Art Of Value

Discover Value | Create Options | Start Pricing

Emotional Blind Spots Influence Your Pricing with Wes Higbee – 122

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In this episode, Wes Higbee and I explore the impact that emotional blindspots can have on the success or failure of a software project. The first challenge is they are blind (unseen). The second is they are rooted in emotion (feelings). Wes explains how to overcome both challenges.

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The Who, What and Why of Value with Ed Kless – 118

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In this episode, Ed Kless and I discuss his recent trip to Australia. He was in Melbourne to present a strategy workshop and speak at Sage Summit 2017. We explore the strategy framework of Why, Who, What and How. Then, we review his sessions from Sage Summit, Healing Leadership and Innovation Beyond Technology.

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WordPress News Is Not A Commodity with Brian Krogsgard – 113

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Brian Krogsgard is a WordPress developer from Birmingham, AL. He is the founder and editor of Post Status, a WordPress newsletter, and the host of Post Status Draft, a podcast for WordPress developers. He started working with WordPress in 2010, after graduating from Auburn University with a degree in mechanical engineering.

Starting As a WordPress Developer

What is the most important thing you can share about pricing?

Pricing is not “one size fits all.” It varies depending on the customer,  context, and degree of risk. The objective should be to maximize value for the customer and profit, not revenue, for the business.

What was your journey to becoming a freelancer?

His first development position was at a small agency, helping clients transition from a proprietary CMS to WordPress. At the next agency, Brian was the operations manager. He was responsible for determining scope, setting prices and presenting proposals to customers.

He started pricing websites by the number of pages or functional modules. Over time, he learned to price by the number of leads and average revenue per lead that the website would create for the customer.

What is the difference between developing websites and construction projects?

The progress of a construction project is very visible to the client. However, a website is not something a client can drive by and see. Regular communication is necessary to convey progress to the client.

Did the agencies where you worked compete through price or specialization?

The first agency was a full-service design shop, mainly in the state of Alabama. Their strongest competitive advantage was personal relationships, building trust with the customer.

The second agency was a boutique firm, focusing on high-end WordPress sites. Customers were attracted to their expertise even when the price was higher than the competition.

Making the Transition to Publisher

What did you learn from writing the article How much should a custom WordPress website cost?

The article was written in 3 hours one night from his frustration writing customer proposals. The feedback to the article helped Brian build a framework of the most common factors when setting a price. The article was viewed over 50,000 times in the first few weeks alone. The short answer to the question is, “It depends.”

What was your journey from free news to paid memberships with Post Status?

Brian learned web development by writing about WordPress. He started PostStatus in 2013, after writing WordPress news for other sites. Then in 2015, he began the transition to a paid membership site for $99 per year. The site has grown to 700+ paid members.

What did you learn about pricing membership sites?

There are three ways to buy PostStatus. First, a dozen companies are sponsors because of Brian's reputation in the WordPress community. Second, individuals can pay either $99 or $365 annually. $99 is the sweet spot, an impulse buy. $365 is a patron level, supporting the artist.

What is one of your best stories about creating value for a customer?

Each year, Brian chooses a non-profit to which he contributes his consulting services. It is an opportunity to keep his skills sharp and help a cause in which he believes.

Contact Brian Krogsgard

The Freedom of Value Pricing with Chris Blunt – 103

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Chris Blunt is a software developer from the United Kingdom and a member of the Art of Value Society. In this episode, we discuss his transition from hourly billing to value pricing. In segment one, we explore his motivation to move from hourly rates to pricing on value. During the second segment, Chris explains how he transitioned from a vendor to partner with his customers. In the last segment, Chris describes his early success with value pricing.

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Escape from Tracking Time

What is the most important thing you can share about pricing?

When you are pricing the value to the customer, there is no magic formula you can apply. The price you determine is based on everything you have done to understand what the customer needs.

What was your inspiration to implement value pricing?

 Chris began to reach a limit on his hourly rate. He first learned of value pricing in the book Double Your Freelancing. Then he discovered the book Value-Based Fees Value-Based Fees by Alan Weiss.

What has been the best advantage of switching to value pricing?

It is easier to present a proposal to a customer. Chris is more at ease during the presentation than he was with hourly billing. Writing a proposal has become easier. It is shorter and focuses on the outcome rather than the technical requirements.

What was the most significant challenge you had to overcome to switch to value pricing?

The internal fear of quoting the wrong price. You have to take a risk and start. The more you set a price based on value, the better you become.

Partnering with the Customer

How do you approach the value conversation with the customer?

Chris has learned to take a step back and focus on why they want to achieve the result rather than the technical side. What is the reason you want to complete this project? It helps the customer clarify their needs.

What is one of your favorite ways to create options for a customer?

Offering the customer three options. Creating options is one of the easiest changes to make when switching to value pricing. It changes the way to approach writing a proposal.

Why did you choose to share your switching experience with a public blog?

It was a way to hold himself accountable as he made the switch. After considering value pricing for several months, he wanted extra motivation to price the customer per the value rather than hourly billing. He also wanted to encourage others to make the same change.

Value Pricing Your First Project

Can you describe the first project you wrote about on your value pricing blog?

He offered an existing customer three options for a one-week project. He offered one price for project A, a second price for project B, and a cumulative price for project A and B together. The customer was extremely happy they did not receive a “surprise” bill for extra hours.

 Can you describe another project you wrote about involving a service plan?

The service plan is a new strategy Chris is using with most customers. It was not based on the number of hours per month. It was based on the scope of access to Chris and the scope of the maintenance. Chris included monitoring performance of the software as part of the service plan.

What is one of your best stories about creating value for a customer?

Chris had a testimonial from one of his first customers. “In just a few hours, Plymouth  Software saved us thousands of pounds in time and resources.”

About Chris Blunt

Narrative Is the Medium for Value with Chris Lema – 101

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Chris Lema is a software product strategist and daily blogger at ChrisLema.com. In this episode, we discuss value pricing in the enterprise market and creating membership sites. During the first segment, we explore selling software to large customers through story and value. In the second segment, Chris explains why a subscription service is actually a membership site and how to maximize revenue with pricing.

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Selling to the Enterprise

What is the most important thing you can share about pricing?

Never put a price in front of a customer until you understand what is motivating them. The customer's perception of value is different than yours. You need to understand their back story.

Is selling software to the enterprise different than to small-medium business?

The length of the sales cycle is extended for the enterprise. There are more stakeholders. It takes longer to understand the complexity of the back story. Consequently, the dynamics of pricing are also different.

How do you handle a value conversation in the enterprise?

  1. When a customer asks for something, have a value conversation to understand why they need it.
  2. Next, create options to give the customer choices with various prices, timeframes, and outcomes.
  3. Then, develop a narrative from the perspective of the stakeholders and frame your product/service as an accelerator.

How is selling a product different from selling a service?

For Chris, selling a product is easier because you can create one narrative for each market segment instead for each customer. In the enterprise, bundling customization (services) with a product is a strategic advantage.

Pricing for Membership Sites

What are some pricing models for membership sites?

The most common is a monthly subscription. However, the average monthly revenue is $17 and the subscription term is 4-6 months. A yearly subscription can create a more sustainable business. Another model is a lower membership fee and higher prices for premium content.

What are some stand-out membership sites?

  • MatterMark – Provides research data to salespeople for $500 per month.
  • Subscription Insider – Provides research data for membership sites for $60 per month.
  • ConvertKit or Drip – Email marketing automation starting under $100 per month.

Why is a subscription service really a membership site?

A subscription is a monthly financial transaction. Membership is being a part of something. The question is what does being a member mean? What is the narrative (or value) to which you belong?

What is one of your best stories about creating value for a customer?

Chris helped Roar create version 1.0 of their product using existing software. The company was able to prove there was a viable market for $20K. Later the company was sold for 7-figures.

About Chris Lema

A Value Conversation for the Solopreneur with Eric Davis – 095

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Having a value conversation with the customer is important regardless of the size of your business. However, as a solopreneur, it is essential for survival. You have to determine what type of customer is necessary to operate your business profitably. Then use the value conversation to identify and educate customers that you can serve and with whom you enjoy working.

What Is the Customer's Perception of Value?

  • What is the most important thing you can share about pricing?
    • There is more to pricing than the cost.
    • Pricing is not just what someone is going to pay for it.
    • Your perception, expertise, and abilities are part of it.
    • Price is a component of the relationship with your customer.
    • If you undercharge to win an engagement, you have colored yourself in a bad light.
    • If you use pricing as part of your positioning strategy, it changes the perception to your customers.
    • Is the customer looking at hiring a pair of hands or your brain?
    • Once you state your price, it is very hard to change it.
    •  If you have a relationship with your customer as an expert, you can engage in other areas.
    • A customer was willing to train Eric because they wanted him to build it.
  • How do you educate your customer about software development?
    • If a customer is pursuing custom software development for the first time, you have to educate them about what is possible.
    • Usually, they need to customize something that exists, but they do not know what they can do with it.
    • Talk with the customer about the problems they are having and how you can help them gain greater benefits.
    • A lot of the pre-sales education is identifying pain points and why the customer came to Eric.
    • He educates not only on the value for what they asked but looks for opportunities to create more value.
    • Often, they start with the original idea for a trial project to make sure it is a good fit. Then they book as much time as possible to continue working with him.
  • How do you handle the high demand for your services as a solopreneur?
    • His wife is in human resources, and he has heard the bad side of having employees. He felt like he could control the interaction with one customer each week.
    • He pushes things back or helps the customer hire its own team to go faster if necessary.
    • If there is a huge gap in the business, doing something minimal can cover the gap.
    • He works with them on a schedule, budget, and value to prioritize work.
    • Once you unlock the value that custom software can deliver, the customer sometimes feels like it is Christmas and asks for more.
    • Constraints empower creativity.
    • It is the consultant's job to help determine what is the biggest return at the moment.
    • The list of features is prioritized based on the client's perception of value.
    • His clients need to trust him for the software development, but he has to trust them in their unique business.
    • Value, as a dollar amount only, is short sighted.
    • When the customer admits there is no value and they still want him to do the code, he will engage the customer.

Creating Value Through a Conversation

  • What is one of your favorite questions to ask during a value conversation?
    • He starts the conversation via email.
    • Asking questions by email lets Eric know if can communicate via email, which is necessary for his business model.
    • He will ask them to tell him a bit about the problem to start a narrative with them.
    • Once he gets them to open up, he starts to talk about the budget to set expectations.
    • “Why did you come to me now?” is a question to unlock the urgency of the project.
    • You will learn about the budget, decision maker, and demand for the project from that one question.
    • He had a prospect who had a senior developer leave while they were already understaffed and they urgently needed help.
      • It was then easier to go into how long they have been looking and what the transition plan is.
      • The customer came to him looking for help, and it turned into a staffing augmentation need, giving him the opportunity to train a full-time employee.
    • He tries to make the value conversation fluid: timing, budget, narrative, and basic technology needs.
    • He asks about the long-term goals of the project, “Where would you like to see this project 12 months after launch?”
  • How do you create value for the customer through the sales process?
    • The value conversation is before the project starts, which gives the customer value even if they choose another developer.
    • He tries to provide alternative resources when the customer is not a good fit.
    • The way you have a conversation (sell) with a customer is an indication of how you work (serve).
    • Eric's sales process helps identify yellow flags regarding how they will work together.
    • One year, he worked only with past customers, since none of the new prospects was a good fit.
    • He makes it a priority not to work with people or projects that he dreads.

Managing Projects as a Solopreneur

  • Is working with a small number of customers a risk for a solopreneur?
    • The biggest risk is getting stuck with a customer that jeopardizes you legally.
    • But, if he works with a “yellow” customer, he cannot work with a “green” one that comes along.
    • Bad customers drive out good customers. – Ron Baker
    • Saying yes means you are saying no to something else.
    • Pricing plays a part of getting the best customers.
    • When you engage several with small, low-price customers, you will have a hard time raising your prices.
    • Those customers are not going to give you good referrals.
    • Price in a way where you do not have to sell every waking minute to pay your bills.
    • If you are selling all your capacity, you do not have any availability.
    • If he sells only one week per month, he is still comfortable because he uses pricing a tool to make that happen.

How you sell is indicative as to how you solve. – Mahan Khalsa

  • How do you handle scope creep during a software project?
    • He welcomes scope creep, as long as they go back to reprioritizing.
    • He follows the chaos model to make a list of everything to get done and then work on the most valuable thing first.
    • Eric wrote a blog post on his project management.
    • When a customer comes with multiple documents to scope the first phase, often you cannot do everything at once.
    • You can deliver the minimal, most valuable items first and then build over time.
    • Slowing down helps with project management.
    • Every Monday, he reviews the list of priorities with the customer, and they reprioritize what can be accomplished that week since he works week-to-week.
    • He likes that process because it shows that the customer thinks about the value they are receiving.
    • He guides their priorities but lets them make the decisions.
  • What is one of your best stories about creating value for a customer?
    • One customer because of a blog post on technology.
    • The company was a decent size start up and needed his help.
    • They had a hard launch date in less than a month, due to government regulation.
    • He started to finish features but then started to question what they were doing and why.
    • Early the next year, they solved a lot of the additional issues, and people started becoming productive, rather than in crazy start-up mode.
    • He probably brought several million dollars of value and set them up for long-term success with just a couple of months of work.

About Eric Davis

Eric is the founder of Little Stream Software. He has made a conscious choice to start and remain a solo developer, even though he has made over six figures developing for Redmine, an open source software project. He is now making a pivot to developing web apps for Shopify.  He shares his knowledge about pricing nad marketing through his curated newsletter, Freelancing Digest.

Seek the Desired Outcome First with Lincoln Murphy – 092

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The tagline for the Art of Value Show is discover value, create options and start pricing. Lincoln Murphy calls value the “desired outcome”. In the SaaS world, the desired outcome is not the number of users for your app. The customer does not wake up in the morning and say “How do I get 50 users on this app?” The desired outcome is deeper. You have to venture into the discomfort zone to discover it. Lincoln shares why your success, and the customer's, is dependent on it.

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Understand the Customer First

  • What is the most important thing you can share about pricing?
    • Most mistakes are made by not starting with the customer.
    • Start by understanding the value the customer will receive.
    • 10X Rule – Determine the value the customer will receive and set your price at 10% of that value, as a starting point.
    • You have built your product with a specific customer in mind.
    • If you cannot answer which customer will get the best value for the product, it is a non-starter.
    • Know your customers better than they know themselves.
    • People back in Henry Ford's day were looking at the desired outcome of “getting there faster” vs. “having a faster horse.”
    • Knowing the desired outcome is transformative.
    • Desired outcome is what your customers need to achieve and how they need to achieve it.
    • Sometimes your customers cannot volunteer or articulate clearly what the desired outcome is.
  • Can you apply “understanding the customer” to existing markets?
    • It is applicable to any business.
    • Whether it is customer relationship management or a gym membership, the specific customer segment that you target has a desired outcome specific to them.
    • If you can unlock it, you can align yourself with that desired outcome.
    • By understanding what motivates the customer, a gym can target mature ladies vs. a CrossFit style boot camp.
    • The appropriate experience for the customer segment will allow them to meet the requirement of being healthy and feeling better.

[clickToTweet tweet=”Know your customers better than they know themselves.” quote=”Know your customers better than they know themselves.”]

What Is the SaaS Marketplace?

  • What are the current trends in the SaaS market?
    • The market does not really exist; it is a business architecture.
    • Aside from ethics and laws, there are no rules for SaaS.
    • Companies like Slack use a land-and-expand model.
      • Once you reach a certain number of people, Slack gently pushes its paid services.
    • Zenefits is another one of the fastest growing companies ever, giving you a free option.
      • Its core revenue comes from insurance.
    • Gainsight is an enterprise level company.
    • All three are SaaS companies have very different revenue models.
    • Zenefits does not have a recurring revenue aspect.
    • SaaS is moving away from the per-seat licensing.
    • For example, the company might charge based on projects rather than users.
    • Base your pricing around how your customers perceive value.
  • What are some of the changes in traditional Saas pricing?
    • People are realizing that it does not matter how it was traditionally done.
    • Resonate with the customer in a way that gets the customer to achieve value while you achieve revenue.
    • Basecamp is a good example that companies copy, but they are constantly learning too.
    • Pricing is always evolving, from a market standpoint; you need to evolve as well.
    • Have a legitimate story behind your options.
    • Understand that your customer needs to evolve too.
    • Create an ascension model for them, keeping them moving up the pricing tiers.

[clickToTweet tweet=”Base your pricing around how your customers perceive value.” quote=”Base your pricing around how your customers perceive value.”]

Focus on the Desired Outcome

  • Which 17 elements for customer success are most important to pricing?
    • Understand the appropriate experience your customers are looking for and deliver it.
    • The appropriate experience depends on the desired outcome and the customer segment.
    • Your pricing model should be built around:
      • Appropriate experience
      • Desired outcome
      • Customer segment
    • If your price is too low, a customer segment will know that you cannot provide what they need.
  • Why does complexity create opportunity with the customer?
    • Mo' money, mo' problems talks about taking into consideration everything going on in the customer's world.
    • Understand how the customer gets value out of your product and base you pricing around it.
    • Understanding the complexity of the customer's needs leads you to more opportunity.
    • Understand – beyond your product – what is going on in the customer's world.
  • How can a SaaS company price on value?
    • Sometimes the customer's imagination is more powerful than what you can report on a spreadsheet.
    • Sell a future vision of what your customer can accomplish with you.
    • Enter the conversation that is already going on in the mind of the customer.
    • Get to the bottom of how customers value the outcome, rather than the product.
    • How to Develop your SaaS Pricing Model goes into how to price.
    • When you first start and you don't know what you don't know, no one knows the best pricing.
    • Start wide open with 100 customers, giving them full access to everything.
    • Learn and record the conversations to address the objections.
    • Learn the customer's language.
    • Raise the price each time you close a customer until 25% of the people push back because of the price.
    • Watch how the customers use the product and you will notice self-segmentation.
    • There is a wide range of products with multiple examples over time, like WorkDay.
    • The bottom line is you have to figure out what works best for your company and how that can interject into your customer's world.
  • What is one of your best stories about creating value for a customer?
    • An email marketing company started with a 30-day free trial and they were getting people to sign up after 42 days.
    • They were pricing based on value metrics that were not important, like the size of the list.
    • They changed the pricing to be based on a campaign run.
    • They lowered the entry obstacles to get people converted faster.
    • They realized there is something called a success gap, where sending the email is not the desired outcome, so they started helping people create better content.
    • They reduced free-trial conversion down to 3 days.
    • Creating a pricing model that was more aligned with the desired outcome of the customers, they could also strategically discount the next tier up.
    • Know what your customer's desired outcome is and optimize around that in whatever you do.

About Lincoln Murphy

Lincoln Murphy has helped over 300 SaaS (Software as a Service) companies grow by focusing on customer success. He is the founder and chief consultant at Sixteen Ventures. He writes and speaks regularly on customer success, growth, and pricing. He is also the Chief Success Evangelist at Gainsight.

The Mental Health of the Entrepreneur with Cory Miller – 091

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Mental health is a tabu subject. And that is exactly why Cory Miller is sharing his story. He went through a divorce, and one of the effects was depression. It affected his ability to lead his team and make decisions in his business. Fortunately, he had an attorney who recognized the symptoms and suggested he see a counselor. Now, on the other side personal tragedy, Cory is telling entrepreneurs to pay attention to their mental health. He has done what few people would ever do. He was interviewed for Inc. magazine about his experience and is speaking openly at WordCamps across the country about the danger of poor mental health to your business and family.

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Get to Know Your Customer

  • What is the most important thing you can share about pricing?
    • Pricing is a part of a larger negotiation between the buyer and seller.
    • When you offer significant value, price does not matter; it is just a formality to pay it.
    • Price is the start of a negotiation.
    • It is bigger than a negotiation over a number.
    • It is a negotiation of value between buyer and seller.
  • What is the foremost pricing lesson you have learned at iThemes?
    • Know your customer to the core.
    • Provide exceptional value for the community to make their lives awesome.
    • Think of the core thing that you are trying to solve.
    • iThemes tries to save money, prevent loss of data and offer peace of mind.
    • What are the customers‘ obstacles, and challenges?
    • What is the customer's journey?
    • What obstacles that arise could our products solve?
    • Those answers direct product development, the sales page, and technical support.

[clickToTweet tweet=”When you offer significant value, price does not matter; it is just a formality to pay it.” quote=”When you offer significant value, price does not matter; it is just a formality to pay it.”]

Understand Value Like the Customer

  • What is the value conversation for a risk management product like backup or security?
    • BackupBuddy was created because a dedicated server crashed, without a backup.
      • Cory personally lost photos and blog content that he can never get back.
      • There is no number that he could assign to that loss.
      • He asks his customers, how much do you value your online work: website, e-commerce data, blog posts, comments?
    • iThemes Security was created because one of his websites was getting nailed with spam and bad login attempts.
      • Cory did not even understand how bad his site was being attacked.
    • These products are like insurance.
    • Empathize with the customer's journey.
    • It helps if you have your personal stories to relate.
  • What is the correct balance between gathering and implementing feedback?
    • The vocal minority tells you what is critical and what they want.
    • The majority is silent.
    • Customer empathy and understanding their journey is the key.
    • A translator between the customer and the developer is important to avoid disconnects.
    • You do not want the customer to talk directly to the developer becasue they speak different languages.
    • The technician and the customer perceive value in different ways.
  • What is the advantage of having a “customer advocate” on your team?
    • You have to step your game up to know and serve your customers better than the competition.
    • You want the customer to feel an empty void if you are to leave.
    • He is conducting his own iPhone vs. Android comparison to make sure he understands his customer's perception of value.
    • Get as close to the customer's experience as possible.
    • Understand whatever affects your customer and then think through the future and lead them.
    • iTheme's purpose is to take customers from transactional to transformational.
    • They want to go from making a profit to transforming lives, by making sure their customers are in the best place possible.

[clickToTweet tweet=”When employees know their leader is maintaining his health and happiness, they are more confident.” quote=”When employees know their leader is maintaining his health and happiness, they are more confident.”]

Your Mental Health Is Important

  • Why is mental health important to an entrepreneur?
    • Cory was interviewed for an article in Inc. magazine, Why This Entrepreneur Is Talking to the Tech World About Mental Health.
    • He is a voracious reader and shares articles with team members to increase their quality of life.
    • Entrepreneurism is a tough sport; most family and friends do not understand.
    • He shared his story publicly, including his mental health and divorce, and most people had no idea.
    • He wanted others to understand that they are not alone.
    • He was helped greatly by some experiences, and if he did not share them, it would be a tragedy.
    • The key is empathizing with your fellow human being; just care about people.
    • He chooses to use his time, talent and treasure to serve other human beings by making their lives awesome.
    • He was divorced and suffered low-grade depression.
    • The statistics for entrepreneurs shows he is not alone.
    • His attorney suggested he go to see a counselor.
    • His biggest fear was feeling vulnerable; he uses a digital journal to help.
    • Building intricate, healthy, loving, reciprocal relationships around you is important.
    • Four times a year, he calls his counselor to get a professional opinion, where he can unload his baggage and leave it at the door.
    • He sets time alone with his family and team to pour into each others' lives.
    • It makes you happier and healthier when you decide what you will and will not allow into your life.
  • What is the impact of good and poor mental health in your business?
    • At one point, his team was concerned.
    • He realized he had a responsibility to the people in the families supported by the business.
    • He had tried to skate by on his ego and pride, but he has committed never to try to do it alone again.
    • Healthy relationships and a professional counselor have made a big difference.
    • Being mentally healthy as the leader of the company makes his team better.
    • When they know their leader is working to maintain his own health and happiness, they are more confident in what the business is doing.
    • You have to be responsible for your happiness.
    • That responsibility applies to your team members too – you cannot carry them.
    • Six Pillars of Self-Esteem is a great book that he wished he had read as a child.
    • It helped him take responsibility of just being himself.
    • “Show up filled up” (Kary Oberbrunner) to take care of yourself, your family, your team and your customers.
    • Your health and happiness have to come first, or you are no good for your spouse, your kids, your team, etc.
    • Your customers and team, deep down, can see that things are not fully right.
  • What is one of the best books you have read about mental health?
    • He bought The Happiness Advantage for his team.
    • Share around your dinner table with your family 3 things that you are thankful for every night.
    • His favorite book is Six Pillars of Self-Esteem, about leading cautiously and accepting your feelings.
    • He has recommended reading on his site.
    • Books are a very cheap way to gain amazing wisdom.
    • By putting them on your Kindle, you can take them with you anywhere.
    • He has over 300 books on his iPhone so he can carry the wisdom with him.
  • What is one of your best stories about creating value for a customer?
    • Three years ago, he was at a WordCamp in New York City meeting with customers.
    • His wife asked him to share a story about how a customer's life was changed.
    • You can treasure the stories about how you are a part of a life transformation.

About Cory Miller

Cory Miller founded iThemes in 2008. iThemes was one of the first commercial companies in the WordPress space. Its mission is to make people's lives awesome. They have a core suite of products including BackupBuddy, iThemes Security, and Exchange. Before founding iThemes, Cory was the communication director of a church with a staff of zero.

Creating Proposals That Win Business with Curtis McHale – 087

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The traditional view of the proposal is that the professional must wow the customer with his expertise. A contrary view is the proposal is a collaboration between the professional and the customer. A collaboration that explores the value they can create, the value they should create, and the most valuable way to do it. WordPress developer and business coach, Curtis McHale, has achieved a high closing rate with his proposals by focusing on the results for the customer. His entire sales process, from the first email to the proposal presentation, is an inquiry into why the customer needs what he can provide. In this episode, Curtis explains what a good proposal is, and is not, and how focus on what really matters to the customer.

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A Proposal Is…

  • What is the most important thing you can share about pricing?
    • Find the value for the customer and then relate the price to that value.
    • Not finding the value is the worst mistake people make with proposals.
    • If you do not discover the value and tie it to your price, you will guess whether it is a good price for the customer.
    • Software developers tend to jump into the technical requirement too early.
    • Going slower allows you to build trust over time so you can learn the real value of the project.
    • He does not usually accept “rush” customers.
  • What is a proposal?
    • As Alan Weiss defines it, a proposal is a summary of the agreements that you have already made in your conversations.
    • As you talk to prospects, you can get to the real value by asking a series of why questions.
    • Ask why five times.
    • The customer is not an expert in your profession.
    • Slowing down helps to establish you as an expert.
    • As Tim Williams said, it is part logic and part magic. The customer will pay for the magic.

[clickToTweet tweet=”Not finding the value is the worst mistake with a proposal. #pricing #software #sales” quote=”Not finding the value is the worst mistake with a proposal.”]

Components of a Proposal

  • What should you exclude from a proposal?
    • A proposal is not a summary of every task you are going to do in a project.
    • You do not want to appear tactical, rather than strategic.
    • It is not to establish credibility or to win work over someone else.
    • For the scope, Curtis and the customer write a Google Doc without prices or timing.
    • The objectives are different from the scope/task list; objectives define the project's success.
    • By making it a collaborative effort with the customer, it creates an opportunity to identify problems and create more value, and thus improve your bottom line.
    • Not taking the time to build the relationship will create a desire to put your company's history in the proposal, which is a mistake.
  • What are the 6 key elements of a proposal?
    1. Define the current problem.
    2. List the objectives– high level focusing on the desired outcome.
    3. Gauging success statement.
    4. Three options, with option 1 fulfilling all the requirements of the project.
    5. Timeline, based on the options.
    6. Accountabilities for the customer and the provider.
  • Defining the elements:
    • Objectives are about the bright future, e.g., “to get more sales by driving more traffic” – like a sales letter to a specific customer.
    • Gauging success through metrics demonstrates that you are not just dreaming.
    • You can usually pull that information from your notes.
    • Gauging success needs to be something you can control; e.g., “we will be ready for responsive on mobile devices.”
    • Require action of your customer to help them succeed, when necessary.
    • To push through the fear of making requirements, take the time to think and say what is most accurate.
    • Do not forget the customer is paying you for your expertise.
    • Experience will teach you how to be confident in your expertise.
    • Putting the customer's bad idea in a proposal is the equivalent of malpractice.
  • What is a common reason a customer says “No” to a proposal?
    • You do not find their true budget.
    • Not making time to build the relationship with the customer.
    • In rare situations, something else takes precedence (and should), like a death in the family.
    • You realize that you did not talk to the real decision makers.

[clickToTweet tweet=”Putting a customer's bad idea in a proposal is malpractice. #value #pricing #sales” quote=”Putting a customer's bad idea in a proposal is malpractice.”]

Retainers and Requests for Proposal (RFPs)

  • What is a retainer?
    • A retainer is essentially an access agreement.
    • A fixed price is paid for access to professional to help with problems.
    • The rate varies depending on the need for the access.
    • Having access to the knowledge and experience creates value.
    • Individual access should be your most expensive offering.
  • Why is an RFP a waste of time?
    • There is typically a preferred provider.
    • If you do no know it is you, then it is not.
    • It is created by a committee and lays out everything for you.
    • Curtis declines RFPs and occasionally gets business because he is contrarian.
    • Usually, you will interact a committee in a large organization.
    • To establish creditability, you need to be intentional with your positioning (speaking to the right audiences, write guest posts for the top 5 sites in the industry, create a short white paper).
  • Why is it important to talk directly with the buyer?
    • Most often with RFPs, you are only speaking with the tactical person.
    • You want to speak with the person who, if he says yes, the project will happen.
    • Slow down, take time, and ask strategic questions to ensure that you are speaking with the right person.
    • No one can represent you better than you.
    • The decision maker will get the best information by directly talking to you.
    • 50% of projects fail in the software industry; 2/3rd are over time and budget.
    • Part of being a professional is not being part of the statistics.
    • The expert should have processes that are required to prevent failure.
    • Look for customers who want quality over a hard end date.
    • Sometimes, doing the right thing can be frustrating.
  • What is one of your best stories about creating value for a customer?
    • A nonprofit has been able to hire its first full-time employee, rather than just people who are volunteering, due to his work.
    • He will reap a reward from the long-run performance.
    • He has a lot of skin in the game and believes in what they are doing.

About Curtis McHale

Curtis McHale is an entrepreneur with 10 years experience and wins 90% of his proposals. He is a WordPress developer, specializing in membership sites. He is the author of two books, including his latest, Writing Proposals that Win Work. He is also a contributing writer to the Huffington Post, LifeHack.org, and Addicted2Success.

To enter to win a copy of Curtis' book, answer this question in the comments: What is the one thing that has helped you be more successful with your proposals?

Software Development Is A Profession with Tom McFarlin – 076

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Tom McFarlin is the founder of Pressware, which develops web apps with WordPress. He is also an open source software developer and an editor for Touch Code, an online technology magazine. Tom has been appointed a Microsoft Most Valued Professional 4 years in a row. He has a computer science degree from Georgia Tech.

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Solving Customer Problems

  • What is the most important thing you can share about pricing?
    • Start by looking at what you need to live, thinking forward into retirement.
    • Over time, you want to scale upward, just like you would in a traditional career path.
    • When you are self-employed, you do not have an annual review.
    • You want your pricing to be commensurate with your skill set and experience.
    • Base your pricing on:
      • Planning for the future while you are growing
      • The skill set you have developed
      • The experience you bring to your customer
    • By communicating value (high or low), your price attracts a certain type of customer. Do you want this type of customer?
    • You want the customer to see you as an investment rather than a cost.
  • How does a software developer create value for a customer?
    • Developers solve problems.
    • If you are just building things to scratch an itch, you are are a hobbyist.
    • Nobody wakes up and says: I want to pay someone to develop software today.
    • Developers need to work on solutions that matter because 50% of projects fail and 67% are over time and budget.
    • Several factors contribute to the failure rate.
    • The government said, “We will take care of healthcare.” Then the website did not work, perpetuating the industry stereotype.
  • What is can a developer do to create more value for a customer?
    • Create tighter/smaller feedback loops to deliver projects on time.
    • Do not assume you understand the requirements for a project when you see them in writing.
    • The customer terminology might be very different from what you assume.
    • You need to work with the customer to see it from their perspective.
    • You should work iteratively on a feature/requirement, asking the customer to verify it works as expected.
    • If you wait until the end of the project, you will have a large number of things to refine.
    • Make sure you are building what the customer wants in a timely fashion.
    • You have to develop the solution with the user's eyes, not the developer's eyes.
    • It is the developer's responsibility to say when you should not do what the customer wants.

Standards Create More Value

  • What is the value of coding standards for the developer and the customer?
    • Your source code is written in a predictable fashion.
    • It will look like a single developer wrote the code, regardless of the programmer.
    • There is less of a learning curve for the developer because it sets an expectation.
    • For the customer, coding standards save time and money.
    • When bringing in a new developer, he will be able to pick up the code more quickly.
    • Feature requests and bugs can be more quickly addressed, eliminating maintenance costs.
    • Ed Kless teaches the IT Smile Curve, where the ends of the curve (the problem to solve and ongoing support) are the most valuable.
    • Domain-driven design by Eric Evans looks at the problem from the user's perspective, rather than just writing code.
    • You usually find something that is simpler, once you begin solving the problem.
    • Software developers need to get better at asking questions to uncover to the simplest solution.
    • To improve software development, developers need margin to make mistakes and allow the customer to make mistakes.
    • Educating the customer on the process is part of the developer's responsibility.
  • Should a developer provide a free estimate for a software project?
    • Your experience will make you comfortable charging for estimates.
    • If you analyze the solution before being paid, the customer has no skin in the game.
    • If you charge for the estimate, the customer has skin in the game to choose you as a partner.
    • You are setting a precedent for the type of business you want.
    • If you give away estimates, you are devaluing the analysis in the customer's eyes.
    • If you provide a free estimate, the customer can take your proposal to someone else, which is an integrity issue.

Value in the WordPress Economy

  • What do you think about pricing in the WordPress ecosystem?
    • It is a race to the bottom right now.
    • Many of the products are cheap – both financially and technically.
    • Because of open source and the plug-and-play nature, you can call yourself a developer and charge $25/hour, devaluing what real developers do.
    • Good examples of sustainable businesses doing open source work:
    • Gravity Forms would risk a public outcry if the price were to increase.
    • The easiest way to increase a price is to add value, like with Hulu‘s non-commercial option.
  • What is the relationship between the WordPress Bill of Rights and the WordPress economy?
    • WordPress is General Public License (GPL), which provides a handful of benefits to the community, where a user:
      • Can run the program for any purpose
      • Can change how it works
      • Can redistribute it
      • Can modify and distribute it to others
    • Some try to obfuscate their source code, which raises an ethical question.
    • From a positive standpoint, there is a wide variety of libraries and tools to help build solutions.
    • You can explore APIs–figure out how they work and tie into them.
    • You stand on the shoulders of giants since you can see the source code.
    • You can create a sustainable business because customers want access to support.
  • What is one of your best stories about creating value for a customer?
    • The educational content that Tom has provided through source code, blog posts, screencasting, and speaking have created the most value.
    • He has had contacts from all over the world who request consulting, because of his desire to educate.
    • A thank-you email from a fan is valuable to him.

About Tom McFarlin