4 Steps to Setting the Value of Your Services (Part 3 of 3)

Continued from part 2.

BusNotesPt3Pricing Sample:

An editor I coached needed to make $50,000 a year. She also needed two weeks of vacation, holidays off, and some personal/sick days to take care of her kids. She was also able to work 6 hours a day, although not in a row, and wanted to make sure that her work time was filled at least 80% of the time. Here is the formula we used to determine hours she’s available to work each year:

((6 hours per day * 5 days per week) * 48 weeks per year) * 80% of time busy = 1,152 hours of work

• The 49 weeks allows for two weeks of vacation, one week of personal/sick time, and five holidays.

Next we had to figure out the hourly rate:

$50,000/1,152 hours = $43/hour (Not taking into account overhead, education, etc.)

Since no one wanted to hire her by the hour, she needed to convert the hourly rate into a per page or per word rate. She determined that there are about 150 words per page and it takes her 5, 10, or 20 minutes per page depending on the type of editing she does. So we developed the following two formulas:

$43/(60 minutes/time per page) = per page rate

per page rate/150 words = per word price

She created two versions of the above prices based on the three types of editing she does, which looked like this:

Editing Type A = $3.58/page
Editing Type B = $7.20/page
Editing Type C = $15.00/page
Editing Type A = $0.03/word
Editing Type B = $0.05/word
Editing Type C = $0.10/word

Now when she gets a call from a potential customer, she asks how many words are in the manuscript. If they tell her 77,000 words, she says, “For type A editing, your price will be $2,310.”

Gone are the days of calculating out how many days are left in the month and her workload. She no longer has to review the physical documents for typeset size based on the font used in the manuscript. She just uses a simple multiplier to calculate the answer. All the other background work is done by the previous formulas to free up her quoting process. And, if she’s a bit faster on a job or two, she’ll find a nice bonus at the end of the year.

End of part 3 of 3.

© 2017 by CJ Powers
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4 Steps to Setting the Value of Your Services (Part 2 of 3)

Continued from part 1. 

3. Value Results-Oriented PricingBusNotesPt2

I met with a CEO of a small business that requires lots of traveling to disseminate its products. The team is well liked by all clients, but the traveling process makes the business inefficient. This drops the overall value of the product and delivery services. It also means, unbeknownst to the CEO, that clients are looking for alternative solutions.

My package offer to fix the looming problem was designed to increase revenue 300% by implementing online ordering. The new process guaranteed that the parts and services happened “just in time” rather than by chance. It also allowed for territory expansion without adding more personnel or trucks.

The package was priced at $120 per hour for my time to set up the online services, train the employees, and structure the new distribution practices using a third-party shipping company. Plus, they wouldn’t owe anything if I didn’t double the company’s revenue in 12 months. In other words, if I only hit 99.9% of the financial goal, they’d get everything I did for free.

The CEO turned me down because he never paid anyone more than $29 per hour. Since our last meeting, the business has seen a 12% reduction in revenue because clients have found alternative sources for the product. While this situation was an odd bird, there are plenty of companies that would love to work with a vendor that guarantees his work. The real value of any workload is in the end results.

4. Establish a Formula for Service Pricing

When I worked for the network division at Lucent Technologies, our competition was running circles around us. After loosing two dozen bids in a row, upper management demanded something be done about it. I researched the situation and learned that it took our team 7 days to publish a quote, and our competitors did it in 3-4 days.

After discussing the issue with the team, we came up with an online quoting system that returned accurate quotes within 4 hours. No one ever questioned why we were inundated with orders. Upper management just smiled all day long.

An entrepreneur that I met with last week had a similar problem. She didn’t have enough time each day to put quotes together and lost most jobs before she could finish her quotes. By turning to a modular formula system, she can now turn some quotes around while she’s still on the phone.

End of part 2 of 3. Part 3 will provide a pricing sample.

© 2017 by CJ Powers

4 Steps to Setting the Value of Your Services (Part 1 of 3)

BusNotesPt1

My Denver omelet was tastier than normal and I wondered what happened in the kitchen that made it more flavorful. Its value went up and the menu’s price tag no longer mattered. I took another mouth-watering bite and looked across the table at the CEO of a small marketing firm that I was coaching.

I suddenly saw a connection, as she struggled to accept the value of her newest service offerings. The streamlined approach simplified her workload, which compelled her to reduce prices that were already under valued. She was basing the asking price on her ability to streamline her work efforts rather than on the service’s value to the customer.

Many small firm executives struggle with the perception that unless it involves a melee of sorts, the service or product must be priced lower to justify its value. Truth be told, in today’s market the client’s outcome determines the services value.

Executives can learn to position their services based on the value of the recipient’s outcome by following the below 4 Steps.

1. Value Your Clients Success

Last year I coached a small business owner whose declining revenue numbers suggested his doors would close within 6-12 months. I was asked to increase the store’s sales in whatever manner might work. While my strategy was foreign to the team, I was fully supported and given an expense account to implement my action plans.

Within 6-8 months the measureable results had increased the revenue percentage by double digits and brought in about 130 new customers. Each customer spent an average of $1,000 per visit—a 100% increase over the national average order size benchmark. The elated owner said, “You’re worth ten times what I’m paying you!” I suddenly realized that my value was in the end result, not in how much I struggle or sweat.

By placing a focused value on the outcome, clients are willing to pay for those results. Most will not care how much it costs, if it’s a small percentage of the revenue it generates. Everyone likes a project to pay for itself and then some. The happy client is always the one who gets the results they asked for, not the one who saved money and is forced to close down.

2. Value Your Ingenuity of Development

One business I coached never front loaded any lessons learned or ramp up time when starting a new project. The owner felt that his customers shouldn’t have to pay for his education, especially if it is required on their project.

I asked him what his greatest value was that drew his customers. He pointed out that they come to him because of his expertise. It didn’t take long for him to realize that his learning curve on the current project would soon be a part of his expertise and of great value to his customer.

I suggested his ingenuity, education and development time, which are his greatest assets, should be included within his pricing. After fidgeting a bit, he agreed to charge 50% of the learning costs since the customer would gain from his new knowledge.

Companies are willing to hire someone who can figure things out quickly to get them up to speed in new market areas. Whenever someone comes along with similar, but not exact experience, they are snapped up for the sake of speed to market. The cost is never the issue; the only concern is productivity and timeliness of release. So all ingenuity during the development stage is of great value whether learned on the job or outside of it.

End of part 1 of 3. Part 2 covers steps 3 & 4 with part 3 providing sample pricing.

© 2017 by CJ Powers

Creative Child’s Game Simplifies Value Decisions

How to Assign Value to Disparate Projects for Equal Consideration

Have you ever wanted to know which project to start next? Did you get frustrated comparing unrelated activities in an attempt to determine which provided the greatest value? The solution is as simple as a child’s game.

No, I’m not talking about a Six Sigma Pugh Concept Matrix to determine which potential alternative solution can more quickly and easily be engineered into a viable product for just-in-time manufacturing.

I’m talking about a simple game that boutique tech businesses use to prioritize projects by overall value.

It’s called a weighted decision matrix and its fun to use.

Picture a simple table with the name of the projects listed down the far left column. Across the top of each column is the criteria that you’ll use to measure a projects overall value. Where each project and column intersects are the letters H, M, and L. The far right column holds the total of the criteria scores for each project.

Slide1

STEP ONE:

Name each project in the first column. Name the criteria being considered at the top of each column.

The H M and L represent the importance level of the criteria for the project—giving it a high, medium or low level of importance for each particular criterion. Circle the level of importance that each project holds based on the given criteria.

Slide2

 

STEP TWO:

Give a value to each H, M and L. With less complex decisions I use the following values: H=4, M=2, and L=1. If the decision is more complex I use: H=9, M=3, and L=1. Then total the score by adding the values from each cell. The decision is obvious—I need to write a blog on Decision Matrix (see below table).

Slide3

 

But many times life is not so simple because some criteria are more important than others, which requires some form of weighting.

STEP THREE:

When criteria are not equal, a numeric value must be attached that will work as a multiplier. I use a 5-point scale to make sure each criteria receives its due credit or strength in the formula. However, when sorting through a large number of projects, I switch to a 10-point scale in order to pick up on the value of subtle nuances for each criterion.

In the below table I’ve given each criteria a numerical value. In the first cell the M was circled and is valued as a 2. I then multiply it with the weighted criterion value of 4 and get a new total cell value of 8. Each cell is added together for a total score of 40.

Slide4

The weighting has clarified what’s more important and shifted the score to a tie. In this case I would’ve been better off using the larger spread of values: H=9, M=3, and L=1 as in the below table. However, the scoring is so close that the decision of what blog to write had an original score of 10, shifted to a tie, followed by coming in second place (see below table).

Slide5

Here’s where the game gets tricky. You have to be totally honest with yourself whenever assigning values to what’s important. Deciding between H, M, L is pretty easy, but the choice is more difficult with a 5-point criteria value—even more tricky with a 10-point value.

In the table below I changed the weighted amount for the third criterion from 3 to 4. Why? Well, since most of my readers run families, small businesses and departments, I thought the category should hold a higher level of importance.

Slide6

Now look at what happened to the scores. The numbers made the decision very clear, but only because I was being truthful about the third column’s actual value of importance.

WARNING: As in all games that use numbers, a person can cheat to make things read anyway they want, which defeats the purpose of playing.

STEP 1A:

It’s important to use only the criteria that are truly important to a project. Extra criteria that’s not seriously weighted only complicates your decision making process.

If you’re an artist, consider some of these criteria:

• Passion Zone
• Stretch Comfort Levels
• Gain Knowledge
• Generate Money
• Advance Career
• Network Expansion
• Develop Skills
• Touch Lives
• Build Relationships
• Fun & Games

The above factors can all impact a decision for an artist deciding whether or not he or she is interested in signing on to a film project. Sometimes it’s worth doing if it expands your network or you can learn something significant from the experience. Other times making money is the number one weighted factor.

In business, other criteria might be considered like:

• Meets Objectives
• Forwards Career
• Meets Boss’ Bonus Requirements
• Generates Commission
• Creates Double Digit Growth

The above list can go on and on, but the idea is sound. Figuring out what criteria is important for the projects being considered helps change the decision from an aggravating dilemma to a child’s game that’s easy to solve with a quick hand written table or spreadsheet.

Members of different departments that make up a special team can also play this game. Each can add a few criteria to the table to make sure their area of expertise is well considered by the decision maker.

The biggest decision I faced was sorting through 11 projects with 32 criteria. Thankfully it was on an automated spreadsheet and the answers were quick and sound.

Let me know what other games or tools you use to decide which project should be next.

© 2017 by CJ Powers

Managing Daunting Projects

startup-photosLast Saturday I interacted with several generations at a friend’s 95th birthday. Typically during events of that nature I get to learn a lot about people and observe things that get tucked away in my brain for future use. But this time a person brought up my latest novel (Steele Blue) and asked, “How were you able to write an entire novel? Isn’t it such a daunting task?”

I answered, “It’s not all that difficult if you write it 500 words at a time.”

Now, I’m aware that my answer was a bit simplistic when you consider story structure, character development, and the other intangible elements that must be carefully crafted into a novel. But the person’s face suggested a concern about how to overcome very large and overwhelming projects.

Last week I happened to be consulting with a CEO of a marketing communications firm that specializes in elite professional speakers. The question raised to me was very similar and went something like this, “How do you manage the myriad of elements it takes to make a movie?”

Again my answer was simple, just like you’d give an answer to the question, “How do you eat an elephant?” One bite at a time.

There are three steps I take to break down the overwhelming into manageable bites:

STEP ONE: Assess the project scope.

The 50,000-foot view is a great starting point to understand the maximum effort required for a project. However, a 10,000-foot view makes for better decision making because it includes all departments and freelancers that will have their hands in the mix.

Before I break down a movie script to determine budget and schedules, I must first understand the “why’s” of the project and who will be heading up the departments necessary to capture and translate the vision into a reality. This insight immediately tells me what size ballpark we’ll be playing in and the rough estimate of the cost to produce the picture.

As a director, I’ve found that Anthony DeRosa, who’s worked on numerous Nickelodeon and Disney projects, is one of my favorite producers to work with. The reason is because he and I have a shorthand of quickly determining if a script is a $3MM, $12MM, or $40MM project. It allows us to quickly assess what level of actors will be tapped for the show and what team might be best to spitball the visual effects budget.

The bottom line is that only speaking at the level of vision and goals is not sufficient for breaking down daunting tasks. It must be broken down for each department head to fill in the blanks of what he or she knows is needed to accomplish the task.

In the case of an author or consultant, the work needs to be looked at from the standpoint of available time slots. No consultant can work on more than four projects in a given day because it takes time to ramp up and review the previous day’s work, plus have enough time to do something significant to move the project forward. Most experienced executives will try to limit their productivity to no more than two projects on any given day so they have enough time to meet quality standards.

STEP TWO: Look for natural breaks.

When you look at a work of art you see the whole that makes an impression. But when you study it, you see all the segments that make up the whole. In a story there is always (or at least should be) a beginning, middle and end. In film you have the three-act structure.

In nature, you see patterns of fractal art. Take a closer look at a tree. Its trunk branches out into large branches. Each large branch then, in the same artistic fashion, extends out with more branches. This pattern continues until you have a full balanced tree of branches. Next the leaves come in, and the piece of art is complete.

Finding the natural breaks in a project reduces the pressure and allows for the steps to be aligned to a calendar for easy management.

When I was at a large technology company I was tasked to sell $480MM in switching equipment to one customer. After meeting with the CEO, I learned that I needed to get the written and signed consent from certain key vice presidents before the sale could be completed. I then learned from each V.P. that I needed agreement from key directors, who needed buy-ins from senior managers.

It took me two and a half years to collect support from all players. Everyone added great insights to the project, which also altered the configuration to exactly what the company needed. I closed the deal after a long presentation of input to the executive board including the new offer for $750MM.

That meeting was the easiest close I had ever experienced because I had reduced the entire project down to 300 pieces of research, presentations and sign-offs. The CEO was thrilled because he knew the $480MM project didn’t fit, but loved the perfect custom package, and the future profits the new offer provided.

STEP THREE: Develop specific action plans.

Zig Ziglar, arguably the greatest salesman of our time, shared a story about a father giving a party for his newly available daughter. The father hushed the crowd and told the eligible bachelors that the first man to swim the length of the pool without being bitten by the alligators that he stocked in the pool for the night, would receive $100MM and his daughter’s hand in marriage.

A splash was heard at one end of the pool, and after a series of frantic strokes a young man emerged at the other end. The father asked the young man what drove his decision to risk his life: his daughter’s hand in marriage or the $100MM. The pale looking man answered, “Neither. I just want to know who pushed me in.”

Clearly the young man didn’t know what he was doing or why he had “won.” No one is capable of knowing if they achieved a goal unless they first set it in writing and objectively measure the outcome of their activities. Before taking action, people also need to know what’s in it for them, which is the strongest motivator that we hold dear.

A written action plan must include the following: measureable objectives, motivational benefits, self-assigned awards for success, resources needed to accomplish the tasks, and the next steps for the portion of the project during that stage.

With these three steps in place, the daily tasks are reduced to simple steps that are easily accomplished with little emotional concern.

© 2017 by CJ Powers

Recipient of 2017 Torch Award

Photos by: Sean Su @[203867963313063:0]I was thrilled to be a part of the management team that created and implemented an ethical business model, especially since it was acknowledged and rewarded by the Better Business Bureau (BBB). We received Honorable Mention for businesses in the 1-9 employee category at the 2017 Torch Awards for Marketplace Ethics.

The BBB received over a thousand nominations from consumers and businesses in Illinois. The awards banquet was sponsored by numerous companies serving Chicago and Northern Illinois. Present for the award presentations were WGN, ABC, and the WCIU.

Photos by: Sean Su @[203867963313063:0]ABC 7’s Hosea Sanders hosted the event and handed out the awards. Melissa Stockwell, Army war hero, mother and three-time world champion Paratriathlon medalist was the keynote speaker. The event was well attended by 400 plus Illinois business leaders.

I was given three minutes to share highlights from our ethical practices, journey and gratitude for the award. It was the first time I received an award of that magnitude on behalf of a team and I found myself extremely nervous until my foot hit the stage. Once on the platform I quickly came up with a new speech, since Sanders touched on my planned comments as he introduced me.

Photos by: Sean Su @[203867963313063:0]During the selection process I was inundated with 25-30 hours of paperwork. Our final document answering the questions of the third party counsel was just shy of 50 pages including process and event documentation for standards adhered to and lived out.

I was energized by this once in a lifetime experience because everyone in the room was passionate about raising ethical standards in Illinois. Being in a room with like minded executives was encouraging and I hoped each company effectively instills within their employees the need for and benefits of working within ethical standards.

Photos by: Sean Su @[203867963313063:0]

The Mastery Cycle

Slide1I led a master class and several workshops at a conference last week. My goal was to take the students through the mastery cycle without them knowing it. The outcome was eye opening during the debriefing stage of the conference – The time when reality revealed where on the master craftsman scales each person landed.

The mastery cycle has four parts to it: attitude, knowledge, practice, and skill. The attitude step is all about adjusting one’s dreams to a reality check without draining their vision. Increasing their knowledge is the second step that requires a certain amount of entertainment in order to retain the information. The third step is practicing with a coach who can guide and correct each step of the way. The fourth step is the development of a specific skill that can shine during the process.

Once the process concludes, it’s always useful to debrief the participants and find out what they achieved or learned. Everyone gains a new skill (or part of one) or learns how to avoid a disaster going forward. Both are needed for the master craftsman’s utility belt regardless of their occupation.

ATTITUDE ADJUSTMENT
My classes were filled with beginning filmmakers and semi-professional amateurs. Both groups typically have a great aptitude for filmmaking, but greatly lack the skills needed to climb to a higher level of quality. Since its impossible to get to the next level until you first understand what you don’t know, adjusting the attitudes of the participants is critical to their growth.

I opened with an example of a finely crafted short story that an amateur would shoot for less than $10,000 and a professional would shoot for no less than $265,000. By explaining the difference in quality, story, skill levels, etc., I helped many of the students correct their vision and desire more skills.

INCREASED KNOWLEDGE
The next class was about how to develop a story using a simple logline as a blueprint. Loglines are one to two sentences that clearly articulate the overall story. Any variation due to overzealous creativity in the process weakens the story and hinders the film’s success.

The class developed the beats of the story based on the logline and then wrote a script to be shot the next day. Everyone in class got caught trying to take the story down a rabbit hole, but the team maintained focus thanks to the agreed upon logline – a safety net to make sure the chosen topic is adhered to.

PRACTICE WITH COACH
The day of the shoot was guided by the experienced training the inexperienced. We had hoped for a professional team coaching an amateur team, but circumstances didn’t come together as planned. Still, the experienced were able to help and encourage those with less experience. Three scenes were shot and then debriefed the following morning.

We reviewed the dailies and discussed the pros and cons that came from the shoot. And yes, there were more cons, but I prefer to say there were more learning opportunities. As long as the person learns from his or her mistakes, they are another step closer to mastering their craft.

During the shoot the director is in charge. He must hold true to the logline, the script breakdown, his notebook, and all the other tools he has in delivering the final story based on its original intent as expressed in the script. Unfortunately, the director was so busy trying to keep his cast and crew moving that he forgot to refer back to his notes.

The outcome was some really good shots and acting that had nothing to do with the story. During our review, I pointed out as many of the errors that added to the destruction of the story and why each person failed. I also pointed out that with film being a collaborative art form everyone must stay on task, rather than offering up things that don’t move the story forward.

SKILL DEVELOPMENT
Each participant got a taste of a new skill they need to develop. The director learned how to breakdown the beats of the story to make sure they are filmed. The actors learned the importance of becoming the character instead of changing the character to be like them. The writers learned that creatives can make things up all day long, but must only keep what fulfills the logline. And on it went.

The process that led to the beginning development of a new skill can now be cycled again to lift that skill to another level. The repetition will eventually see the person master the skill and others for his utility belt, which will eventually lead to the mastering of the craft.

The person who embraces the mastery cycle will eventually become the master and be able to properly break the rules in order to move the art forward. They are also the ones who are passionate about the art. They are the perfect type of people worth having on any set and in any workshop.

Copyright © 2016 by CJ Powers