Truths and Myths About Money
Do you have trouble talking about money with clients? David makes seven common statements about money and Blair states whether they are true or false and why.
BLAIR ENNS: Hi David how are you?
DAVID C. BAKER: I am good Blair, you're doing well?
BLAIR: Yup, I'm doing well. We're going to talk about money, it's one of my favorite topics. It wasn't always, but it is now.
DAVID: What changed?
BLAIR: Great question.
DAVID: You started making it?
BLAIR: Yeah maybe. It's funny I'm one of those people when I have money I just don't care about it, I don't care about it at all. But when it's not there, there's some days when I've cared about it quite a bit I'm sure, as I'm sure most people listening to this can identify with.
DAVID: I think they can identify with that, okay we're going to change the format up today okay.
DAVID: So I'm going to make seven statements;...
BLAIR: These are all lies right?
DAVID: Not necessarily, they might be, I'm going to hopefully trap you a couple of times here. Okay, you're ready for this?
DAVID: This is almost like Jeopardy without any good looking people.
DAVID: Okay, alright first question, it's impolite to talk about money?
BLAIR: True and false, depending on the context and that will be answer to every statement that you share with me. So it's a great statement, it's a great question because we are all taught from a very young age that it is impolite to talk about money. It's impolite to ask somebody what they make for a living, it's impolite to ask what somebody paid for their house or their car. These very personal financial questions. Now we're taught that from a young age and we're brought up that way but what we don't realize it what Mama was talking about was she was talking about a personal context.
So many times in my interactions with agency principles, owners of creative firms and even the people on the front lines doing sales, doing new business development, or doing account management. I would be talking about some kind standard sales principles or at least win without pitching principles and every jurisdiction in the world I have heard, "No, no Blair you don't understand," this is the Mid-West, the South, Saudi Arabia, New York. Like I've heard it everywhere, "You don't understand here it's impolite to talk about money." Somebody from New York, wasn't New York City, was upstate New York, somebody said, "You don't understand here in New York it's impolite to, considered impolite to talk about money."
What your mother meant is, it's impolite to talk about money in a personal situation. The opposite is true, almost the opposite is true in business. In business an inability to talk about money is seen as a sign of poor business acumen. So I've seen so many people mistake this kind of polite manners rule that's fully applicable in a person situation, make the mistake of applying that in a business situation and refuse to talk about money, excuse me, until it's just far too late in the game.
DAVID: Do you think that part of what's happening is that their nervous that they might mess up the deal by introducing money too early? It's like it feels almost like a frail process to them and that this might upset the cart.
BLAIR: Yeah usually this is coming from somebody who has no sales training, so probably does not see themselves as a sales person. So it might be the principle of an independent creative firm where you got into this business because you wanted to design or work in advertising etc, and then as you realized very quickly that to build the business you need to sell. So often I get, it's not often that you would hear from somebody who sees himself, or herself, as a natural sales person. Or somebody who's had any degree of sales training at all, that this rhetoric that, "No, no you don't understand it's impolite to talk about money." But I hear it often from business owners as a reason why they're not going to do it.
DAVID: So in personal relationships you're saying that the, in some cases it's okay, sometimes it isn't the difference is whether they've given you permission to do that? The other thing you can't talk about, is you can't talk about how people raise their kids, right?
DAVID: You can talk about sex at dinner, but you can't talk about how much they make or how they raise their kids. So are you saying that in business you don't have to have explicit permission? There's just this assumption that it's okay to talk about money, in the right context.
BLAIR: Especially in a sales conversation, right? You're the person, and often where it comes up is, I'm fond of using a minimum level of engagement, which is at some point fairly early in the sales conversation if you suspect there might be a price objection you would put the objection on the table in front of the client or prospect to overcome. You might say, "Hey before we go to far, you should know that we have a minimum level of engagement of say 100,000 dollars in fees over the course of the first year. I just wanted to, your organizations a smaller size, I just want to make sure you'd be able to afford that." So I'm often advocating talking about money early and often in that way, and often I get push back on that.
DAVID: That's interesting, alright so here's the second phrase. Talking about money is stressful, true or false?
BLAIR: False. Yeah in fact a lot of people are answering at home thinking, "Oh yeah it's really stressful." But somebody said to me years ago, one of the most brilliant things I've ever heard, and I've repeated it hundreds of times. "Stress is caused by the things you don't do."
DAVID: You told me that years ago, and I have thought of about that so many times. Like even in my relationship with my wife, like something comes up and I'm feeling stress about it and the sooner I talk about it the less there's stress, even if we don't end up agreeing. It's a really great concept.
BLAIR: Yeah and some of the stress you might feel might be due to things that are beyond your control but the vast majority of things that are causing you stress in your life are the things that you're avoiding. So talking about money isn't stressful, avoiding talking about money is stressful. If you want to remove the stress from money conversations then you just blurt out, your minimum level of engagement, or a price range, or whatsoever most appropriate as soon as possible. Get the money conversations over with soon, then you'll watch as the stress dissipates.
DAVID: How soon? Like within the first hour?
BLAIR: Yeah I had a client, this is many years ago now, back when I was a consultant, not the CEO of a training company, but he said to me, I was admonishing him for not having money conversations early enough and he said, "Okay fine, fine Blair, how soon should I talk money?" I said to him, I was getting quite upset, I said, "I want you to answer the phone, ABC Agency if you don't have 50,000 dollars please hang up."
DAVID: Well let me flip this around, what about stress on the part of the other person, the prospect, is it stressful? Like how does stress relate to money discussions to the prospect?
BLAIR: Yeah it's the same thing, right, everybody wants to clear the air, everybody wants to see if there's a fit on all these different levels including financial. I just had this, I'm working from my studio today and I heard outside earlier... winters coming, we had the first frost last night, I live in a little village in the middle of nowhere, I had no fire wood so, or I'm almost out of fire wood. I hear my fire wood salesmen guy out in the hall and I say, "Hey can you get me some fire wood?" "Yeah." 5 cords, okay we figured it out, he says, tells me what kind of wood he's got, and he said, "I'll deliver a cord a week over the next four or five weeks."
Then I didn't ask what the money was, I know it's going to be a range between x and y, I know it's always fair, I know I'm going to be happy to pay it, I didn't need to ask. But I did have few moments even now, I think, "Yeah it's just this thing that we didn't talk about." Even though I don't care what it is, he's going to give me a number and I'm going to write him a check, even if he charges just a little bit more, even 20 percent, I don't care. Even though I don't care about it, there's this thing that didn't happen between us. It's completely my fault.
DAVID: If you take a printed proposal to a client, we could talk later about whether that's even appropriate, but you take a printed proposal to a client, aren't they going to flip to the end and look at the price first? You put it at the end.
BLAIR: Oh yeah.
DAVID: You don't want to talk about it first, and that's the first thing they want to talk about, or the first thing they want to look and if it's way to high they're not interested in the rest. If it's acceptable then they'll listen.
BLAIR: You get 50 some year old, 60 some year old salespeople who struggle with this their entire career. It's like, "Oh they just flipped to the last page, look at the price and say, "I don't have that kind of money."" I think you've been struggling with this challenge your entire career, when you could eliminate it completely and forever just by telling them in advance what the number is on the last page. You're just creating all of this drama around the fact that, it's just on top of your stress because you haven't had the money conversation. You're leaving it for as late as possible, not even the last meeting, it's the last page of the last document, of the last meeting when you finally talk price.
DAVID: When you put a price in front of them.
DAVID: Alright you're doing well so far, lets go to number three, you're ready?
DAVID: Alright, avoiding money discussions causes the seller to over-invest in the sale, is that true or false? I'll read it again, avoiding money discussions causes the seller to over invest in the sale, true or false?
BLAIR: Oh it's absolutely true and I think everybody playing along at home absolutely got this one right. We've all been there where you don't just, like the sales person we were just talking about, if you would just ask these, have these money conversations early and say, "Hey we generally look for companies to spend 100,000 dollars a year in fees." Or whatever the minimum threshold, and everybody should have a minimum threshold, you're not a charity, you're not in business, you have no obligation to work for people who wouldn't be profitable or it wouldn't be of the right size.
DAVID: So you're going along, you should have probably talked about earlier, to the last point, and you don't so you're spending more time than you should, then what happens?
BLAIR: Yeah so you're going down this road and the road really should be a short road, right? Because there is no fit there between kind of the amount of money the client has to spend and the amount of money that you need for something like this, or you need from your clients in general.
BLAIR: So this should be a short road that you get to the end of it in kind of the first, at the very least the second conversation. Like 10, 15 minutes after determining that there's a need, the client has a need that matches your expertise, you should get to this money conversation. At least have an initial assessment of the fit here. So when you don't do that, when you're avoiding money conversations, you continue to invest in the sale. So you sit down, you write out the big long deck, you suspect the money isn't there, so you make the deck longer, the length of the deck with how compelling it is, right? Then finally you can delay that moment no longer you get to the last page in the deck, and then you share the price with the client and the client goes, "We don't have that kind of money." You say, "Ugh, I'm so tired."
DAVID: Are you crying?
BLAIR: "I'm so tired, I'm so tired. Well how much money do you have?" "Well we've got half of that."
DAVID: How about half plus two percent?
BLAIR: "Okay." What you're thinking, and I know because I have been there, what you're thinking is, "Well we've come this far." Right? "I'm so invested in this, I'm just going to take this money, even though it's not even going to be profitable. I'll agree to do it for this." So yeah avoiding money discussions causes the seller to over-invest in the sale.
DAVID: You know I knew that this idea of wasting time as opposed to surfacing the truth and surfacing it as quickly as possible, I understood that concept. But as I was preparing to interview for this I was reading something else you'd written, and there was this amazing "Ah ha" moment to me about this. Where you wrote that, "Because you've put so much time in, you're trying to rescue something. In other words you're trying to not go back to the firm empty handed." That was such an "Ah ha" moment, it was really interesting to me, but what you're saying in effect is that you'd be better of to resist that trying to rescue it, because even if you've wasted all that time you already have the sunk cost, even better surface of truth earlier. But that concept of trying to rescue all the time you've spent, was so interesting to me.
BLAIR: Yeah and that's known as the sunk cost bias, which is a cognitive bias that we all fall prey to, we do it in investing, this idea we don't cut our losses early enough and we do it in HR, we don't cut our losses early enough.
DAVID: Alright so here's the next phrase, true or false, budget discussions and ranges change as you move up the decision maker ladder? Let me read that again, budget discussions and ranges change as you move up the decision maker ladder, true or false?
BLAIR: Yeah that's an easy one, I think everybody scoring at home will score that one a true, as I do as well. It's really interesting, you'll be dealing with like a mid level manager of some kind and he'll say, "Oh no, the budget is x." This persons in charge of managing a selection process, with very specific parameters including what the budget is. Then you get to that persons boss, and have a wider ranging conversation, where maybe you kind of open up the scope of the conversation, and imply or reinstate clearly that you should be thinking about these other things. Then this persons boss, the more senior person says, "Oh yeah well, we'll fund whatever needs to be funded."
I'm reminded about a conversation a client relayed to me, similar situation, he was dealing with the Vice-President of Marketing, so a client of mine, a principle of an agency that you know, I won't name here. Dealing with the principle of marketing who was adamant that the budget was 70,000 dollars, this is years ago I remember the number, he gets a meeting with the VP of Marketing and the President of the company and he thinks, "Okay I've got the President, I'm going to try to get a little bit more."
So the President asks, they have a conversation about scope etc, what the agency would do, and the President asked, "So what are we looking at here?" The principle said something to the effect of, "100,000 dollars." The Vice-President of Marketing stops and says, interjects and says, "We don't have 100,000 dollars." Because he's got 70,000 dollars in his budget and the principle says to him, "We have whatever it takes to do this properly."
DAVID: You wonder if that guy was embarrassed a little bit.
BLAIR: Yeah and interesting corollary of this is, is that when it comes to value price discussion... so value pricing is easy in theory and it's difficult because, in practice because the value conversation is difficult to do, and that's where you say, "Alright lets forget about kind of the deliverables, lets talk about the value we're going to create here. Let's talk about how we're going to measure that value. Let's talk about what's that worth to you, Mr Client?" Then from there you would try to agree on what your fair share of that value that you would create would be.
Now a mid level manager is not interested in having a value conversation with you. Because they've been given certain parameters about how to choose a firm and what the budget is. A more senior decision maker, somebody from the C-suite is more interested in a value conversation, because they're charged with future value. So a friend of mine said to me years ago, "Employees are worried about the past, managers are focused on the present, and it's only executives who are charged with the future, and looking towards the future." So the manager that you're dealing with, is thinking, "Well my current budget today is 70,000 dollars, I'm not going to go above that."
Once you get above that person, and you're now in the C-suite and you're talking to somebody about future value, future direction of the organization, bigger impact etc, etc. That person is in charge of delivering that type of value and he's more open to having a value conversation and having you be compensated based on the value that you would deliver to his organization, not based on the amount of time you would put into the job.
DAVID: That's really great, I would just remind the folks listening too that Blair's written a lot about the importance of having decision makers in the important discussions early on. This ties right into that, that's really great. Alright, next one, next phrase is price is usually just a tie breaker, true or false? Price is usually just a tie breaker.
BLAIR: Yes in most competitive situations, in most creative firms, that's true, price is usually just a tie breaker. The tie breaker price, same with chemistry, right? So there's a phrase in the Creative Professions, chemistry wins new business, yes it does. It wins new business a lot, and it never should. Not never, but what I mean by that is you shouldn't... chemistry like price, you shouldn't lean on these things as a way to get new business because they're tie breakers and when you're leaning on a tie breaker you're sending a very strong implication to the client. The implication is the important variables, the important decision making variables on which the client should chose you, they're the same from firm to firm, that's what you are implying when you're leaning on chemistry or when you're leaning on price. The important variable is basically you're perceived ability to get the job done and to deliver value, right? That's what you're being judged on and when your ability in the client eyes, to do this job to a certain level, is seen as on par with everybody else that's when price becomes really important.
DAVID: You said once, I'll read the quote very specifically, "If you're losing business on price it's not because you're not cheap enough, it's because you're not good enough." Can you explain that phrase?
BLAIR: I said that, wow, I don't remember saying that. But I'm glad I said it, because it's brilliant.
DAVID: "If you're losing business on price, it's not because you're not cheap enough, it's because you're not good enough."
BLAIR: You're down there competing on price, right? If you're competing on price it's because in your mind and certainly in the clients mind, if you're losing business on price, the client thinks he can get just as good quality somewhere else for less money. So instead of focusing on cutting your price focus on raising the quality of your offering. As so many of our conversations do, that's comes back to the subject of positioning. Are you carving out a kind of owner able leadership position within a niche?
DAVID: Yeah that's great, alright, number six, the money you command is directly proportional to your self esteem. So again I'll read it, the money you command is directly proportional to your self esteem, true or false?
BLAIR: What do you think the answer is?
DAVID: Well I'm nervous because I feel like we've slipped over into some different kind of motivational speaker in a van by the river, kind of thing. The money you command is directly proportional to your self, oh I think that's absolutely true. To me, in fact I look out there at so many poorly positioned firms who are making a lot of money and it seems like it generally come from a lot of confidence, or self esteem.
BLAIR: Oh yeah, this is so true, so profit margin is a direct measure of a bunch of things. Like it's a direct measure of how different you're seen to be, price elasticity effectively. But more than anything I think, especially in a consultative sale and a knowledge based business, profit margin is a function of the sales persons self esteem. The higher your self esteem the higher your margin. It's really just a matter of you kind of believing your worth it. So there's a formula for this, and there's a kind of off sited, many times validated formula that says, P equals M times A, performance equals motivations times ability. The key to that statement is that motivation is a multiplier of ability. So you can take two different people of identical, if that's possible, abilities, and slightly different motivational makeups and you'll get significantly different performance levels because motivation is a multiplier of ability. So I take that P equals M times A and to make it fit what we're talking about here, I say SP, sales performance equals M motivation, times A ability, times SE self-esteem.
DAVID: So if somebody, one of your clients doesn't have much self-esteem, in fact you might, there probably times when you believed in their abilities more than they have.
DAVID: And tell them that, and it doesn't really sink in. I've often thought that the primary solution to that is marketplace acceptance. Like the marketplace is going to have to tell them that they're good. They don't necessarily believe me, but what are the options for somebody that's struggling with that?
BLAIR: Well great question, I've got the answer to this question from you, and that's, that the options, if you don't have self-esteem, then what you want to do is you want to increase your options, right?
BLAIR: So your confidence is either, this comes back to conversation we had years ago now where you called me in the middle of a snow storm [crosstalk 00:23:20]
DAVID: Oh yeah that's right.
BLAIR: Said I've got this really great question, "Where does confidence come from?" I said, "I don't know, you take something you're good at, and you draw strength from it." You said, "No, no, idiot," you said, "confidence comes from two places, it's comes from deeply held beliefs or options." I said, "Yeah let me think about that, I'll come up with something better." I never did, that's really stuck with me, confidence comes from those two places. Deeply held belief, so let's put self-esteem as an outcome of deeply held beliefs, or in this case maybe just write surrogate of deeply held beliefs.
DAVID: Deeply held belief that I'm good.
BLAIR: Yeah, I'm worth it, I'm good enough, I'm worth it, doggone it people like me. So if you don't have that, then you want to have options, what do options look like? What are the forms of options that will give you confidence to ask for more in the sale cycle. Well a full client load right now, right?
BLAIR: You've got full client roster, would be number one. Number two would be a full pipeline, well if this doesn't, if this deal doesn't happen that's okay, because I've got two others right behind this one.
DAVID: People wanting to work with me all the time.
BLAIR: Yeah, the third would be money in the bank, right?
DAVID: Oh yeah.
BLAIR: So you've got all of these options, you've got a full client load, you've got a full pipeline, you've got full money in the bank, even if you don't have self-esteem you can sell and you can command high profit margins in situations like that. Because you have nothing riding on it, right?
DAVID: You don't care as much and you're not as desperate, you'll make better decisions at that point.
DAVID: Yeah, we need to talk for the next whole podcast we need to talk about that. That's really fun to explore. Okay here's the last one, you're doing very well so far, okay.
BLAIR: Thank you.
DAVID: Yeah, for me to have a dollar, someone else has to be without a dollar. Again, for me to have a dollar, someone else has to be without a dollar. Is this sort of a way to phrase the zero sum game sort of a thing.
BLAIR: Yeah business is a zero sum game, where this kind of malthusian economics idea that says essentially business is a zero sum game. I think when all, when we're all posed, obviously this is false and when we're posed with a question like this in context like this we all know the answer is false. But I've still, I'm just incredulous at the number of people... This is like a key fundamental concept that underpins all business, it underpins the entire capitalist system, and I don't know how many people, what percentage of the population, even what percentage of those in business do not fundamentally buy into this idea that through trade, through trading, goods, services, or ideas then we can increase value. Value is created through the exchange of goods, services, and ideas. Ideas in particular because ideas... I have an idea and I share it with you, I give it to you, well now you have the idea, I still have that idea, right?
DAVID: Right. So how does this hurt business owners if their wrong on this point? Thinking that it is a zero sum game. How does it hurt them?
BLAIR: It hurts them through a feeling of guilt over being financially successful, and imposing artificial limits on their own success because they feel like, "Okay that's enough." Or "That's too much." I've had, the work I do in pricing, I've had a lot of clients of mine say to me, "Well that's not, that price isn't fair." Well you are not the arbiter of what is fair to somebody else, fairness is like value, it's entirely subjective. It's a feeling that this is fair I would do this again at this price. We make these ridiculous mistakes and assumptions that we can determine what a fair price is for somebody else. You can only determine what's fair to you, right? If somebody takes it, it's likely, takes that price, it's likely, it's not absolutely certain, but it's likely that they think it's fair too. So we think, you should really see dollar bills, or pound notes, or Euros or whatever currency you work in, as kind of certificates of gratitude for having helped someone, right?
BLAIR: You should, so rather than... I made x dollars last year, or I have these dollars in my hand. Rather than think well there's somebody else out there who no longer has these dollars. No, no, there's somebody out there who actually has more dollars in his hand because you gave him something that was worth more to him than the dollars he gave to you. He went out and created greater value in the world. So we really need to see these currency notes as certificates of appreciation for the work that you do. You, me, most of the people listening to us in this podcast, we are all in the business of helping people.
Now somebody who runs a charity, a food bank or something might scoff at this, "You're not..." You and I, we are in the business of helping independent business owners and their teams build more successful businesses, in turn help their clients etc, etc. the money that we earn and the money that the people listening to this podcast earn, they only earn that because they're doing such an effective job at helping those that they're endeavor to help. So we need to see the dollar in your hand, you don't have it, because you have it doesn't mean somebody else doesn't have it. That's a certificate of appreciation that somebody is willingly given you.
DAVID: Money is a beautiful thing isn't it? I mean in the hands of smart generous, it's like money enables so many amazing things. I just wish that we could talk about it more comfortably.
BLAIR: I think the vast majority of us have unhealthy attitudes towards, and relationships with money. A small number of people are what you would call, greedy, and the large number of people are kind of fall into this category of having some sort of guilt, or feeling like there's a lack of fairness for earning money. Yeah I agree with you, I think monies a wonderful thing. I think most of the worlds problems can be solved and a lot of them are being solved, through the creation of wealth. Some people, some very dear friends of mine would just recoil at that thought. But they're wrong.
DAVID: Blair this has been fantastic. Thanks for letting me ask you these seven questions. They were maybe easy pitches, can we say that?
BLAIR: Yeah, soft, false.
DAVID: Very good, good thinking Blair, look forward to next time.
BLAIR: Thanks David.
BLAIR: Talk to you next time, bye.