Back in 1998, I had an executive coach . One of the things that we worked on, was me learning to hear “no”. This was based on my limited sales experience, and the perceived personal impact I felt being turned down. (“The clients don’t like me”, “am I bad at what I do”, etc.) Daniel worked with me to understand that I would need to learn how to address hearing no, possibly many times, before I might hear yes. In the past 2 weeks, I’ve lost 2 bids for consulting work. And while I am disappointed that the revenue from these projects won’t be coming in (no 30” cinema display for Dave for Christmas), after realizing that price was the deciding factor, I am comfortable with hearing “no”. I’m okay not being the cheapest . It’s interesting to see that a “competitor” is able or willing to do the work for a third (1/3) of what I quoted in the proposal. I am left with the question of why is a “competitor” able to propose doing the work for so much less than me.
- A loss leader
- An existing product
- Repeatable previous work
There’s not much I want to do to compete with a loss leader. I don’t have an product I am selling (or re-selling) yet. This proposal was purely a services engagement for me and I wanted to keep the proposal to a time-and-materials contract (actually it was an optional scope contract , which I did not do a great job explaining or selling to the client). I don’t have an existing product to do what the client needed. We would have been selecting and customizing an existing open-source product to which we have no allegiance of benefit. The client was asking for something similar to previous work I’ve done, but there was going to be a lot of new code development.
There are only three ways to increase your company's revenue – get more new customers, increase the value of your average sale, and get more repeat business. From the Bizinformer
Okay, so I lost a couple of proposals based on price. Was my pricing out of line? How should I price my services? Software pricing is difficult , understanding the ins and outs of product pricing takes time and knowledge. Joel provides great insight into pricing and profits for software products. Funny, if my pricing for the solution didn’t fall into the greater than $1,000 and less than $75,000, where as Joel identifies there are no opportunities:
- Free. Open source, etc. Not relevant to the current discussion. Nothing to see here. Move along.
- Cheap. $10 – $1000, sold to a very large number of people at a low price without a salesforce. Most shrinkwrapped consumer and small business software falls into this category.
- Dear. $75,000 – $1,000,000, sold to a handful of rich big companies using a team of slick salespeople that do six months of intense PowerPoint just to get one goddamn sale. The Oracle model.
I am not bothered by loosing these proposals. I was selling services at an hourly rate multiplied the estimated time to complete the project this became the upper bound on the optional scope contract . I think my estimates were accurate for me (and my other development partner) to complete the project. If we had won the bid, the client was getting a great small development team to build a completely customized software tool. The client would have gotten the software they wanted (needed) and we would have been paid the going rate for our services. However, I think we were competing against competitors that were either off-the-shelf products (or products with some customization) that enabled them to reduce the total number of hours required to meet the clients’ requirements. This continues my love affair with starting a product company (or at least a “combination of products and services”: http://eirepreneur.blogs.com/eirepreneur/2004/01/products_vs_ser.html ).
Products multiply, services add.
Even without a current product, I hope to improve my freelancing opportunities and professional services proposal responses. I need to figure out how to better sell optional scope contracts to clients. Joe Connolly writes about finding your first client as a consultant. He provides 10 suggestions for better proposals:
- Be very specific about your area of expertise.
- Highlight what’s different, and better, about your experience.
- Make a former employer a new consulting client. It already hired you once.
- Network with people who might become your clients or who will lead you to their contacts, who might become your clients.
- Don’t just network. Be sure you ask for business.
- You may have to do some volunteer work at first. You have to assure people they will not be sorry for hiring you.
- Get testimonials that tell stories about your credibility.
- Hire a business coach.
- Stick to a budget.
- Write short proposals.
Oh well, back to the drawing board.