35% of companies see price pressure as the number one factor in preventing growth.

For the last few years, we’ve been involved in research projects to reveal how to help service companies grow. We’ve also conducted monthly small group dialogues to discuss what we uncovered. Hundreds of Ontario business people attended these meetings and at the beginning of every meeting we asked, “What’s going on with you, what are the biggest changes in growing your business?” Right up there at the top was price and margin pressure.

Over and over we heard how customers are more demanding and almost cruel in their negotiations and their price requests. We revealed from one of our research papers, “Where have the big customers gone” – that the reasons were:

1) It’s easier to get into your markets. Competition is coming from everywhere, even unusual sources. The flood of new, local, and foreign firms who are eager for new business, are putting pressure on pricing models and affecting margins.

2) Everyone tends to say the same thing about their offering and as a result, prospective clients just hear “blah blah blah” and because of this, only 14% can see a difference in offerings. Every business is commoditized. Relevance and value is tied to what clients really want is missing.

3) Only 38% of clients rate service responsiveness, quality and speed as number one. What do the remaining 62% want? They want someone to help them directly grow their business more directly. They value the firm that goes out of its way to determine what they really need and want and become an assistant coach, trusted advisor and instigator that causes them to move on things that help them grow revenue or reduce costs. Clients aren’t saying they would pay a lot more for that, but they are liable to choose those trusted advisors over typical competition. Our research says higher value billing is possible when you become a genuine, trusted advisor, regardless of the level of your business model.
Level 1 – Commodity Servicing:
The bar is higher, even for those companies that have a level that is about commodity servicing which approximately 70 % of all companies are. In this model, everyone is doing routine services and even junior people can and need to do it well. Today, knowing the customer’s emotional needs and demands is paramount. Taking an online survey occasionally helps to know those demands. It’s important to create a culture where everyone understands and is competent at the company process of making each client touch point excellent according to the customer’s demands. Efficiency and everyone becoming an ambassador of your promise to the market is required. If these things don’t happen, price becomes the most important element to your customers and cost cutting is your only answer to fighting off competition.

Level II – Client Problem Projects:
Some clients want expertise from a firm who has expertise and the reputation for solving certain type of problems. Those who provide it in their offering usually have a senior expert leading a team that does most of the work. They invest time in developing a respectable process that solves the problem, makes money for the firm, and the team can follow. They engage juniors who can do the upfront and diagnostic work. As a result, they can bill more for the total process. They become project-oriented. They sell the process as well as experience the solving of those problems as their firm’s offering. Project management and client collaborative skills are required to make this model price and user friendly. Bigger deals are possible.

Level III – Top Flight Expertise – the Highest Level of Value and Expertise:
Some clients want top flight expertise with their frontier aspirations and their problems getting there.

Since few clients have regular, ongoing needs for top flight critical expertise, the client mix of practicing in this area tends to be diverse, and is continually shifting. Only ten to fifteen percent of firms organize themselves to meet these needs. Those that do hire the absolute best, young associates and have informal mentoring systems, acquire senior professionals who are inventive and can immediately do large scale engagements, and charge for their diagnostic and client work. They make profits through high billing rates or some form of on-going value billing. It’s justifiable and sustainable because of the complexity, and risk in the client engagement. These type of experts are marketed – rather than the firm. These experts do blogs, write books, give speeches, conduct workshops, and appear in many public venues. They live from high end referrals. They operate with autonomy and are loosely part of an inspired team and eventually own a big piece of the firm.

The key in these three models is to obviously match the expertise and offering to the right clients. Earn higher prices or fee levels through specialization, innovation, listening to your market and subsequently creating the value that matches up to your customer’s needs. Use marketing to get better work. Make talent management a priority. Speed up your skill-building process. Create teams who learn and develop higher value services. Lower delivery cost for each engagement by increasing leverage in the delivery of that service. Handle the underachievers immediately, get rid of them, or train them.

Other ideas are to increase billable hours per person. Keep eliminating redundancies and duplication by developing methodologies that everyone follows. Increase speed of billing and collections. Be more visible with your outcomes. Unlock your senior associate’s time in working in low profit areas.

We hope you are stimulated to refocus on what’s important in facing pricing pressure. I would imagine you know about all these things, but actually implementing them is another matter. What needs to be implemented or executed in 2016?

Next week factor number nine – Selling! (Ugh!)

It’s the best time ever to be in the service business in Ontario. Make 2016 the year you raise your game.

Have a happy and successful 2016!

Kevin D. Crone
Chairman, Dale Carnegie Business Group
kdcrone@dalecarnegie.ca
(905) 826-7300

Note: I just got back from Arizona for our national conference. Our team was presented with an award for business growth. Last year was a year of innovation. We spent a great deal of time studying the market, researching business trends, advising, coaching, and giving a our expertise away to support our client’s businesses. We thank our clients and appreciate their commitments to improve. I am proud of our team and congratulate them for their dedication to take care of business. Let’s make 2016 the best yet!