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The Power of Domain-based Email

Thursday, December 20th, 2012

By Dr. Renae Sanders

If there is a group of people in the universe who believe in low cost value it is the small business owner (SBO). It’s no secret large institutions spend millions in time and money trying to offer necessary services to SBOs at low costs hoping that attracting more SBOs will reap financial gain. SBOs will, in an effort to keep costs down, make “free” work for as long as possible.

Many even forgo branding their own companies through email by maintaining their free email services despite pressure from coaches, mentors, and blog posts suggesting its past time to upgrade to a domain-based email setup. I have heard numerous “reasons” like:

  • “I have had my email account with {named company} for years”.
  • “Everyone knows my email account; it’s too much effort to change”.
  • “I have a domain-based email account, I just don’t use it”.
  • “I don’t have time to focus on that stuff, I am working my business.”
  • “Business is built on relationship; no one cares about my email address.”

There are several important reasons a SBO should consider a change to domain based email and all are important to business reasons:

Domain-based email builds credibility

Two businesses equal in every way except by their email addresses, jack@bigdaddystrucking.com is perceived as more credible than bigdaddystrucking@xmail.com, especially in the absence of a relationship. Business people still collect massive numbers of business cards that they rely on if they need a future service.

Domain-based email introduces the business

Our interaction with the most successful businesses have taught us to look after the “@” symbol to find the name of the company. We often look here before we register the individual’s name. If your company’s name is listed as xmail then a perception is created about the business. When companies follow proper business protocol we things occur even before you meet the prospect (1) you have sent a positive message about your brand, and (2) you have given them a name – we know Jack works at Big Daddy’s Trucking.

Domain-based email protects the business

When SBOs hire employees and provide them with a company based email account, which is owned and controlled by the company, greater control of business information and continuity is maintained. Consider this true story: A SBO and two business partners open a restaurant. Each person is using their comfortable, well engrained personal email accounts to facilitate business. One is responsible for booking events (wedding parties, company parties, happy hour specials, etc.). One day this person suddenly leaves the business and will not return your calls. Once or twice a week, a party would arrive on site for their event and the remaining managers and staff had no idea. Why? There was no access to the departed managers email account.

If a company provides an email account tied to its registered domain, all of the employees email is yours. You can change the password and lock them out when they quit or released. These controls are lost if you maintain your “free” email option.

Domain-based email accounts are easy to remember

It’s easier for people who now know Jack, to remember jack@bigdaddystrucking.com than it is to remember Big Daddy’s email extension is one of many email providers that I have to look up or save. It must be the desire of every business owner to make doing business easy for prospects and clients.

The final bullet in the list of reasons businesses maintain the status quo, that business is conducted on relationship is quite true. But first impressions are lasting impressions and a company’s name appears in many places and prospects may “see” you before you see them. Your company name may appear on lists of references provided by other companies, on vendor lists, on business cards, in directories, mass email distributions, just to name a few. While your service and price may be the best, you may not be the first business contacted by individuals seeking the product or service you offer.

Trust, branding, management control, and easy-to-remember are important business values. Low cost value takes on new meaning when we critically consider the indirect contributions of a domain-based email account. At the end of the day, free may be costing more than you know.

Dr. Renae Sanders is the Managing Director at KRS Consulting, LLC, a business services and consulting firm specializing in business development and training. Believing people are the link between strategy and success, Dr. Sanders works with organizations, leaders, and managers to strengthen internal practices and business relationships. Email info@krsconsult.com to book an engagement or meeting with Dr. Sanders.

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Winning through Certifications

Friday, November 30th, 2012

Dr. Renae Sanders

For many small businesses becoming a certified vendor at the local, state, or federal government level is an important step toward diversifying the client base and income stream. Certification is recommended for all eligible businesses, but pursuit of any government contract should be a strategic move for businesses. As you prepare, the following will help you avoid wasting your time and resources:

Establish Clear Sales Goals

Businesses should have clear goals for the types of business they are pursuing and which certifications are needed to achieve stated goals. Only pursue certifications that are most recognized by the organizations or entities with which you wish to do business.

There are several certifying agencies at each level of government, but businesses must also investigate which entities accept certifications by other agencies. For example, you may need only a state or regional certification to enter the supplier diversity program at large corporations. Knowing your target audience helps to narrow your scope and focus your marketing efforts on specific businesses or entities.

Learn the Lingo

Pursuing opportunities with government agencies also comes with a vernacular that is necessary to master to be successful in this space. A term like “lowest responsible bid” is quite telling and suggests business owners should be (1) operating at its most efficient level and (2) understand that egregious markup of services are less likely than in the past. Lowest, responsible bids means the granting entity already has an informed idea of the costs for the project, so unless your bid has a valid, and compelling reason to be higher than your competitors, the bid that meets the needs of the project with the lowest price will win the bid, provided all other requirements are present.

Demonstrate Performance

Competition for the largest contracts is stiff. Many agencies are loath to displace a known entity with an unknown player based on what is written in the bids or certification applications. New players must bring their “A” game. To win big in government contracting, a solid track record of performance, stability, and sustainability in related business activity along with great timing is paramount.  Tell your story, better yet, get others to tell your story to key players for you.

Establish a Solid Marketing Strategy

Government agencies are a market segment just like any other segment. As such, a marketing strategy specific to this target group is a necessity.  Simply having space in a vendor’s database will yield minimal results unless an aggressive marketing strategy is employed. Keep in mind, the sales cycle for each level of government and agency are different, but few are instantaneous. Landing a multi-million dollar contract can take years.

While many bid opportunities are issued at the state and local levels, the level of competition for these contracts is also high. Decision makers who have built relationships with existing contractors are more like to stick with a known entity over a new comer.

Remain Abreast of Trends

The time spent between pursuing and waiting for your big break is also the time where additional training and preparation should be obtained for leaders and key employees. For instance, LEED certification and training is a growing requirement among companies seeking large contracts with government and large corporations. Understanding your role in the social and environmental space is of growing importance and increasingly large general contractors, government agencies, and large corporations want to ensure small businesses will add value and strengthen their efforts in the sustainability areas.

The bottom-line is there are numerous, good reasons to pursue certifications. However, developing a solid strategy for how you will leverage them for your business is a critical step in the process. There are many companies that offer services to assist businesses with obtaining certifications, just be certain find a partner you can trust, that is knowledgeable and offers real value to you and business.

Dr. Renae Sanders is the Managing Director at KRS Consulting, LLC, a management consulting firm specializing in organizational development, growth, and relationships. Believing people are the link between strategy and success, Dr. Sanders works with organizations, leaders, and managers to strengthen internal practices and relationships. Email info@krsconsult.com to book an engagement or meeting with Dr. Sanders.

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The Purple Elephant in Our Country

Sunday, November 11th, 2012

By Dr. Renae Sanders

The election has come and gone.  And thankfully so, on one hand, the airwaves are now free of the barrage of the negative political ads that bombarded the airwaves, especially, in the swing states where the ads had become a minute by minute occurrence. On the other hand, for some reality that their candidate had not won would come another day. The tragedy is that we do not have rules or regulations around political advertising when we are asked to make informed decisions about whom we should vote; but that is a separate article.

Today, let’s focus on the proverbial Purple Elephant in our country. The silent, yet ever-present and dangerous animal, that under writes our beliefs, attitudes, and actions.  Yes, its race. And it continues to fester below the surface of our great country. This is bigger than an apology. It’s bigger than reparations. It’s about our collective courage to face, own, and acknowledge that race is as much a part of our current cultural landscape as the air we breathe.

Emotional intelligence experts tell us that we must first be aware of our own emotions and what they are if we are to self-regulate our attitudes and thereby our actions.   Very simply, this means its o.k. to feel what you feel, but it’s unacceptable to act any way you want to act in response to those feelings; especially, if they are negative emotions.  Of course, this holds true for any negative response to emotions; but today – we talk race. Secondly, our emotional intelligence quotient (EQ) is higher if we then have an understanding of how emotion may affect those with whom we interact and how to leverage our awareness of emotions in our dealings – personally, professionally, or politically.

A rising tide floats all boats. Well, all decently constructed ones.  But you get the point. Therefore, the notion that the strength of America’s growing minority population will somehow erode the wealth and stature of America’s wealthiest is less than rational. Believing that in a global environment self-imposed segregation is beneficial and will help our kids cope with the rapid changes occurring in our country or their ability to compete is a response to beliefs of loss. Providing a superior education to the economically advantaged and then blame the poor for not doing more to take care of themselves is less than rational as well. The answers to curing the ills of our society lie in our collective engagement toward solving problems, self-awareness, emotional and social intelligence.

This election, and the last, exposed to many what they have feared with the growing demographic changes – that the democratic process would change the course of history. Surely, the British felt the same way, which is why the American Revolution occurred. In order for us to become a more perfect union, we must change as our country changes and we must respect what we have always seen in the defining moments in our history, “the minority will be heard, but the majority shall rule”.   This festering of unchallenged ideology has the potential to harm communities and create underperforming businesses, as morale, trust, teamwork, and knowledge sharing are compromised.

Author David Walsh wrote in his book, “Conversations with God”, that at our actions and decisions are based on the two primal emotions, love and fear. If we drilled down to the source of our behaviors, we are either acting out of love or on fear. War, segregation, political spin, bullying, analysis paralysis, and the inability to reconcile our sorted history are all based on fear.

It’s appropriate to quote, now, the lyrics from one of Dianna Ross’ megahits, “what the world needs now, is love, sweet love. It’s the only thing that there’s just too little of…”

Dr. Renae Sanders is the Managing Director at KRS Consulting, LLC, a management consulting firm specializing in organizational development and relationships. Believing people are the link between strategy and success, Dr. Sanders works with organizations, leaders, and managers to strengthen internal practices and relationships. Email info@krsconsult.com to book an engagement or meeting with Dr. Sanders.

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The Power of Effective Meetings

Sunday, November 11th, 2012

By: Tevin Smith

According to the National Statistics Council the average American employee spends about 37% of their time in meetings discussing various business issues. With so much time invested in these meetings it’s vital for business leaders to plan and execute effective meetings. Efficient meetings save time by allowing participants to get back to their work quicker, they also save money by enabling employees to reach new alternatives and solutions faster.

There are three important elements of planning successful meetings business leaders must consider:

  1. Is a meeting necessary?
  2. What type of meeting is necessary?
  3. When is the best time for a meeting?

Is a meeting necessary? We have all been in meetings simultaneously contemplating what we will have for lunch or if we have remembered to unplug the iron. Calling unnecessary meetings is a quick way to decrease employee morale and lose the trust of those you count on to deliver results.

Researching and analyzing should be done prior to a meeting. Once these activities are completed, it may then be necessary to discuss the findings in a meeting. This way valuable time is not wasted on tasks that are better completed individually. Meetings should be reserved for sharing information or advice, clarifying an issue, sharing concerns, or when your group feels a meeting is necessary. Keeping these best practice guidelines in mind will lead to more productive meetings and increased morale among employees.

The most common reasons to meet is to solve problems, make decisions, or to report information. Problem-solving meetings enable participants to identify particular situations that need improvement or development. Since the purpose of these meetings is to come up with new ideas they are usually discussion-oriented. In decision-making meetings participants are asked to reach a final decision from previously developed alternatives. These meetings require coordination and planning to keep people focused, and to ensure that a full range of opinions have been contemplated. The purpose of information-reporting meetings is to update people on the status quo or alert them to anticipated or planned events. These meetings are often a forum for making announcements, giving feedback, and providing progress reports.

Arguably one of the most important factors of planning and executing a successful meeting is timing. The right timing will create an atmosphere conducive to achieving the end goal of the meeting. The three optimum times for meetings are: one hour after you start work, immediately following lunch, and just before the end of the day. Early mornings tend to be the best time for decision-making or problem-solving meetings, most people are fresh in the morning and often more productive. When meetings are held in the early afternoon following lunch, participants mornings are free to prepare and they aren’t constantly peeking at their watches wondering when lunch is. Another good time for a meeting is at the end of the day. Tired employees are usually more relaxed, if there’s a somewhat contentious issue that needs to be discussed a time when employees are most relaxed will be best.

With over 11 million meetings held each day in the United States alone, leaders who plan efficient meetings save time, reduce cost, increase productivity, and morale among employees. With such far reaching positive implications, it is time business leaders put more planning and effort into effective meetings.

Tevin Smith is a guest writer for KRS Consulting. Tevin has a passion for small business and seeks to illuminate issues that promote productivity, growth, and sustainability of business. Contact Tevin Smith by email at tevin@krsconsult.com.  

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From Corporate Worker to Entrepreneur: A Major Cultural Shift

Monday, October 15th, 2012

by Dr. Renae Sanders

Research has highlighted numerous reasons small businesses fail. Organizations like SCORE and CreditDonkey.com purport ten primary reasons for failure. They are:

  1. Lack of experience
  2. Insufficient cash
  3. Poor Location
  4. Poor inventory control
  5. Over-investment in fixed assets
  6. Poor credit
  7. Personal use of business funds
  8. Unexpected growth
  9. Competition

10.Low sales

Often lists like those above fail to demonstrate what activities lead to these types of lists. When such research is conducted the activities are bundled into categories. This article focuses on the journey for the career corporate turned Entrepreneur.

Corporate culture

The lingering economic downtown of 2008 sent massive numbers of former corporate types to start up new businesses. These new entrepreneurs were responding to the need to make ends meet or pursue latent dreams prioritized by unexpected layoffs. Far from the characterization of much politicized 47% (victimized, lazy, and mindless), these individuals pursued the American dream.

Corporate employees have the skill to deal with issues facing big companies and they have the big corporate funding to support those efforts along with the corporate resources to needed to execute. One of the first lessons of the new entrepreneur is “I’ve got to do it all”. From ordering paper clips, to writing plans, making sales, to shipping goods and marketing; the new entrepreneur is the nerve center of it all.

This awareness can be quite overwhelming, especially for those organizations lacking the financial resources to hire workers.  Kicking the habits of the corporate culture to the ever changing world of entrepreneurship is major feat. Most corporations, even the nimble ones are slow, compared to the speed with which an entrepreneur changes direction, business model, product or service offering, or competitive position in an effort to survive those first three years and break the $250,000 barrier.

The mind of an entrepreneur is opportunistic. It takes effort and emotional fortitude to move faster, work longer, and push the envelope of personal inertia and see each person as an connection to be cultivated.

Another challenge many former corporate-raised-entrepreneurs armed with great ideas, retirement funds, and passion face includes under estimating how challenging it is switching from a regular payment schedule to an irregular cycle of some money, lots of money, or no money. The psychological adjustment can be quite debilitating from some. However, the lionhearted this change represents an awareness that you are indeed in control of your future. For the faint of heart, the dread of another 15th or 30th passing with no “hit” is analogous to a junky ‘jonesing’ vacillating between horror, debilitating fear, and sleepless nights. The fear often leads to a low confidence and perspective that leads to a self-fulfilling prophesy.

A good business idea is often spawned by observations made while in a current business or industry. However, many business owners newly released from the norms of corporate culture miss having individuals who handle the administrative activities of the company. Gone are the days when the administrative assistant orders ink, paper, paper clips, shipping supplies based a simple comment. Those orders, invoices, surveys, posts are all handled by a much smaller staff or the owner.

At the end of the day, take heart in knowing all is not lost. The paradigm shift can be liberating and lead to a prosperous life. Of course, there are many elements that lead to a success business, all which are more likely to occur with a positive perspective and internal systems that make managing your business activities turnkey rather than dependent on human hands.

Dr.Renae Sanders is the Managing Director at KRS Consulting, LLC, a management consulting firm specializing in organizational development and relationships. Believing people are the link between strategy and success, Dr. Sanders works with organizations, leaders, and managers to strengthen internal practices and relationships. Email info@krsconsult.com to book an engagement or meeting with Dr. Sanders.

Related Articles

How to transition from Corporate Job to Entrepreneurship

Transitions: From Corporate Employee to Entrepreneur

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From Losing to Winning

Wednesday, February 15th, 2012

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Barrier to Entry for Small Business

Sunday, December 25th, 2011

By Dr. Wesley Carter
Stella stood with her hand resting gently on the whiteboard in the conference room. She had been in the office most of the night and all morning, working on a report for her father, the owner of a small business. Stella’s father had asked her to identify the barriers to entry for potential new competitors, or entrants, into their market. With a supportive pat on the back, her father had posed the question last night.

Stella was intent on convincing her father that she was ready to take over the reins of the family business. She absent mindedly twirled the dry erase marker between her fingers and mentally reviewed what she had learned about barriers to entry in business school and from years of experience in the family business.

New companies must be able to enter the market before they can actually become competitors. Creating strategic barriers is an excellent strategy to stave off competitors and deter entry into a market. Stella’s father posed the challenge to evaluate how the business would fair under Stella’s leadership. Her father’s faith in her ability motivated her to provide a thorough assessment.

Stella recalled Michael Porter’s five strategic market forces regarding barriers to entry for potential competitors. She quickly went through her mental checklist and scribbled her ideas on the whiteboard. Economies of scale can pose a barrier to entry when potential competitors must make large investments to compete in the same market as an established business. Typically, new market entrants will be forced to enter the market on a large scale to threaten an entrenched and established business in a particular geographical area. The access to proprietary technology, an advantageous location, or government subsidies can make it difficult to enter a new market.

Product differentiation creates a barrier to entry when customer loyalty for a particular product or service is strong enough to threaten businesses attempting to enter a new market. Customer loyalty can result from customer service, brand identification, or the status associated with a particular product or service. However, product differentiation is only a barrier to entry for the potential competitor if they do not have access to the capital required to compete.

Capital requirements can make it very difficult for potential competitors to enter the market of an established business. The capital requirements can result from the need for large start-up costs, heavy certification fee requirements, or research and development. Basically, when an industry requires a new entrant to make a large capital investment to enter the market, those capital requirements represent a barrier to entry.

Cost can also represent a potential barrier to entry. When established companies achieve either a lower “cost of doing business” or product/service price advantages, cost becomes a threat to a new company entering the market. If an established company is fortunate enough to operate profitability at a lower cost than a new company entering the same market, the established company has a cost advantage.

Established companies often have greater access to distribution channels than new companies entering the market. Access to distribution channels poses a barrier to entry for a new company if it will be difficult to gain access to similar or more efficient distribution channels.

Government policy and regulations have the potential of posing a tremendous barrier to entry. Industries such as liquor retailing, coal mining, or trucking are examples of government policy interfering with entry into the markets. The government can enact a barrier to entry by limiting the number entrants into a particular market such as public utilities or garbage collection.

The issue is not whether a potential competitor will enter the market, but “how long it will take a competitor to enter and challenge the market space of an established business?” Stella quickly wrote the potential barriers to entry for the family business, took a step back, and admired her work. She smiled with confidence as she prepared for a very positive discussion with her father. She looked forward to hearing her father’s feedback during their lunch meeting. The white board was white, no more.

WESLEY CARTER DM, authors an advice column that leverages leadership and management strategies to solve common business problems. Carter holds a Doctor of Management (DM) degree with an emphasis in Organizational Leadership, an MBA, and a B.A. in Management. Carter is a partner at KRS Consulting, LLC in Charlotte, NC. If you have a question, email wesley@krsconsult.com. All submissions become the property of Wesley Carter. Call (704) 992-1211 or email to book an engagement. This article originally appeared in “The Charlotte Post”.

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Pitching to Angel Investors

Monday, November 7th, 2011

By Dr. Wesley Carter

Cathy, CEO of CK Inventions, LLC, tugged at her sleeve and checked her watch for the tenth time in five minutes. Kyle, her business partner and COO, glanced at the closed conference room door and willed it to open. Dave, the team’s numbers man, patted his pocket to confirm that he had remembered to bring extra batteries for his calculator. As Cathy leaned over to whisper in Kyle’s ear, the door opened and the team was invited into the room.

They were invited to plug their thumb drive into the laptop sitting on the conference room table. While Dave opened the presentation, Cathy made the rounds and introduced herself to the Angel investors sitting around the table. Kyle stacked the hardcopies of the presentation on the table and ceremoniously placed the team’s invention in the middle of the table with a black drape covering it.

Raising capital can be a daunting task. Entrepreneurs frequently call on an angel, aka high net worth investor, for infusions of funds to start enterprises or to expand existing businesses. Angel investors are individuals willing to part with a portion of their net worth in exchange for a higher return.

According to the law of primacy, first impressions are powerful. Cathy, Kyle, and Dave did their homework and walked into the room ready to sell their invention. Recognizing that investors evaluate hundreds of pitches, the team prepared a compelling, memorable, and financially sound story.  Cathy introduced the team and launched the presentation. She convincingly painted a picture that enabled the investors to make the connection between the loss of life of U.S. military troops due to improvised explosive devices (IEDs) and how CK Inventions was the appropriate response. The pitch resonated with the Angel investor who had served two consecutive tours in Afghanistan.

Cathy, a retired civil engineer with 22 years of active duty, explained how the CK Inventions team had served together and kept their commitment to identify a tool to reduce the threat of IEDs to troops on foot patrol. She described the unique skill set of Kyle, a computer engineer, and Dave, an accountant.

Cathy provided a brief overview and introduced the agenda, Kyle provided the core ideas in the middle of the presentation, and Dave closed with the financials and a recap of the key points. Dave had the forethought to include a 1-page synopsis of the terms of the investment required; 1) how the money would be used, 2) terms and conditions, 3) success metrics, and 4) payout schedule. 

Presentations designed to pitch a business idea must impress and convince investors to allocate their money to a particular business venture. The slide master should be configured to include the company’s logo on each page. The presentation should be no less than 10 pages, but no more than 20 slides. An appendix can include more detailed information.

Presenters should plan to spend from 90 seconds to three minutes presenting each slide. A common mistake of amateur presenters is to inundate the audience with too many words. Each slide should include three to five bullet points per page, with no more than 5-7 word phrases per bullet. Pictures and images should be used if, and only if, they convey a point and invoke an emotional response in the investors.

Nothing is more detrimental to a pitch than the lack of knowledge of industry trends in a chosen field. Angel investors leverage industry trends to validate sales projections and operating costs. The pitch team must be familiar with industry trends to increase their credibility and demonstrate that they are serious and committed to the business concept.

Investors are data driven. Current financial standing, as well as, financial projections for at least three years must be included in a pitch presentation. Financial data should be checked, and rechecked, to ensure accuracy. Though it may be tempting to dream of hitting it out of the park on the first try, grandiose projections have no place in a pitch.  Projections should be realistic and honest. Milestones should be quantified and included in the key metrics used to drive revenue and gross margins.

CK Inventions had anticipated the possibility of negotiations and established a walk away figure before they entered the room. In case the investors chose to completely forego investing in CK Inventions, the team was prepared to ask for referrals. Pitching to Angel investors is a numbers game. Cathy and Kyle knew the more they pitched the idea, the more succinct their pitch would become.

Cathy reached over and pulled the drape from the CK Robot and demonstrated the degree of cutting-edge artificial intelligence built into the IED finder. Kyle noticed that the investors were sitting on the edge of their seat. It was obvious that the team’s hard work had paid off.

WESLEY CARTER DM, authors an advice column that leverages leadership and management strategies to solve common business problems. Carter holds a Doctor of Management (DM) degree with an emphasis in Organizational Leadership, an MBA, and a B.A. in Management.  Carter is a partner at KRS Consulting, LLC in Charlotte, NC. If you have a question, email wesley@krsconsult.com. All submissions become the property of Wesley Carter. Call (704) 992-1211 or email to book an engagement.

Zantac

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Consulting Favors Add Up

Monday, November 7th, 2011

By Dr. Wesley Carter

Rodney braced himself for yet another request for a favor of free consulting. His neighbor, Larry, approached him while carefully dodging the pile of freshly raked leaves. Rodney switched his rake to his other hand and gave Larry a firm handshake. Larry wasted little time before he launched into a diatribe about the trials and tribulations of owning a business in today’s economy. Within minutes, Larry asked Rodney do him the favor of reviewing his marketing plan.

Rodney stiffened at the tenth request for free consulting services in as many days. Friends, family, and even a few strangers routinely asked Rodney for consulting services without any intention of paying for the services. Rodney exhaled as he quickly calculated how much revenue he had sacrificed over the years by doing consulting favors.

 Without waiting for an answer, Larry reached in his pocket and pulled out a thumb drive with his marketing plan. But, this time, Rodney was ready. He looked at Larry and said, “Larry, it is time to give your business the attention that it requires. Why don’t you call my office with a couple of possible meeting times for us to get together next week? I want to give your business my full attention.”

Larry’s hand froze in midair. He had hoped to avoid paying for Rodney’s services. But, Rodney had had one too many lectures from his accountant. Every month, he gave away enough consulting services to turn a nice profit. Instead, he continued to struggle to make ends meet. Occasionally, he had to pick up teaching jobs at the local university to supplement his income.

 Larry made one last feeble attempt to persuade Rodney to look at his marketing plan over a bottle of wine later that evening. Again, Rodney declined, pleading fatigue, and repeated his request for Larry to call the office. Rodney felt a little embarrassment even as he stood his ground.

 After an awkward good-bye, Larry headed back to his house, thumb drive in hand. Larry resumed his yard work and prepared himself for more of the same conversations in the coming months. Until he had satisfactorily trained his circle of family and friends, he would be having similar conversations.

Larry had already gotten thousands of dollars of consulting with his requests for Rodney to review his financials and operating model. Rodney used to look out of his office window and see that Larry’s lights were out while he toiled over Larry’s documents. Rodney was tired of taking time from his paying clients to work on nonpaying projects for family and friends.

Rodney recognized that he was to blame for making it so easy for others to take advantage of him. More importantly, Rodney finally realized he had devalued his services by giving them away so freely. He knew that Larry would probably be resistant to call his office and become a paying client. Rodney was determined to get paid for his services.

Entrepreneurs frequently suffer requests for free services from family and friends. Whether from ignorance or more unbecoming intentions entrepreneurs are often asked to provide free services or products. Entrepreneurs must respect their value to resist being taken advantage of by others.

In anticipation of requests for free services, entrepreneurs should establish a budget for the amount of free services they are comfortable with providing each month. In addition to a budget, it is wise to establish criteria to assist with decision making regarding the requests that will likely come. Perhaps a portion of the services may be allocated to nonprofits. Services can be provided to individuals based on need or referral potential. Invoices should be provided for all services and a professional services credit should be reflected at the bottom. This small detail reminds that receiver that there is a cost associated with provided free services. It also establishes the foundation for requesting payment for future services.

Research indicates that 80% of small businesses go out of business within the first two years. It isn’t a stretch to consider that some of those businesses likely forfeited revenue due to the provision of free services to family and friends. It is important to remember that entrepreneurs garner respect for their products and services when they manage their business professionally. Others will respect Rodney’s services, as long as he holds to his commitment to terminate giving business away indiscriminately.

WESLEY CARTER DM, authors an advice column that leverages leadership and management strategies to solve common business problems. Carter holds a Doctor of Management (DM) degree with an emphasis in Organizational Leadership, an MBA, and a B.A. in Management.  Carter is a partner at KRS Consulting, LLC in Charlotte, NC. If you have a question, email wesley@krsconsult.com. All submissions become the property of Wesley Carter. Call (704) 992-1211 or email to book an engagement.

Vasotec

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Pricing Professional Services

Thursday, October 13th, 2011

Dr. Wesley Carter

No matter what you charge, you will encounter the occasional persnickety client that balks at your rate. The sticker-shock may be justified. But, it could also be a strategy to persuade you to lower your rate. As a consultant, one of your most important responsibilities will be to accurately establish rates and fee structures.

There are several alternatives for establishing your consulting fees. A few of the most popular strategies are hourly, project-based, market value, per day, or formula-based rates. Arbitrarily multiplying an hourly rate can be tricky. If you set the rate too low, you undercharge and work yourself to death. And if you set your rate too high, you will have a hard time finding clients willing to pay.   

Using a project based pricing strategy requires an accurate assessment of the amount of time it takes to complete a project along with the inclusion of additional hours for unexpected challenges. However, on predictable projects, with predictable tasks, a project based fee structure may be applicable. But, again, even a project based fee structure must be priced based your hourly rate in addition to numerous other variables to withstand the scrutiny of a profitability evaluation. A project based pricing strategy includes a requirement for hourly valuation to ensure that project based pricing creates a profit for the consultant.

The easiest pricing strategy is establishing your fees to align with market rates for comparable services in your geographical area. However, this strategy does not accommodate skills and experiences unique to you. Moreover, without a rationale for establishing your pricing structure, it will be difficult to justify your rates.

Similar to the project based fee structure, pricing your services based on a per day rate also requires you to first, decide on an hourly rate. Keep in mind that a consulting day is seven hours, as opposed to an 8-hour employee day.  Again, it is critical that you annualize your daily rate to determine if the rate will adequately sustain you and your family financially. You will also need to be realistic about the actual number of days that you will actually be able to work for hire. For example, you may not be available for hire during vacations, sick days, holidays, or when you need to address the administrative functions of running your business.

 Basing your fee structure on a formula methodology will enable you a degree of customization dependent upon your unique situation. For example, consultants with special certifications and/or qualifications can justifiably charge a higher rate. You will need to research the annual salaries/fees, expenses, and training needs of professionals with similar experience and expertise levels.  

According to the industry standard, the cost of employing an individual needs to be increased by 25% to account for benefits. However, health insurance fees are typically higher for a small business owner than for an employee of a large organization. Therefore, start with 135% of your annual salary forecast and add an estimate of your annual operating expenses to that amount. Lastly, add your tax liability and continuing education expenses. The result will be your cost of doing business. Now, divide that amount by the hours that you realistically expect to work each year. This is your hourly rate.

Leveraging a formula based fee structure provides the flexibility of pricing by the hour, day, or project. More importantly, a formula based structure will enable you to justify your fees based on an objective assessment of the cost and value of offering your services.

Even the most qualified and seasoned consultants find themselves being asked to justify their rates. If you cannot reasonably justify your rate in a way that makes sense to your target market, you have not priced your services accurately. If your rates are a deterrent to securing clients, you will need to reevaluate your rates. If you have more work than you can reasonably do, your rates may be too low.

There are three effective strategies to assist you in justifying your rates to clients; investment, value, and differentiation. Translate your rate into the return on investment (ROI) for the client. Ensure that the value that clients receive as a benefit of hiring you is greater than the cost of hiring you. In addition to competitive advantage, differentiation provides grounds for justifying your rates.

Refrain from consulting for family or friends to avoid requests to lower your rates and ultimately, your probability of operating a successful business. Family and friends often harbor unrealistically high expectations and an unwillingness to pay fees commensurate what their level of demand. Now, get to work!

WESLEY CARTER DM, authors an advice column that leverages leadership and management strategies to solve common business problems. Carter holds a Doctor of Management (DM) degree with an emphasis in Organizational Leadership, an MBA, and a B.A. in Management.  Carter is a partner at KRS Consulting, LLC in Charlotte, NC. If you have a question, email wesley@krsconsult.com. All submissions become the property of Wesley Carter. Email wesley@krsconsult.com to book an engagement. This article was written for and originally appeared in the Charlotte Post.

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