The VantagePoint

So You're a Consultant. Really? Are you sure?

Over the past 7 and a half years running a consulting practice I have come across the most amazing people, companies and technologies. It never ceases to amaze me how much I have learned over these years, and how much I will learn over the years to come. There is really nothing like being a consultant. I have had experiences and opportunities that many people will not gain in their entire careers, but a consultant's life isn't easy. In fact in the first two or three years it is tremendously difficult, and not for anyone who has a low risk profile or a weak stomach.

When I told my wife in January of 2002 that I wanted to quit my life as a high tech executive where you can get a fat paycheque every two weeks and have a stable or at least predictable life, she never once questioned my decision. That's right, she never questioned me, even though I was the prime bread-winner, 2 of our 3 kids were yet to be born, and we had just moved into our dream home. Gee, sounds like a great time to change to an "eat what you kill" career.

Now for all of you reading this who are currently a consultant or are thinking about becoming one, can you honestly say that you have this kind of strong support from your significant other? If you don't, you may want to re-think your career path because being a consultant is a very difficult, stressful, uncertain, scary, fun, exciting, rewarding and punishing way of life. Gut check time.

To be a consultant or not to be a consultant, that is the question.

In my travels, I have met two kinds of consultants; those who want to be and those who have to be. Those who want to be are entrepreneurial and believe they have the knowledge or skill set to succeed on their own. Those who have to be are people who have unexpectedly found themselves unemployed, (laid off, fired, released, etc.), and because they don't have another gig to jump to, they decide to become "a consultant", but really, they are just buying their time until they land there next full time job. Sadly, many of them will never admit this, but are forced to when they realise that it takes at least 2 years to develop a strong, reputable practice. It is very important that you are honest with yourself and know which bucket you are in, because it is hard enough starting a consulting practice when your are 100% committed to it, never mind if you have one foot at the local career fair.

If you are sincerely going to make a go at a consulting practice, make certain that you have financial plans A, B, C, and D. You will need this because it is likely that your current financial commitments have been structured assuming a predictable paycheque every two weeks. The peaks and valleys of consulting means that there will be times where you need to draw upon your financial resources to substitute a paycheque that didn't come in when you hoped it would. Your savings account, your retirement funds and your line of credit take on a whole new meaning for you. Personally, I ate up more than 60K of my financial resources to get me to a point where my consulting practice had a strong annual revenue. I am still paying down that debt.

So if choose to take the leap, and start off on your own, go for it. Just know, (and be honest with yourself), that you will need 3 things: the unconditional, rock-solid support of your significant other; liquidity of investments and other sources of emergency cash; and the strength and confidence in yourself, your experience and your abilities. Without any one of these three, you are in for a very difficult, if not impossible road ahead.

Are Your Clients Really Satisfied with You?

Let's be clear on one critical strategic reality. When the economy declines, finding new clients to sell to will be very difficult for most companies, which means that to obtain your revenue objectives, existing clients will need to be your prime source of revenue achievement. For those of you who require north of 50% of your revenue target to come from new business, 2009 will be a very difficult year. For some, it will be their final year.

Structuring your corporate strategy to provide continuous business value to your clients, thereby increasing the probability of recurring revenue, high renewal rates and high usage rates is something that should be ingrained in your corporate culture regardless of the economic climate. Ultimately it is very difficult to move forward with this type of initiative without truly understanding your actual, tangible client satisfaction rate. Now I know, at first this may seem obvious, but what isn't obvious is how your client satisfaction should actually be measured and scrutinized. It does go beyond your typical survey.

In my experience, client satisfaction consists of four key elements:

1. Overall experience a given client has had when dealing with your company.

   This is arguably the most measured aspect of client satisfaction (typical of many online or automated surveys) and generally includes their impressions of support, sales, product, service and the overall account management from your company. This can be very useful information, but more often than not, it gives visibility into generalities of client satisfaction, not necessarily the individual client specifics that will make or break long term satisfaction and loyalty.

2. Alignment to business needs and/or business drivers.

   When your client bought your product or service they did so to solve a particular business challenge. How well your product or service addressed their particular problem will be the most significant indicator of client satisfaction and client loyalty. Perhaps as important, meeting a business objective opens the door to expand the business needs that you can solve. The greater the business challenges your company can address, the greater the opportunities to expand your footprint and get into their business bloodstream.

3. Usage of your product or service.

   This measurement could either be anecdotal or a tangible metric (if you have the visibility and/or tools), but it is one that is important to get a pulse on. If usage is low, it will be near impossible to get the internal approval needed to send more business your way. It is critical that you understand the root cause of low usage and develop a plan to increase it. Conversely, if you have particular clients that have very high usage rates, you need to dissect the reasons for this and mirror its success to those clients with low usage rates.

4. Marketing reference.

   The likelihood and willingness to be a reference for your company is a huge indicator (and is often the end result) of client satisfaction and loyalty. In business today, most people understand that when you provide a reference, you are putting a piece of your reputation out in the open. Your client will need to have the utmost trust and confidence in your service or product. You need to find out what is required to get a reference from your client, (other than 1, 2 and 3 above), and what they would be willing to do. Referrals? Case Studies? Press Release? Reference? Strategic Alliance? Also, who within your client's organization has to give their approval to be a marketing reference? It may not be anyone who you have dealt with in the past.

With all of this in mind, the process of understanding client satisfaction starts to look less like a survey, and more like a business review you have with each of your clients. These business reviews could be held quarterly, semi-annually or annually depending on your specific situation and the size or importance of the client to your business. Personally, I would recommend quarterly for your more strategic accounts, then semi-annually for less strategic accounts, while using surveys when it can help in the efficiencies of conducting business reviews.

The first client business review is a critical starting point that should:

1. Accustom your client to the mutual importance of doing business reviews. They need to understand the seriousness that your company places on meeting their business needs.
2. Clearly document their business drivers and the gaps that exist towards fully meeting their needs. All gaps should be recorded, understood and agreed to.
3. Contain clear, tangible and reasonable action items, that will close gaps that may exist. Ownership for these items could be for you or your client to complete over the subsequent quarter.
4. Give a clear, holistic view of actual client satisfaction of each individual client and provide a clear understanding of the overall health of your company. If you see warning signs, you need to act immediately to fix it.
5. Uncover opportunities to generate revenue by expanding your business value. You will be surprised what will come to light.
6. Generate a well documented score card that will be used for all subsequent business reviews to track and show progress.

In many cases, you may find that a full quarter of progress (or in some case, several quarters) may be required before any revenue opportunities exist, as most people will not be willing to open their wallets to a company that has not yet met their business needs to their satisfaction. Conversely, many will find the budget to spend on companies with a proven, tangible track record for addressing their business needs.

 

Surviving When New Sales are Scarce

Welcome to our inaugural blog - The VantagePoint.  Hopefully this will be an anticipated read for each of you every week, and even more so, we hope to receive your comments, views and opinions on each of our posts, because it will be the sum of its parts that will ensure our readers gain the most of each issue.

I decided to start this blog to share the great experiences over my many years as a high-tech executive, and in particular, over the past 7 years as founder and CEO of ServiceVantage Corporation where I have had the opportunity, so far, to work with more than 25 companies with 25 different technologies, leadership styles, market segments and varying degrees of business successes & failures.  The experiences and insights that I have gained can, at the very least, serve as a catalyst for healthy discussions and debates about the high tech industry.  An oracle I am not, a person with experience-based opinions, I am.

For this first instalment, we should look at one of the key strategic initiatives that will be required in order for technology companies to weather the current economic storm - generating recurring and/or farmed revenue from existing clients.

Let's face it, generating new business, (read: new revenue), is going to be extremely challenging in 2009.  And for those of you who have less than 50% of their revenue coming from existing clients (maintenance, SaaS, etc.), this might be a very grim year for you. 

There are several areas where you can uncover revenue opportunities from your existing accounts, but remember, there has to be clear, very tangible value to your clients, and it should have a complete marketing and sales program around it, like any other product or service you offer.  This doesn't necessarily mean spending money, but it means that the approach has to be well thought out, and well executed, otherwise your clients will know that you are scrambling.

Recommended Prerequisite: Client Profile / Client Satisfaction Survey

A well executed Client Profile / Client Satisfaction survey will give you very important information about your clients such as:

• Overall satisfaction with your products or services. If their satisfaction is low, good luck farming for revenue.
• Overall usage rates-  How much do they use your product or service?  Is it under utilized?  Do they use the whole suite?  Understanding why usage is low, or their pattern of usage, may help you uncover opportunities
• Other key information that would help you understand the opportunities that exist to offer your clients value-adds, and most importantly, the likelihood they would pay for them.

Once this Client Profile / Client Satisfaction survey is completed, you will be able to formulate a plan for providing on-going value to your clients, farm for revenue, and hopefully uncover recurring revenue opportunities as well.  Here are a few examples of what you could look to offer:

• A better maintenance or support program:
  • Yes, yes, I know this will sound both boring and obvious, but you would be surprised how many poorly setup maintenance programs I have come across.   Many are bound to have renewal problems - which in software is a big deal, as many software firms have a substantial percentage of their revenue comes from this.
  • DON'T - design a program where the main emphasis is support and bug-fixes.  Guess what, if the client didn't need to call you this year, they will be questioning the cost of renewing. The only exception here is if it is a mission critical app or service where they will buy it as a type of insurance policy.
  • DO:  All support programs must have proactive business value, that even if they never needed help, they still see value in the program.  Examples could be:  Pushing certain KPI reports to the executives or operational managers, business reviews that continuously ensures your service or technology is meeting their business needs, then offering ways to fill in any gaps that may exist, etc.

• Software-as-a-Services (or just the subscription revenue model)
  • Obviously SaaS is a tremendous revenue model (over time...2 or 3 years), as it involves less money up front (bad for cash-flow), but much more predictable, stable revenue streams once you get over the initial investments to get a SaaS offering.  Or perhaps, your product or service could have the revenue model of subscription, regardless of whether it is delivered as such.
  • Think about:  What could be "turned on" (via license key as example) that would extend the suite of your application (or service), and make it available via a subscription based fee, which they may have the operational budget to purchase, versus the larger upfront fee that will be part of a highly scrutinized capital budget.
  • Output or results based service:   As example, could your product or service output data, reports, answers, information that would be of value to your clients.  Can you wrap a service offering that does this (or automates this), where every day, an executive, will receive in their inbox a PDF file with pertinent business value that would give them the visibility or the information that would help them make decisions.  Would they pay a few hundred dollars a month for this?  Depends of the value, it may be much more. 

• Uncorking Business value through services
  • Again, with the help of information from Client Profile / Client Satisfaction initiatives you should be able to target client specific services that will produce client specific business value.  If you can price this in a subscription model, even better.
  • Customizations:  (OK, really configurations) where your product or service can be modified to address client specific needs.  Perhaps they would like your app or service be less of a silo, and communicate data to and from other key business tools, as example.
  • Training:  Critical for addressing usage rates, squeezing business value out of what you offer them, and maintain consistency as headcount changes occur within your client's organization.  Perhaps a monthly fee (again recurring) of x dollars per month for web-based tutorial sessions - as example.
  • Consulting:   Given what your company does and the value it brings to your clients, surely there is subject matter expertise that you clients would pay for if it allowed them to experience further business benefits, efficiencies, cost savings, etc.  Find out what business problem exists, that you are currently not solving, and see if you have the resources and skillsets (or access to) that can fill this void.

For anyone reading this, you need to take a really hard look at your organization, its financial health, the strength of client relationships and you need to act immediately to improve your ability to increase the value your clients gain (read: farmed revenue opportunities) and position yourselves to weather this economic storm.  Get this right, then imaging having this in place when the economy comes back around.  There will be significant growth.

Jeff Bennett

www.servicevantage.com