Lessons Learned From Marcellus Part Three: Timing: When’s Your Right Time to Pounce?
Filed under: Business Growth, Marcellus, Pittsburgh, Profitable Growth, Uncategorized
“When will the Marcellus boom impact my firm?” Since timing is everything, you need to know when’s the best time for you to invest and gain a12-month return. If you are hearing all about opportunities but seeing few leads, buyers or orders from shale-related business, you’re not alone. Throughout my recent trips to West Virginia and throughout Pennsylvania, I’ve been watching the boom happen in fits and starts.
Last time, I wrote you about which industry sectors to watch first. Now, here are my thoughts on how to time your Marcellus initiative. When will the “Marcellus money” hit your business? For my insights read on:
When is the right time to invest in your Marcellus-related business? The answer will depend on how your region is advancing regarding the following factors:
1. Water regulations need to be “flushed out”
Right now, testing protocols for determining the impact of Marcellus drilling on ground water are being set and revised. This is for everyone’s benefit. And of course, there is a healthy debate. What is the definition of clean water and within what radius? And if a well, soil or drilled sample isn’t clean, then why and who’s to blame?
Which jurisdictions will prevail in setting the rules? State, local and federal agencies are jockeying for control, but lag behind industry groups like the Marcellus Coalition who are better funded and more sophisticated testers. Once protocols are set, who is liable and who will enforce the rules should follow quickly.
2. Midstream piping capacity is the current bottleneck
The gas wells that are already built are pumping all the gas they can, and that local facilities can store and, existing pipelines can transport. New pipeline capacity to move the gas downstream is in the works. Until new pipelines are approved, the midstream builders are waiting for orders and the fees that will help accelerate the Marcellus boom. These payments will not just be for the construction of the pipelines, but will also trigger the gas royalties that landowners will receive. Now, most landowner spending is based more on their lump sum windfalls from selling gas rights. When drilling starts in full stream, then royalty payments will start. This will clearly accelerate across-the-board spending.
Downstream businesses, namely those who benefit from the gas businesses are lining up behind several large opportunities. For example, a billion-dollar plastics plant producing pellets and film from gas is being contemplated in West Virginia. The business impact is obvious. And the four sectors previously described in my Lesson 2 — business services, transportation, infrastructure and construction are obvious beneficiaries and will be the first to show the boom is accelerating.
3. The price of gas must rise and stay over $4 per billion BTU’s.
As dependent as our nation and this region is on Middle Eastern oil, this oil and other gas alternatives can still be cheaper for producing heat and power for many commercial and residential applications. Although I’m not qualified to explain or refute this, the energy community thinks that the $4 benchmark is the tipping point for gas to become the prime choice. So, it’s a matter of time before higher oil prices will increase demand for natural gas, thereby increasing its price.
4. The Utica Shale opportunity could make Marcellus seem like the tip of the iceberg.
The Utica tract is the next, big opportunity adjacent to and underneath the Marcellus. It is deeper, richer and larger than the Marcellus. Apparently, it contains gas, oil and other minerals. Its simple existence reduces the risk of Marcellus alone to meet business expectations. As there’s more evidence, investors, drillers and their indirect suppliers and beneficiaries will certainly put their money where their confidence is.
5. Consolidation
Every month, other under financed, smaller drillers are being bought out by the major energy companies, as much to eliminate the risk that their corner-cutting practices pose to safe operations as for their value. Larger producers want clear regulations to comply with. In Pennsylvania, their group, the Marcellus Coalition, is also consolidating as the top-tier.
So when is the timing best for your firm to invest in the shale opportunity? My best advice is to watch your region in terms of the five factors I described above. The boom is coming. Stay tuned as I learn and share more.
5 Steps to Refocus During Tough Times
Filed under: Business Growth, Pittsburgh, Profitable Growth, Uncategorized
Whether it’s the economy, your family, business, community or society, probably some part of your world has suffered over the last five years. Unfortunately, there are enough signs show that the next few years will continue to challenge even the luckiest, blessed and oblivious among us. Even as we strive do “right and good,” what do we do if: demand for what we sell, access to resources we require, or our energy and drive simply dwindles?
If you need a pep talk, read on.
- Recognize bad signs fast. As it’s been said, once is a coincidence, twice a trend, three times, a certainty. If something isn’t working, figure out why ASAP. The world is changing faster yet most people can’t change at all. Every day I speak to people who feel trapped in so many ways. They have become what they tolerate because their pain of changing remains greater than their pain of not changing. In business, however, your marketplace (customers, employees and vendors and investors) will tell you the truth. For the other parts, get the personal, professional or spiritual support you need to accelerate changing your bad to good.
- Take stock in your value; Your Best and Highest Use® Accept quickly that your expertise and your firm’s experience are your greatest treasure. They remain yours forever and always the ingredients and foundation of your renewal.
- Keep your eyes open; seek opportunity. Wherever there is pain, need or hope, you can find and make opportunity. Follow your heart and your head. Your internal voices are ever more righteous as you mature. When most people take a hit, they lose faith in their judgment, impact and options. Stand apart and stay confident.
- Refocus, regroup, repurpose. Take your BHU and the opportunity or pain you uncovered and link these and then find customers who will value your repackaging. Activity matters so keep trying new versions and push forward. Try giving away your reinvention or better yet sell it right away. In facing setbacks such as bad timing, backward thinking and an ADHD society, rely on your passion and conviction to drive you to success. Remember your BHU is portable and deliverable. If you doubt where’s the demand for your value, go where you:
- Are getting human and viral response
- Have raving fans
- Are scarce
- Stay focused/don’t blink. Anything you create takes 3-6 months to generate reaction/awareness in the marketplace and 1-3 years to take root. Create the opportunities for quick wins and the metrics to prove your wins are real. Before you can generate market success and profitable growth, remember to create prospects, and qualify and develop them into buyers.
- Connect online as much as you can
- Get seen, heard and interviewed
- Identify and nurture allies, referral sources and champions
- Make your viral marketing portable; avoid investing in fixed costs, particularly of traditional sales and marketing.
Whether or not this all makes sense to you, think about the parts that do and put them to good use in refocusing your business in tough times. Email me at abirol@andybirol.com.
Companies Either Grow or They Are Sold
Filed under: Business Growth, Profitable Growth, Uncategorized
While financial gamers, schemes and scams have enabled many companies to avoid either profitable growth or a sale for years…
… ultimately one of these options is inevitable.
◦A company that is profitably growing is controlled by passionately committed owners and investors.
Their firm is financially and operationally self-sufficient. There is no need to merge or look for investors. Its leaders can reduce its credit line and pay down outstanding loans. The company has customers who are happy to pay for its valuable products or services. Over time, the company will build up retained earnings and become a creator of wealth. As long as its owners are confident and passionate they should never think of giving up their independence in running it or cashing out. Life is good!
◦A company that is not growing profitably has flat or declining sales.
Its costs and expenses are fixed or rising and it starts to lose money. The company begins to consume more cash than it generates. Owner, banks or investors have to subsidize the company through credit or by tapping any retained earnings. These leaders lose passion for their business as it is no longer self-sufficient. Clearly, its customers cannot or will not pay enough for the firm to delivery its products and services. First, the company runs out of cash, then out of credit and finally must be sold.
There are only two buyers for a company that is not profitably growing:
1.New owners and investors with ideas, cash and passion to return the company to profitable growth.
2.Bankruptcy trustees who sell the company for whatever they can to pay creditors pennies on the dollar.
So companies either profitably grow or they are sold.
What’s it going to be for your company? Do you agree or disagree?
Making Money on Marcellus: First Lessons Learned
Filed under: Business Growth, Marcellus, Pittsburgh, Profitable Growth, Uncategorized
If you own a business in Western PA/Eastern Ohio, the more you learn about the trillion-dollar business opportunity called Marcellus Shale, the more you may wonder how you can best profit from it. But unless you’re selling directly to gas drillers or energy giants, you are probably wondering what to offer, who to approach and how to go to market. As I’m helping my clients and workshop attendees do this, here’s the first in a series of lessons I’ve learned:
First Lessons Learned on Making Money on Marcellus:
- Make Marcellus your rising tide; not your tsunami: Find a portion of the overwhelming demand you can profitably supply and make sure you can deliver on any business you close. As tempting as it is, don’t let any one customer become more than 20% of your business. My friend Shaun Seydor’s seminal report ” The Economic Impact of the Value Chain of a Marcellus Shale Well” *is a must-read and linked here with his permission and my gratitude. Read it and think about where your can catch the wave.
- Follow the money and bring your “A” game: My early advice to clients is to avoid the big players (Range Resources, EQT, Chesapeake, Exxon/Mobil etc.) and sell to the companies who sell to these big boys. Stay one step removed from the “tier one” companies, and you can keep more control over how you do business. But it’s still a fast and furious world and strong contracts are imperative. Put your best foot forward and never forget: with all this opportunity you are competing in the big leagues. Fortunes will be made and lost. This is a great time to Recharge Your Best and Highest Use®
- Stake out your value and place in the food chain. Learning where and to whom you offer the greatest sustainable value is critical. There are many ways to slice the Marcellus marketplace. Identify your ideal target buyer and know their buying process. Build a selling process that matches their buying process. Here’s an article to help you think about this http://profitablegrowth.com/shout-out-or-shout-at-your-sales-force-is-it-generating-sales-growth-in-the-new-economy/ Also, decide where your business fits into these two graphs from the Marcellus report: Figure 1 – Types of Economic Impacts (p 4.) and Figure 2 – Phases and Key Steps in Developing a Marcellus Shale Well Site (p.10).
- Timing is everything. Many business owners I’ve met operating in the Marcellus tract complain that the “out of towners” won’t hire local companies or that “the money is yet to show up.” Make sure what you sell is ready to be purchased. Watching what your customer’s customers are buying is one way not to make your move too soon or too late. Here’s a piece I wrote in a different context but has some good tips on figuring out your best timing http://profitablegrowth.com/is-your-demand-down-or-distribution-dying/
- Chase transactions or relationships Most companies working in the Marcellus space can be split into transactional firms who do business one sale at a time (e.g. gas stations) and those relationship companies growing over the long term (e.g. cleaning companies.) Match how your business profits best to the right kind of kind of customers that you should do business with. To help you decide which you should focus on, here’s an article for you http://www.andybirol.com/DisplayContent.aspx?MenuID=626
Unlike the great Oklahoma Land Rush where everyone got a fair start at the same huge opportunity, Marcellus is much more complicated and tricky despite the trillion-dollar economic windfall it is. Stay tuned. This is the first in a series of pieces I will write as I learn lessons with my clients and workshop attendees on making money on Marcellus.
Do you have questions on how your business or audience can make money on Marcellus? Call or email me and let’s talk about it.
*By Heffley, Seydor, et al & the Katz Graduate School of Business at the University of Pittsburgh.
Finding the Extraordinary in the Ordinary For W.K. Thomas
Filed under: Business Growth, Pittsburgh, Profitable Growth, Uncategorized
As a growth consultant for small businesses, I’ve enjoyed many opportunities to see how various small businesses function, especially those that have operated for a number of years. In an age of understaffed companies and conflicting and competing demands, most of these companies are so busy helping their customers that they don’t take the time to help themselves.
They tend to lose sight of what I call the extraordinary that lies at the heart of the ordinary in their operations–the characteristics that make them special and unique. One such company in Butler County is W.K. Thomas.
The president of this company lacked a formal marketing program and realized that traditional, relationship selling would not get him to where he wanted to be—in the scarce space of marketing and sales in their respective businesses. Now, he’s changing his company to achieve that.
Thus far in our work together, he’s focused on expanding his values and defining and honing what I call his individual Best and Highest Use®. Best is what he loves to do. Highest is what he does really well. And Use relates to what his customers value and are willing to pay for.
Under the leadership of Brent Thomas, W. K. Thomas & Associates provides pre-engineered steel building and construction services to the commercial, industrial, community, and religious markets throughout Western Pennsylvania. Brent’s father, Bill, now Vice President, established W.K. Thomas in 1974 as a custom-home builder and general contractor. Since then, the company has remained a privately owned, family company.
Other firms rely heavily on the service offerings of project management and estimating as commodities to drive business forward. They end up competing in a market where bottom dollar pricing and the resulting low-quality construction become the norm. But Brent Thomas is linking the brand of W.K. Thomas to pre-engineered steel buildings as the company’s big differentiator and is driving revenues up. His company is growing a reputation in Butler County as the go-to company for these types of buildings.
“I’ve stepped outside of being jack of all trades,” says Thomas, “I’m focusing on pre-engineered steel buildings, which is our Best and Highest Use, have taken on more responsibility for sales, and I’m reorganizing our team to help energize this new direction.”
When I began working with Brent Thomas, he had a strong, well-established business with great potential for growth and wanted to take his company to the next level. What made sense for him was my ability to find the extraordinary within the ordinary of his company. My approach has been to find the characteristics that make him special and different from his competitors, and to cultivate these aspects into exciting opportunities to grow his business.
Working with him and his customers has led me to understand his product lines, how they add value, and how they develop special relationships with his customers, whose feedback is critical to our endeavor.
The upshot is that now W.K. Thomas is becoming more aggressive in proclaiming its value and more consistently educating its customers about what it can do to help them. Thus far, we’ve focused on expanding Brent’s values and defining and honing his individual Best and Highest Use®.
Throughout my years of consulting with businesses like W.K. Thomas, I’ve deployed this approach to help more than 430 businesses owners identify the specific markets that’s right for them and their companies. This has had a $450-million impact on the economy.
Best and Highest Use also immunizes companies against the “Be All Things to All People” disease. This disease is as common as a cold, but it’s as deadly as the plague for small businesses.
When business owners fail to target specific markets in this way, a number of consequences occur, all of which are bad. Their companies aren’t special. They’re mediocre, forgettable, or worse. People can’t refer customers to them. Their companies attract unqualified prospects and waste resources on prospects who could care less about their offers. This, in turn, diminishes their efforts with regard to prospects who do.
What’s more, best use helps business owners to resolve the greatest pain or create the greatest opportunity for a narrow slice of a market. This creates a crucial intersection for them between their companies, their Best and Highest Use, and the needs of their customers.
Over time, I’ve had the privilege of learning, using, and teaching a variety of growth tools for organizations. We’ve used a variety of names for these processes, including strategic planning, management by objectives, sales management, and incentive compensation. Too often, these systems steamroller over the interests of the users. The fact is that old-fashioned, autocratic tools just don’t work anymore.
More than a few times, I’ve had people challenge my concept of Best and Highest Use, saying that it’s just another term for distinctive competence, one of the buzz words that periodically make the rounds of corporations and MBA programs. In one way, they’re right. Best and Highest Use is essentially distinctive competence for business owners. The difference – and it’s a large one –is that although distinctive competence speaks clinically of skill sets and marketplace advantages, Best and Highest Use involves an owner’s emotions, goals, and personality.
One concept I hear kicked around is the term, best practices. But this assumes that all firms start out and grow and stay completely equal. To center your business on best practices is to deny, ignore, and disrespect your Best and Highest Use. How can you ever tell if you are better or worse than you should be if you only judge yourself on the basis of the lowest, common denominator of other companies?
Working together, Brent Thomas and I continue to focus on his individual Best and Highest Use to translate new customer demand into substantial, dramatic growth and confidence in his abilities.
In the short and medium term, we’re tailoring initiatives designed to achieve profitable sales growth. At the same time, this company leader is experiencing a renewed excitement and passion for his business. At a time of economic hardships when competitors are pulling back or taking cover, their passion and excitement is giving him confidence to make it work.
As we reinforce the abilities of W.K. Thomas to deliver higher value at lower cost, we’re decommoditizing the company.
This is not to say it’s easy. For one thing, Brent has had to break old habits. That’s difficult. But my goal is to push him out of his comfort zone in a way that causes willingness to raise new behaviors while preventing him from making ultra-risky, bet-the-company decisions like introducing price changes to gain market share, hiring non-producing sales people, or getting rid of a sales force.
As I work with companies like his that have enjoyed years of success, I’ve enabled them to make course corrections a step at a time. The end result has been that they’ve sharpened their views on the kinds of businesses they want, the kinds of services they deliver, and they’ve stopped trying to be all things to all people. These are hard choices that emerge from recognizing that everything they may be involved in is not a business.
Andy Birol is the Founder and President of Birol Growth Consulting, www.andybirol.com. You can reach him at 412-973-2080 or at abirol@andybirol.com.
If The Economy Is Slowing, Is Your Business Growing? 12 Tactics To Ensure Your Business Does Well During A Slow Economy
Filed under: Business Growth, Profitable Growth, Top Line Growth, Uncategorized
By now, there’s no question the U.S. economy is mired in an economic slowdown. While your specific industry may actually be strong, slowdowns are epidemic in nature and have a way of leaking into otherwise solid sectors.
The simple fact is that expectations drive consumer behavior. A mindset of limitations is replacing an attitude of abundance. As a result, people are hedging their own bets and risking less.
All of this has put business owners in a precarious situation that they haven’t witnessed during the roaring ’90s. But that doesn’t mean your business has to stop growing just because the masses are taking a wait-and-see attitude.
Here are 12 tactics to help ensure your business doesn’t follow the downward trends.
Warranty and maintenance contracts that extend the useful life of the status quo.
Programs/products and services that promise reduced costs and greater efficiency will be more attractive than those promising increased sales.
Channel power will go to those with paying customers or the ability to retain their margins.
Loyalties and relationships of convenience/laziness will be broken. In times of stress, relationships either deepen or disappear. Pick and choose your partners on both the supplier and the customer side. You can’t be all things to all people.
The transition from having not enough people to having too many people may be sudden. “Bargain-price” human resources can help increase customer service or search for new customers.
The challenge of focusing on your best and highest use, your target market and your customer pain becomes all the more imperative. As demand slows down, every purchasing decision will be questioned. The practice of finding the best suppliers may be replaced by finding the one lowest cost supplier.
As people become more risk-averse to selling on the basis of fear, uncertainty and doubt will be effective.
Capital goods will be harder to get approved by customer finance departments. If so, they will be prioritized in the following order:
- Those that improve profits
- Those that increase sales
- Those that decrease production costs
- Those that decrease administrative costs
Technology factors. When tech capability greater than the market’s capability to absorb it, then price falls when everyone beyond the early adopters stop buying it. The minute the technology isn’t used, the value drops. Technology starts being given away and revenue streams devalued. Inevitably, the technology is adopted and price goes up, or more likely the next great thing replaces it as the cycle repeats itself.
Outsourcing may or may not decrease but the need doesn’t.
Leverage goodwill if you already created it with your customers.
Rethink the time versus money tradeoff. People may have more time to spend on tasks they formerly might have paid others to perform.
While there is no surefire way to avoid a slowdown, if you’re proactive in your approach odds are you’ll be better off then your not-so-prepared competitors.
Standing up to the Rupert Murdoch’s in Your Business
Filed under: Business Growth, Profitable Growth, Uncategorized
As business owners, we know that no one can intimidate us or our firms, right? But if the prime minister of England can be wiretapped while learning of his child’s cystic fibrosis, and his entire government can be bullied by a single media company, what recourse do we have we when we are intimidated?
How do we “Davids” face the “Goliaths” in our businesses? If you face bullies in the form of customers, investors, vendors, or partners, what can you do? When negotiations with bullies become pointless, here are four logical actions you can take to get out from under their thumbs:
- Create alternatives: No resource (people, money, expertise, or energy) is irreplaceable when you discard your assumptions.
- Pay the cost of just walking away: Realize that you can recreate what you have lost and more the sooner you start over.
- Expose your bullies: Go public with their malpractice or take it to legal and any other authorities they respect.
- Don’t let yourself get screwed in the same way again: Understand how and why you got taken and don’t ever make the same mistake again.
As the News Corp. scandal threatens to spread to U.S. shores and to violate our privacy, it’s clear that power, technology and desperation will further encourage bullies everywhere. If you’ve been wronged, stand up with your integrity, confidence and righteous indignation and then take the right steps to never again put yourself in the same position.
Is Your Sales or Marketing Manager Too Big For His Britches?
Filed under: Business Growth, Profitable Growth, Top Line Growth, Uncategorized
The marketing manager of a client of mine recently told me, “My reps and I already sell everything our customers and prospects will ever buy.”
“How about offering your widgets to younger buyers who don’t buy through distributors?” I asked.
“I hate younger buyers, and so do my reps,” he replied.
Is your firm stifled by your sales/marketing leader’s comfort zone?
Your firm is stifled IF your sales and marketing manager ONLY:
- Focuses on the traditional sales channels he or she knows and works with, but won’t understand or consider the use of other channels like direct mail, social meet ups or educating key influencers so they become referral sources.
- Understands how to service existing buyers through long-term relationships, but not with emerging buyers or buying departments within a company.
- Complains about customers, but is unwilling to identify and respond to emerging customer needs.
- Blames the economy, the competition or customers for why sales aren’t up, despite competitors who are doing better.
- Believes in his own experience and is unwilling to let other people evaluate or provide objective market feedback.
- Focuses on old-school tactics, like creating brochures or relying on sales people to reach to new markets and prospects.
In sum, a great sales and marketing manager is intellectually curious, loves uncovering and meeting the emerging needs of existing customers and always remains open to prospecting for new customers with interesting and different needs.
How does your sales and marketing manager stack up?
Banking On Your Banker
Filed under: Business Growth, Pittsburgh, Profitable Growth, Top Line Growth, Uncategorized
Mention “banker” to business owners or “business owner” to bankers and you are sure to spark a reaction. Having worked with hundreds of each, I marvel at the state of such a critical and ancient relationship in this day and age. While bankers and owners need and value each other, few supplier/customers relationships are so complicated and fraught with angst. Owners vex over the strings, bureaucracy, and inattention that accompany the money they borrow from bankers. To many owners, most loan officers are seen as temporary caretakers who have neither the time nor incentive to understand their customer’s business.
Conversely, every bank president I have met, in spite of his or her regulatory and lending constraints, insists they are the bank for business owners and lead their lenders to do so. They lament over how “over-banked” and rate-driven their market is. And they are right that smaller businesses rarely understand banking, financial management, risk, or working capital.
Because of these disconnects, bankers and smaller business owners rarely
profit from the synergy of their respective positions. The shame is, together
they could become a powerful partnership. In our economy, an emerging business’
credit, deposit, and processing needs make them a bank’s best prospective
customers. And bankers can offer not just fair rates but provide needed counsel
and guidance to smaller businesses that are typically unsophisticated borrowers
and often less rate-sensitive. So why can’t business owners find lenders who
will provide more value? And why can’t lenders convince owners to look beyond
the interest rate and see how much more a bank can provide? With interest rates
still relatively low, rather than shopping for the best rate, smaller business
owners need to find the banker that will give them the time and expertise they
cannot afford to create internally. For their part, bankers need to be capable
and eager to provide far more expertise and understanding of the business
owners’ needs. So as an owner, here are my five key ways for you to bank on your
banker:
- Accept it is the bank’s money and not yours. A banker’s
first obligation is to protect and control their depositor’s money that they are
lending you. Bankers often finance up to 50% of their client’s balance sheets
but only 10% of the business’ costs. They can feel that they are more concerned
with protecting a company’s assets than the owners are. So be a good customer
and when you take their money, understand that much of the “paperwork” and
record keeping is a critical discipline to internalize. Your loan officer is
always evaluated first on how he protects his or her bank’s money. And, unlike
other investors, they won’t try to run your business as long as you do. - You are not a bank’s customer you are their supplier. Think
of yourself as the supplier (of a good credit risk) to your sales rep (the
lender) who must sell it to his customer (the credit committee) and your
expectations will be realistic. Furthermore, it is important to understand that
the decisions of the credit policy committee just as often are based on the
bank’s overall financial needs as they are on your credit worthiness so don’t
take it personally when their decision appears to disregard the obvious. No
aspiring lenders can or will ever jeopardize their career by going against
credit policies of their employer. - Bank on your loan officer, not his or her bank. As all banks quickly copy each other’s products and services, your contact makes all the difference. When deciding on a banker, pick the individual who has substantial tenure in their position and hopefully some business acumen outside of banking. The best lender for your smaller business is rarely the hard charging, most promotable, fast tracker, but rather the tenured expert who loves working with businesses more than his own political bureaucracy and may be perceived as a rebel within their own institution. Unfortunately, the average banker covers over 250 customers so it is harder to keep his eye on your business than to get the lowest interest rate. If your business is so dependent on debt service that even a ¼% can make or break your company, don’t blame this on your banker but rather examine if your Best and Highest Use® is sufficiently valued by your target market.
- Don’t settle for “service.” Demand expertise and advice. If
your banker is only a middleman and expediter, he or she may call this “good
service” but it doesn’t add value to your business. Worse yet, if you call your
banker after months of no talking, and frantically ask him to increase your line
of credit so you can make payroll, shame on you both! Your banker should be
proactively asking open-ended questions, such as how will you make payroll if
you lose an account or production capacity and follows that up with more
questions which lead to you and she agreeing on an overall financial strategy
and contingencies, you have the right person. - Buy on price when the value is not out there. If you can’t
get expertise you need in a lender, then shop for the lowest rate. Think of your
banking relationship as an outsource-before-you-in-source decision. As you grow
in financial sophistication and embrace the discipline your lender has taught
you, hire a treasurer or CFO with the expertise that will also bring your rates
down.
Over these last few years, credit has been scarce but virtually free in this
low-interest rate environment. While many banks say they are vying for your
business, demand a fair rate and the right banker. Or learn to live with even
less debt! If you can bank on your banker and you and your business will be
better off. Articles by Birol Growth Consulting are © copyrighted and all rights are
reserved. However, articles may be reprinted with prior written consent if
attribution is included as follows:
© Copyrighted by Andrew J. Birol,
President of Birol Growth Consulting, who helps owners grow their businesses by
growing their Best and Highest Use ®. Andy can be reached at (412)
973-2080, by email at abirol@andybirol.com,
or on the web at www.andybirol.com.
Advanced Referral Marketing
Filed under: Business Growth, Pittsburgh, Profitable Growth, Top Line Growth, Uncategorized
If you run a company, lead a sales and marketing team, or sell for a living, you know that referrals are your best source of new business.
- Nothing beats an introduction from a peer who knows what you offer to a prospect who needs your value now.
- No matter how strong your sales skills, marketing programs, or products and services, a referral to a qualified prospect most helps you close the sale.
- If most buyers turn to colleagues they trust for recommendations when making a purchase, who do yours turn to?
If referrals are your business’ best way to grow, why don’t we develop our referring skills and seek out more and better referrals? Instead, too many businesses lament the lousy referrals they get from well-meaning business friends. Whose fault is that? Rather than launch a costly and risky lead generation effort, why not improve your advanced referral marketing skills?
The Basics of Getting Referred
To review, there are some critical ingredients to getting a referral. You must:
- Provide specific value to a defined target prospect. If you do not have a Best and Highest Use® please define yours now or settle for being referred as a commodity.
- Be excellent. Always grow your track record of quality work and results.
- Stay in front of those who refer you. Communicate with them regularly and provide new and valuable information.
- Be trusted. Prove to your referral sources you will treat them and their referrals with respect.
While these fundamentals never go out of style, enough people practice these well enough now, that distinguishing your “refer-ability” takes even more effort.
Five Steps to Advanced Referral Marketing
To grow better and get more referrals, here are five steps you can take now:
- Determine Your Need for Referrals
- Understand Your Prospects’ Buying Process and Then Align Your Selling Process and Referrer’s Role
- Define the Ideal Relationship Your Referral Source Should Have With Your Buyer
- Give Referrals to Get Referrals
- Develop Specific Tools and Tactics
Here are the five steps in detail:
1. Determine your need for referrals. Are you clear on where in your sales and marketing process you need a referral and for what purpose? Do you need help finding, keeping or growing your existing business? Do you need an introduction, validation, or affirmation from your referral sources? At which point in your sales funnel are you most in need of their support? Is it in qualifying prospects or developing prospects? For help in determining this, review the PACER Process.
2. Understand your prospects’ buying process and then align your selling process and role for your referrer. Understanding your customers’ buying process is not new but applying this knowledge in obtaining referrals might be. Where can your referrers have the most impact?
If your business is a relationship or an anniversary business, your referral sources need to be constantly cultivating your prospects for you, but if your business is more transactional or event-driven, then you want your referees to be far more opportunistic and pounce when they see the chance to recommend you. Here are two articles to help you decide this. Click Events or Anniversaries: What’s Your Business? Or Relationships or Transactions: What’s Your Business?Once you understand the role your referral sources play in your prospect’s buying process, you will of course align your selling process to parallel their behavior. And the role that your referees need to play will be clear.
3. Define the ideal relationship your referral source should have with your buyer. What are the ideal referral sources for your business? For example, some businesses enjoy most of their referrals from law or accounting firms while others are best referred by suppliers or even their competitors. To determine who is best for you, understand the role your referral source plays with your prospects and why a prospect would accept their referring you to them. For example, a parts supplier is unlikely to refer a financial planner to a purchasing agent because this is not a likely topic for them to discuss. Consider whether your referral source has the sufficient trust and professional intimacy with your prospect to make such a referral. For example, a specialist can often refer another specialist while another specialist will seldom refer a generalist. Also, your referral sources must see you as a scarce commodity as opposed to being abundant. If every business broker is hounding every banker to refer them their next deal, how can anyone care or remember which one to refer to whom? The 80/20 rule applies just as much as to referees. A few will refer a majority of your leads and most will only refer you once. Understand who falls into which groups and why. Finally, make it as easy as possible to refer you. I provide any referral source with the following description of my target prospect and exactly why when and how they would hire me. Come up with your own example along the following lines as I have in my business.
A target prospect for Birol Growth Consulting is a majority owner/operator of a business who is:
A. Dissatisfied with his or her business’ level of profitable growth.
(as good or bad as it may be)
B. Impatient to grow their business to the next level
C. Is a
a. Services Firm
b. Wholesaler/Distributor
c. Manufacturer
D. Willing to take and apply advice by working with an expert who empowers optimism
E. Willing to pay for the value of outside advice that generates ten times the investment
4. Give referrals to get referrals. Apply the Golden Rule in your referral activities. Generously and freely give away as many referrals as possible. While many will disagree, I urge you not to take commissions or fees for referring business. The time you put into developing a fair scheme is not worth the loss of trust you face when your peers learn you are making money off of whom you referred to them. Despite many opinions to the contrary, do not enter into tying, exclusive relationships or “Circles of Influence” with only one referral source such as a single law firm. Your power in referring and being referred comes from being able to match the right people with the best skills and style. There is no one size fits all here. But most importantly, remember who did refer you, follow up and keep them posted on how your or their referral faired. There is nothing more disappointing to refer or be referred and never hear what happened. If you do refer someone constantly and there is never any reciprocity, ask yourself if you have fulfilled the basics as outlined above. Before getting annoyed with your non-responder, ensure you have refocused on the basics, if you have, then it is time to find new advocates.
5. Develop specific referral tools and tactics. Make it easy for your referral sources to refer you. One of the great tools is the reciprocal referral letter. Attached at the bottom of this article is a sample letter you can send, one-for-one, with a mutually referable source. Making it one-for-one is fun, as it challenges both parties to provide great referrals and then to hone their selling skills in obtaining as many appointments, proposals, and closed sales as possible.
Find ways to donate your services to charities so that your referral sources can place you in highly visible venues. Serve as a subject matter expert for their customers where you can showcase your expertise while helping your referral source’s clients.
Summary
Referral marketing can be one of the most enjoyable as well as the most profitable tactics in growing your business. Develop your skills and practices in this area and you will surely enjoy better clients, better relationships not only with those who value you the most, but most of all with people you like whom like you. And after all, isn’t this what business is supposed to be all about? For help in accelerating your referral marketing efforts, to explore how we can refer each other, or simply to learn more, please contact me at (412) 973 2080 or at abirol@andybirol.com.
Here is a sample referral letter you can modify for your business or, (with my gratitude) use to refer Birol Growth Consulting:
Mr. John Smith
President
Smith Products
222 Allegheny Blvd, Suite #4
Wexford, PA 15444
Dear John:
Growing my firm has always been challenging and risky. I often wrestle with questions of what to invest in and when. I wanted to pass on an intro of an exceptional business expert and friend of mine, Andy Birol, of Birol Growth Consulting. He is a published author (5 times I think), accomplished speaker and advises small to mid-sized operating businesses owners on effectively driving top line profitable growth.
- How has my marketplace changed its buying behavior and how should my firm respond?
- How can I create more profitable growth?
- What new channels for profitable growth can I pursue?
While you may not have heard of Andy, I know him personally and he has an extensive record of working nationally to great reviews. In his short time here in Pittsburgh, he has become a regular columnist for eTEQ Magazine and has been accepted into Leadership Pittsburgh.
I told Andy you were on my short list of must-visits and I’ve suggested he give you a call. He’s making a positive impact in Pittsburgh’s small business community. I’m sure meeting with him will be a good use of both your time. You can learn more about Andy before he calls, checkout his website at www.andybirol.com. His articles, client list and newsletters are particularly interesting. No doubt you’ll get an autographed copy of his latest book, The Five Catalysts of Seven Figure Growth, CareerPress, 2006.
If you have any other questions or need anything further please don’t hesitate to give me a call.
Thanks so much and take care,
Sincerely,
You
Your Company
Your Address
Pittsburgh, PA 15232
