, we did 20% margin last year, and we did $170,000 in gross revenue per FTE, and I'd like to get a 20% bump on both of those. Your goals are your goals, and those are nice goals, but that 20% margin is still a really low number. It could be two or three times that 170,000 in revenue per full-time equivalent employee. It could be multiples of that. When you're in your reality and you're imagining what success looks like, we get locked into this tactical incrementalism. We think, well, let's just do a little bit better on the next one and a little bit better on the next one.
What I'm saying is, you should use the new business function, and the fact that you have very few new clients in a year to drive deep transformation in the organization, do a really aspirational visioning exercise of the firm that you would love to be able to have in three years. That what is the culture? What are the prices? How are your people showing up? We'll get into some of the details, the five areas where I think new business can really affect culture. Do a visioning exercise, dream big, be aspirational, and then use the new business function as that tool that is driving these step changes, not marginal gains.
David: Yes. Of course, this isn't what the episode is about, but we could have an episode about reinventing your firm's culture one employee at a time too.
Blair: Oh yes.
David: That'd be pretty interesting to think about. Let me just insert something real quickly because I'm on the phone with a new client. The first thing we do in one of the programs I sell is benchmarking exercise. When we get to talking about the clients, two things always surprise people. That's the fact that I want them to have fewer clients, because there's two mistakes they're making. One is they're dating prospects that are not marriageable. These could never be big good clients, but they're just taking the work. Then the second thing they're doing is they have way too many clients. It's hard to be profitable, hard to do really effective work for them, that's the first thing.
The second is they're always surprised by the fact that I don't want them to have clients a really long time because of something that, well, we've recorded this earlier, and this was when I was interviewing you about how it's just a matter of time, but eventually you're going to make less money and you'll be less impactful with the client. Anyways, I wanted to put that in perspective because if somebody isn't used to those concepts, they're a more recent listener, they're going to wonder about the whole premise of this, the idea that you have fewer clients and that you don't have them as long. This podcast episode we're doing right now is based on an assumption around those two things. It's just important. We'll put in the notes, a reference to the earlier podcast episode that we did about this.
You're saying that we can re-envision our firm one client at a time. What are the five things that are going to change if we do that well? What's the first one?
Blair: Maybe this is my wish list or what I see as the five areas of your culture that you can drive through new business view one new client at a time. The first one is something we talk about a lot, it's just the mindset of your people, and what I think is a healthy generalization, that there are only two mindsets your people can have about their role in the relationship with the client. They are either the vendor or they are the expert. This idea of expert mindset or vendor mindset. Most of the firms that we go into in a training basis, it's pretty clear that for most of the people in most of the firms, they're operating on this vendor mindset, meaning the client has the power in the relationship because they have the money. Our job is to demonstrate our ability to serve the client to turn things around on time and on budget. I'm not saying these things aren't important, but there's this focus of let's get it done quickly with a smile on our face. That's our role in the relationship here, the client is the customer, and the customer is always right. Whatever the client wants, the client gets.
That's not why your clients are hiring you. Yes, there's a component of that, we've talked about this on a few episodes, there's a component of the ability to serve. You have to be able to serve your clients. There is some aspect of service, but you're not hired for that, you're fired for that. As you've pointed out many times, David, you're hired for your expertise. When you show up in the sale, it's really important if you did not show up with the expert mindset that we are the expert, we're the prize to be won in the relationship. If that doesn't seep through your pores without turning something into an unnecessary powerplay, if you don't value, recognize and value your expertise, your clients won't.
Just the attitude, the way we show up where we recognize our own value, and we're discerning, and we're behaving just as any of the experts in our life that we hire would behave, that's where I would start the change that I would look to drive in the culture, through the new business function. We teach those involved in new business that when we are in the sale in these conversations with prospective clients talking about whether or not we're going to do business together, we need to show up in that expert role, not the vendor role because, I've talked about this before, the roles that we will play in the engagement are established in the sale.
Therefore, if we want to be the expert in the engagement, we need to show up as the expert in the sale, and when your new business people start to behave that way, you will see this fundamental shift in attitude, in belief, in confidence. We want that belief, that attitude, that mindset to permeate down through the rest of the organization. When I say line and time after today, new clients, new attitudes, new behaviors, new prices, the new attitude is with our clients, we are the expert in the relationship.
David: Well, you just mentioned something about how it shows up. I couldn't help but think if I were listening to this and I were a principal of a firm, I would immediately think to my staff, and some of them would be okay being vendors, that's the role they're playing, or they have no client contact, others need to show up as experts. One of the questions I would ask is, "Does Tom, does Lynda, do they show up as experts too? Maybe we set the table correctly in a sales conversation, but maybe we give up that high ground, like the episode we just published. We gave up that high ground in how we interact with the client.
I've also just struck by something else you said about how other experts in your life show up. I'm just laughing as like, so who is the expert in your life? Maybe it's a divorce attorney, or maybe it's a medical practitioner, an expert, or maybe it's somebody that's trying to get you out of a tax issue or something, did any of these people call you ahead of time and ask for your business? [laughs]
Blair: I really, really want your business. I'm really passionate about your business. I care a lot about your business.
David: Okay, so showing up as an expert or vendor mindset. This is the first of the changes that you might make if you're going to reboot your culture in your new business, is finding clients who do see you in that way. What's the second one?
Blair: The second place where you can drive a cultural change to a new business is ridiculous new prices.
David: You said ridiculous? Is that what you said?
Blair: Ridiculous new prices.
David: Not higher?
Blair: Ridiculously higher new prices. I remember Dan Sullivan from Strategic Coach explaining that, okay, just look at your business. You set your prices and then you go to the market and you test the prices and you get some acceptance and think, okay, the market accepts these prices, and then you stay at these prices for a while. Then after a while, you start to summon the courage to raise your prices, and you raise your prices a little bit, and then the market accepts it. You think, okay, I'm happy here. Then you just repeat this over and over and over again until the end of your business.
Let's just agree we're going to skip the next 5 or 10 steps. The way that was explained to me, I thought that's really great advice. I have said to clients, okay, just double your prices. Then double it every time you sell this service, and you 'll find out where the top end of the market is. I've seen clients of ours, creative firms, charge multiples of what they've previously charged.
Can we just skip the 10% to 20%, 30% price increase?
David: Bump our hourly rate up by 10%.
Blair: I'm not even getting into pricing models here. I'm not talking necessarily about value-based pricing, but I'm not closing the door on that. I purposely don't want to open the door to the basis of the price. I'm just saying, let's just agree that after today, with the next prospective client, the prices that we put in front of these prospects, if we get to the proposal stage, are going to be multiples of what we have previously charged.
David: If it doesn't make you nervous, it is not ridiculous. It's not just ridiculous to the unqualified client, it's ridiculous to you. Again, the enemy is within here. I couldn't help but think of, when I heard you talking this, I was thinking about a website I was looking at last night. I have a principal of a firm who he's very qualified, he decided to get out of the business and open a motorcycle shop. He and I, we actually did an iron butt ride together. That's a long story, but it's 1,500 miles in 36 hours. Anyway, I'm thinking of buying a new motorcycle, and he's the dealer. I look at his website, I hadn't seen it before. It's Nashville Motorcycle Repair. You scroll down and it says, not cheap, not fast, and it's in red. Apparently he's picking some of these concepts up.
Blair: Oh, now I'm intrigued, expensive and slow.
David: Yes. Then we do not answer the phone, that's the other thing on here. Only email. The waiting list is from 6 to 10 months. I'm thinking, I love this guy. Now I really want to use him. This is great.
Blair: He's retreating rather than advancing. He's listing all the reasons why you might not want to buy this.
David: If you owned a franchise motorcycle dealership, like a Yamaha or Suzuki or BMW, they would never let you do that. That's the holding companies in this model.
Blair: You'd have your franchise pulled.
David: Yes, right. This is just great, so ridiculous new prices. You mean ridiculous. You don't mean just higher, you mean ridiculous.
Blair: Yes. I don't mean 10% or 20% or 30% higher, I mean ridiculous new prices. If the listener has not tried this idea of just simply taking the price, so you've got a new client, a prospective new client. Let's say you're busy and you don't really need this business, and you're willing to test some of Blair's crazy theories, take one, take the price that you would normally charge, and just double it and see what happens.
I forget who said this originally, but every rise in price needs to be accompanied by communication. It's not really the price, it's the communication around that price. In this context, communication just means confidence. Just say it like it is. It will fail if you're very nervous in putting forward the price, and if you feel like this is a fraud or you're ripping the client off, or whatever it is, just do me a favor and test this hypothesis. Just double the price on the next throwaway opportunity where you think, ah, it doesn't matter if we get it or we don't get it. I'm not overly invested in it, let's test some of these hypotheses, and one of them is, well, I'll just double the price and see what happens.
David: Yes. Of course, that's going to work best with new clients. That's the whole point here.
David: Third is, and this is a little bit related, but there's a nuance to it, cost-based versus value focus. This is the third big thing you can change with new clients regularly.
Blair: Yes. This is big, and this is tied to the previous area of ridiculous new prices. Typically, how do you get to a ridiculous new price, is, well, you quit thinking about costs and you start thinking about value. If the listener hasn't listened to our episode on the value conversation, they really should. If a listener has not bought my most excellent book, Pricing Creativity, a Guide to Profit Beyond the Billable Hour-
David: Ding-ding ad insert.
Blair: [laughs] Cha-ching. They should, where it's discussed in detail. This is one of those topics where I think you can read about it. You can listen to two idiots on a podcast, talk about it. You have to get in and try this stuff to see how cost base you really are. When I say value-focused or client-focused, to me, they're the same things, where if you're focused on the client, you're focused on creating value for the client. Most agency principles would say, oh yes, we're client focused. We're value focused. My response would be, okay, well, what are you selling? The answer is almost, well, we're selling time. We're in the labor arbitrage business. Now, if you're selling time, you are cost-focused. Tim Williams had a great article the other day, and I think it was regarding professional firms billing by the hour, and he said it's the ultimate unscalable business model. We'll find a link and we'll put it in the show notes. If you're selling time, you don't really have a pricing model, you have a cost structure. You're conflating your price and your cost, so you've got the cost side of your business figured out, but you're not really thinking about pricing. Your price is effectively your cost with an expectation of profit built in at a certain utilization rate. Actually, there's no deep thinking going on about prices, therefore there's no deep thinking going on, or certainly deep mathematics going on about value creation for the client. I'm making a mess of this idea, but my point is, most firms have a cost based culture, and you can prove it when you look at what it is that you sell.
Are you pricing and selling outcomes or value? Are you pricing and selling deliverables or outputs, or are you pricing and selling inputs of time and material? Most firms are pricing and selling inputs. Some are pricing and selling the outputs or the deliverables, but the math they use to get to the price for these prices is inputs. 95% of the firms out there are cost based, and I'm telling you, you can't sell time and truly be value-focused or client-focused. You are not truly focused on value creation for your client. If you go back to the episode I just referenced the value conversation, in that episode, I make the point that once you learn how to do a value conversation, there is this fundamental shift in the culture of the firm where you let go. It quits being about, oh, I know what the solution is. I know what we need to do. I know how much it costs, therefore I know how much you need to pay. You let go of all of that and you become focused on, oh okay, well, this is what you want.
This is the value of you getting what you want. Wow, if we could help you create this value, would you pay us this much of that value? No, how about this much? You start to set price based on the value to be created without being distracted by solutions. This is a fundamental shift. You're setting price before you're even thinking deeply about solutions, let alone talking about solutions, and that represents a cultural shift.
I'm assuming that the listener who's going to try to take these ideas to heart and change the culture of the firm, one new client at a time, would have a basic understanding of value-based pricing and the value conversation. Again, you can go back and listen to that episode. You can buy my book and learn more about it, but there is no better place to start to make that shift with the next new client. It's really hard to shift current clients who have been buying time from you for years to this idea of, okay, now we're going to sell you value or outcomes. That's a hard shift to make. It's not hard with good new clients.
David: Well, I think that's one of the stumbling blocks that people have in theory. They love the idea of switching to value-based pricing, but they're testing that on their existing clients that already have them in a mental box. Tying this back to the whole point of this episode is that there are five things that can change in your firm through an active new business program that brings the right clients and the right number of them who last for the right amount of time so that you're not trying to squeeze blood from a broken rock at some point after seven years of engagement.
By the way, can we just stop this statement all the time? That's often made publicly on whether it's like we're still working with the very first client that hired us. I look at that and I'm thinking, that is not anything to boast about, unless you're a two-year-old firm or something, and of course you wouldn't say it then.
Anyway, all right, so five things here. First, expert or vendor mindset that can change because of how you sell at the very beginning and then show up afterwards.
Blair: Yes. Moving from the vendor mindset to the expert mindset with the next new client.
David: Right. You can experiment with ridiculous new prices. You can move to a value-based focus rather than a cost-based focus. That's the third. The fourth is not over-investing in the sale. We'll also put a previous episode in the notes on this one, but this is so important that it's included in one of these five that you have.
Blair: Yes, this fourth area where new business can drive a cultural change of not over-investing in the sale. I think this is such a fundamental tenet of what we teach. I'm often saying, if you want to get better at sales, it's just three words, no sunk costs. If you don't over invest in the sale in time, in hard costs and money spent, travel, et cetera, and in emotions, you're going to be a far better salesperson. Let's get you out of this attitude of being a needy vendor. This is really tied to the first area of an expert mindset versus a vendor mindset.
It really is the manifestation of that mindset because when you are in a vendor mindset, you're happy to go to work in the sale to prove that yours is the firm that should be hired. You do this over investing.
We did an episode recently called the Agency Gatekeeper. It was really about the qualifying conversation, the vetting conversation. When you vet rigorously in that first qualifying conversation, the client should feel like they're being vetted. They should understand that you have this criteria that describes who you will work with and who you will not work with. You're putting them up against that criteria to see if this is a good fit. That rigorous vetting where you adopt this attitude of I'm the agency gatekeeper, it's my job to keep the bad fits out, that is the beginning of you not over investing in the sale. You're being very discerning about if this is a good fit and if you're going to let them pass you into the next step. Then throughout the subsequent steps in the process, you just don't fall back into these old behaviors of thinking, oh, this is the spot where I run through the credentials deck, where I go into convince mode and I give my power away. This is the place where I get on a plane for a meeting. This is the place where the client lets me incur some cost as I go prepare to respond to this RFP.
Even our own emotions of when you go into presentation mode and you're convincing the client to hire you, you're getting needier and needier. You're getting sucked in deeper and deeper. We're seeing these new prospects, these new opportunities that come to us after that line of time. They're blank canvases. We can be whoever we want to be. We can show up however we want to show up.
All of us would agree that we would love to drive our cost to sale to nothing. For some listeners, that might sound like an impossible ideal, but it's not, it is actually very achievable. Go into the next opportunity thinking, I'm not going to let the client put me to work unless they pay me, like through some discovery or diagnostic or road map session. I'm not going to let myself get emotionally over invested. I'm going to stay clinical and professional in these conversations, and I'm certainly not going to spend too much time on it. Therefore, direct business-like conversations, professional conversations, and I'm not going to incur expenses. I'm not going to get on a plane for a meeting.
David: I'm not going to have two meetings with a gatekeeper, even knowing upfront the decision makers in the meeting. You mentioned time, money and emotions, and the time and the money are obviously related. To whatever degree you're spending lots of time over investing in a client, that's time you could be doing things that your firm really, really needs from you. The emotional side is something that I'm not sure we think quite enough about. I was trolling LinkedIn yesterday and I saw that you'd shared an article, I forget the title, but it's something about the emotional investment, or the emotional role of over-investing and losing a sale.
Blair: A client of ours in the UK is pitch free for three years. The executive creative director wrote a post on the damage to emotional health that pitching does.
David: Oh yes. I shared that same article and confessed my own mental issues with losing that thing. Pitching a lot and losing is like signing up with a dating app wearing just a mullet and a pullover or something. It's like you know you're going to lose all the time. The harder you try, the needier you look and the less anybody wants to date you. The time and the money, you're obvious, but the emotional side is bad too.
What you're talking about is this almost the ridiculous side, but for time, and it's terrifying because in your gut, you're intentionally schizophrenic here. Part of your body is screaming, we need this work. The other part of you is saying, well, shit, I'm just going to draw a line in the sand because this is the right thing to do. You're acting all bold on the surface, but inside, you're shaking a little bit.
Blair: That's the hallmark of a really good salesperson is, you can't tell how badly they want or need this. You can't tell that if they don't close this deal, their kids won't eat. We will look not for the first time reference, an episode we did previously called Slapping Down Your Childlike Glee where we talked about managing those emotions, how emotions get in the way in the sale.
David: We've had so many great titles, and then-
Blair: We're so good at this.
David: -The Hate Sandwich.
Blair: Oh, come on.
David: Then how to drive your team batshit crazy. The content isn't all that great, but the titles have been fantastic.
All right, so the fifth thing that can change with a complete revamping reinvigoration, reinvention of your client base, would be one page proposals. I don't think you care all that much about this one. You don't seem all that passionate.
Blair: In my outline to you, I dropped a whole bunch of F bombs. I've got them out in the outline, so I wouldn't say them here.
Basically, if you've listened to more than five hours of 2 Bobs, and you're not using the one page proposal format, what is your problem?
David: That's not how you wrote it.
Blair: No. I'm deliberately saying it commonly. What is your problem here? I think we've done an episode on this called The One-Page Proposal.
David: We have, yes.
Blair: We did the spoof episode.
David: The 120-page proposal.
Blair: The secrets behind a killer proposal, worth listening to just for the lulls. Don't take the advice in that one. Really, you should be able to get your proposal down to one page. It gets you out of the proposal writing business. I write about this quite extensively in the book Pricing Creativity. I've said before that the second most common piece of feedback I've received from that book is, yes, we've shortened our proposals down to two, three or four pages. We can't quite get them to one, but they're short and I'm happy with them. I always push back, no, it's one of the most valuable constraint driven exercises you will ever do. One page, you can't possibly get on one page everything you want to include in your proposal. Therefore, the proposal becomes the words that come out of your mouth in the conversation. You see that fourth and final conversation, the closing conversation, as what it is, it's a conversation. It's not a persuasion. It's not a presentation. It's a conversation you're having with the client, and you're using one page as basically speaking notes, as a reference points for the conversation. This is a transformative exercise to get your proposal down to one page.
I know there are a lot of firms out there. There are almost 5,000 people who have bought that book. There are a lot of firms out there who have looked at the device and thought, well, this seems to be the hardest advice to take in the book. They don't even try it. I'm telling you, try a one page proposal, three options on the page, and keep the focus on the conversation. It will change everything. The place to try this is not necessarily with your existing clients. If you're nervous about trying this, once again, the reason why new business can drive a change in culture, is every prospect is a blank slate. It's an opportunity and an invitation to show up differently and behave differently. One of those different behaviors that you should be employing with all of your new prospects, is this one page proposal.
David: Well, I admire you for your clean language. I enjoyed reading the non-clean version of that.
Just to recap, folks, there's five things that can change if you take on the challenge of reinventing your firm one client at a time over the next three to four years, a new confident attitude, new prices, a new focus on value creation, not over investing in the sale, and saving untold time on stupid proposal writing instead of just a one page proposal.
This is inspirational. This is great, Blair. Anything you want to add?
Blair: No, I think that's a great summary. Most of these things, we have talked about in other episodes, but the fundamental idea that you want to create a better version of your firm at some point in the not too distant future. You really need to see the new business function as the thin edge of the wedge. Your opportunity to create whatever type of firm you want, it's going to happen via one new client at a time.
David: That's great. We're just going to leave it at that. Thank you, Blair.
Blair: Thanks, David.