Posts filed under 'Buying'
An article in today’s New York Times describes a possible change in the way federal contracts are awarded, and it specifically calls out facility service contracts.
Plan to Seek Use of U.S. Contracts as a Wage Lever
The Obama administration is planning to use the government’s enormous buying power to prod private companies to improve wages and benefits for millions of workers, according to White House officials and several interest groups briefed on the plan.
By altering how it awards $500 billion in contracts each year, the government would disqualify more companies with labor, environmental or other violations and give an edge to companies that offer better levels of pay, health coverage, pensions and other benefits, the officials said.
Because nearly one in four workers is employed by companies that have contracts with the federal government, administration officials see the plan as a way to shape social policy and lift more families into the middle class. It would affect contracts like those awarded to make Army uniforms, clean federal buildings and mow lawns at military bases. (read the full article)
How might this effect Facility Service Contractors?
Is this good or bad for contractors, those going after federal contracts? Why?
Obviously, this is for federal contracts only….at the moment. If this change were successful with federal contracts, would city, county and state be far behind?
What about the private sector? Specifically high profile firms like those in consumer goods, banks and academic institutions. Their purchasing decisions already pay attention to maintaining a good public image.
I’ve started asking contractors what they think about this change and here’s the first response.
I think it would be great if we could all compete on an even playing field with hours, wages and benefits set in advance. I believe our company (IH Services) provides the type of work environment, management expertise and forward thinking that could get us more contracts in this environment. We do not have employment violations because we follow the rules, not like some of our competitors.
Taylor M. Bruce, Jr., President, I H Services, Inc.
What are your thoughts?
What do you think? Share your comments in this post. I’m very interested to hear your perspective on the future.
~~~~~~~~~~~~~
Chris Arlen
President, Revenue IQ
February 26th, 2010
Here’s a customer-contractor situation that, although it doesn’t happen too frequently, is extremely dicey when it does.
Your customer wants a non-contract service from you, but the project isn’t in their budget.
To pay for your project they need an amount from you so they can find a place to allocate that unplanned spend.
You provide an estimate to be billed on actual per-unit-pricing because you know the scope of this particular service varies hugely. Not because you’re a poor estimator or a sloppy provider, but because customers always get excited and want more, or your customers’ end-users want more.
Either way, your scope typically increases substantially from the original estimate and that’s why you provide pricing based on a per hour or item basis.
But here’s the rub. Your customer took your estimate as an absolute, and communicated it upstairs for approval. Without your knowledge your estimate is now a fixed fee.
Sure enough, you get started with your non-contract service and your customer gets excited and scope expands.
You believe it’s all covered because you priced it on a unit cost and your customer is happily increasing scope.
Unfortunately, once the work is done and your bill arrives, your customer changes from ectastic with your results to letting you in on their little failing. Your estimate became their not to exceed budget.
Customers do that sometimes. Either because they feel they can’t get their pet projects funded, or don’t want to upset their bosses with a larger, more conservative number in the first place.
To keep it under the radar your customer presents the financial picture in it’s most humble light. They figure they can sort it out after the fact. And of course that means you’ll help them figure it out.
What to do?
At this point in time almost every solution will be uncomfortable, for you and/or your customer.
The following are some possible ways out, but they’re not for everyone. If any of these make you feel uncomfortable, by all means skip them.
Bill overage onto 2nd smaller invoice
Spreading actual amounts above the estimate onto a second smaller project your customer can get through on a different Purchase Order (PO). Customers usually have other projects and some will have a little left over space on another PO.
Of course you only take this approach with your direct customer’s full knowledge and approval.
Carry overage onto 2nd project
Hold off billing for the overage on this project and include it on the next project. Ask your customer to guarantee the next project and get a start date. However, if projects are competitively bid it’ll be tough to cover overage costs this way.
And again, you only take this approach with your direct customer’s full knowledge and approval.
Eat the overage & not bill
You can take the loss and not recapture your billing. It’s the least palatable for you but may be required depending on your customer relationship. Also, the size of the overage will also dictate whether you can live with this option.
If you go this route, make sure your customer knows what you’re doing. Hopefully it’ll be worth the brownie points.
Hold fast & bill full amount
This may be the least palatable for your customer. But if you submit your bill with your written proposal that clearly states billed per actual unit then you’re telling the customer “you made the mistake, you sort it out”.
This option depends on your customer relationship and the overage amount in question. Also, even after approval, your payment may take a while to get paid if your customer is no longer willing to shepherd it through their A/P process.
Educate & communicate with a hammer before doing the work
The best solution is always to avoid the problem in the first place. When asked to provide a pricing, consider your customer may likely consider that a budget amount. Since you can’t reasonably provide a fixed amount, you’ll need to educate the customer to why you’re pricing the work on a unit basis, to bill on actual incurred:
Try:
- Communicating the variables beyond your control
- In person or on the phone, explicity cover the per unit pricing & how those variables impact total spend
- Always confirming everything in a written proposal/estimate
- Adding text to your proposal/pricing confirmation in bold & caps THIS IS AN ESTIMATE, NOT A FIXED PRICE, BILLING ON ACTUAL INCURRED
No Guarantees
Customers sometimes are wild, unfathomable beings. As contractors we can only do our best. In this budget vs. estimate situation, being proactive and a good communicator is your best defense.
~~~~~~~~~
Chris Arlen
President, Revenue-IQ
February 1st, 2010
The old game for selling throws lots against the wall and something sticks – numbers comparing thrown to stuck.
And it’s still true, something sticks, eventually. Even one becomes the justification to continue the old game.
It’s the cost/benefit ratio that’s changed. The benefit keeps getting smaller relative to the cost.
But the throwing continues, because as it’s gotten less effective, it’s gotten more efficient. Grind-em-out salespeople, mail order catalogs and spam only take the rare few sales to keep playing.
Their throwing no longer produces the expected results, even from just a few years ago. Unfortunately, it only takes one to feed the habit.
The new game
Selling is still a numbers game, but a new one.
The numbers are humans (salespeople) working with other humans (customers) who are a lot smarter in 2010 than customers sold to in the 1950s.
Because customers are in different stages of their buying cycle, most salespeople need to be busy with more than one.
The new numbers game is based on:
- Salespeople not selling in ways that make themselves feel less than human
-> customers buy from other humans
- Customers are more valuable to salespeople over the long-term
-> high customer turnover is death to easy sales
- Salespeople build relationships with a customer through the accumulation of all that customer’s experiences with that salesperson & company
-> salespeople are branded as much as their company
- Salespeople engage customers to help solve customers’ problems & realize customers’ benefits
-> what else are salespeople for?
- Customers live in stages of their buying cycle
-> not salespeople’s selling cycle
Playing the new numbers game
Sellers counsel customers through stages of the buying cycle.
To play the new game requires that salespeople:
- Are known, respected & trusted by customers
- Understand customers’ buying cycle
- Identify where customers are in that cycle
- Empathize with customers’ buying situation (risks, gains, fears, etc.)
- Make continual effort towards all the above
What game are you playing?
~~~~~~~~~~~
Chris Arlen
President, Revenue-IQ
January 15th, 2010
I’d like to thank you for making 2009 a successful and productive year for Revenue IQ. As the weekly blog for facility service contractors, it’s the only sales posting (I know of) that’s not for beginners. You, dear reader, are interested in post graduate education in sales and marketing.
And with those flattering words, here are the best posts of this year. These are the “best” because:
a) They received the most page visits as tracked by Google Analytics
b) They generated the most reader feedback (via email, hoping to get you to comment online in 2010)
c) I felt they were the best out of what I’d written
The Best of Revenue IQ in 2009
These are grouped for easy navigation but aren’t in any ranked order. Enjoy, and please let me know of any topics you’d like explored in 2010.
Selling, Proposals & Presentations
Customers & Buying
Marketing
Happy Holidays and a healthy and prosperous 2010
~~~~~~~~~~~
Chris Arlen
President, Revenue-IQ
December 22nd, 2009
Customers have no choice, they must buy. It just might not be you.
Obvious? Overly simplistic? Sure it is, but…
I was talking with someone who’s about to begin an outside sales career after years of inside sales. Our conversation reminded me when I began selling, and I was a little intimated and embarrassed calling on customers.
At that time I didn’t know customers have no choice, they must buy. There are certain understandings fundamental to selling, and business in general. This is one of them.
Skip over this one, or miss it entirely, and your selling will be out of step with customers, apologetic, and a burden to yourself.
Customers 4 Buying Options
Customers have no choice, they must buy.
Why? Because they have needs. Explicit or hidden, all customers have needs. And those needs drive customers to one of only 4 options, customers can:
- buy you & your offering
- buy your competitor’s
- buy themselves by doing it themselves (aka going in-house)
- buy time by not deciding to change, waiting for something better to come along later ( look for next week’s post LOST OPPORTUNITY COST)
Therefore, if customers must buy, then salespeople have a purpose for their existence. Here it is:
Salespeople help customers become aware of their specific needs. Or, if customers are already aware, salespeople help them clarify the implications when those needs are fully or partially resolved, or not resolved.
The question isn’t “do I, as a salesperson, have the right to contact customers?”. No, there’s an imperative for salespeople to engage customers. To help customers fulfill their purpose by helping them buy.
How do you help customers buy?
~~~~~~~~~~~~~~~
Chris Arlen
President, Revenue-IQ
November 12th, 2009
A few years ago Bill S. wrote:
“All the world’s a stage, And all the men and women merely players”
We perform, and are judged by our audiences.
In business, as in theater, bad acting is wasteful and destructive. Here’s how:
For sales people, “bad acting” means actions and words that are seen as deceitful and greedy by customers (the audience).
For customers, “bad acting” means actions and choices that are seen as manipulative and punitive by contractors (the audience).
What are the chances anything valuable and lasting coming from these performances?
You Don’t Mean To
No salesperson or customer intentionally acts badly. Bad acting creeps up and becomes the norm over years.
And it’s impossible to self-diagnose. You’ll have many justifications for why you did or said something.
But in the performance of business it just comes off as bad acting.
Sales People – The “Don’t” List:
If you avoid the following, you’re further along toward being a better sales performer. If not, you’ll be seen as “salesly” by customers and likened to the plague.
- Don’t make extravagant, unsubstantiated claims – hyperbole makes customers cringe
- Don’t act overly chummy to recently met customers – hyperfriendly has them running to wash their hands
- Don’t always have an answer to things you don’t know – hyperknowitall axes you off customers’ trust list
Customers – The “Don’t List”:
At first glance it might not seem necessary for you to avoid bad acting.
However, even though there may be many contractors to burn through, bad acting hurts your reputation. And that stays with you, limiting your ability to accomplish your firm’s outsourcing goals.
So, avoid the following and contribute to your golden reputation. If not, you’ll become known in professional circles by names you’d rather not know about.
- Don’t withhold info you can share with contractors - hypersecretive makes contractors think you lack trust
- Don’t require unreasonable hoop jumping of contractors – hyperdemanding is a sign to customers you’re hard work
- Don’t demean contractors for seeking a profit – hypercritical has contractors thinking you’re delusional or idiotic if you don’t know your firm seeks profit too
How do you avoid Bad Acting?
~~~~~~~~~~~
Chris Arlen
President, Revenue-IQ
October 2nd, 2009
All marketing and selling efforts (the sales cycle) try to move customers from indifference and inaction to purchase. However, we tend to lose sight of where customers are in their purchase process (the buying cycle).
To help contractors make their sales cycle more efficient I’ve developed a table identifying marketing and selling efforts appropriate for your customers’ buying cycle. This table is best presented as a pdf , rather than laid out in a blog post.
So, the main part of this post is the 3 Stages of the Buying Cycle. A down-loadable pdf you can get by clicking here.
NOTE: When I use the term “customer” it applies both to prospective customers (those you’re not doing business with yet) and current paying customers (where you’re the incumbent).
But before you download 3 Stages of the Buying Cycle, lets define:
- 3 Stages of the Buying Cycle
- 2 States of Customer Contracts: Pre-Bid or Bid
3 Stages of the Buying Cycle
This defines where customers are during THEIR buying process, not what we’re doing trying to sell them.
MOTIVATED
Motivated customers know they have problems AND are motivated to do something about them, i.e. go out to bid AND will be likely to change contractors as the incumbent hasn’t solved their problems.
It’s as if these customers know they have a pebble in their shoe and they take the effort to get rid of that pain.
AWARE
These customers are aware they have a problem or want an improvement. However, they don’t have a compelling reason to take action. At least not yet.
These customers can feel the pebble in their shoe but it doesn’t bother them enough to stop and take off the shoe.
OBLIVIOUS
These customers don’t know if they have service problems, don’t know if they have areas in need of improvement, and aren’t particularly interested in finding out.
It’s as if these customers say “Pebble? What pebble? I didn’t even know I had a shoe?”
2 States of Customer Contracts: Pre-Bid or Bid
In sales, a properly targeted opportunity is one for life, until it becomes a paying customer.
With that said, a customer can only be in 2 states, either pre-bid, or actively in the bid process.
Even an in-house opportunity can be considered in a pre-bid state, just waiting for a contractor to help the customer see the value and benefits of outsourcing.
And lost bid opportunities, ones that were considered in the bid state, fall back into pre-bid as you work towards bidding them next chance.
How do you move customers through the buying cycle?
~~~~~~~
Chris Arlen
President, Revenue-IQ
August 22nd, 2009
The following story is fictitious, but you’d have guessed that anyway.
The marketing and selling lessons in it are true AND absolutely essential to marketing and selling anything, but even more true (if that’s possible) for selling contract services.
Here goes…
I’d just moved to a foreign country where I happened to speak, read and write the official language (lucky for me it was English).
While I was settling into my new home and work, I started hearing about something that I absolutely must buy: Yorwin.
My neighbors praised Yorwin.
My colleagues at worked swore by Yorwin.
I saw newspaper and TV ads imploring that I buy Yorwin, telling the story of the greatness that is Yorwin.
I read on the Yorwin web site about the founder and his struggle from poverty to undreamed of wealth and prosperity.
I even received a visit from a Yorwin salesman at work. If I could have gotten a word in edgewise I might have been able to ask my Yorwin questions.
But the salesman was a non-stop river. At 120 words per minute I heard the Yorwin story (already knew it from ads), about the Yorwin founder (already read about him on the website) and the Yorwin community (already overwhelmed by recommendations from neighbors). After the salesman left my office it took me 25 minutes to refocus on my work.
However, at this point in time I was still in the dark. Everyone told me that Yorwin is the name of a company, based on a founder named Yorwin. Everyone knew Yorwin.
So, I admit, I was curious about Yorwin.
But curious about what?
Not the story of Yorwin, that was everywhere.
Not the size and strength of Yorwin.
Not the ubiquity of Yorwin (seeing Yorwin embossed paper towels in public restrooms sealed that perception).
What I Didn’t Know
This is what I didn’t know as a potential buyer:
- What is Yorwin for?
- Why do I need Yorwin?
- What will Yorwin fix for me, that I need fixing?
- How will I feel once I buy Yorwin, whatever it is?
- What is Yorwin going to cost me relative to what I’m getting from it?
I didn’t know the answers to any of these questions. I was numbed.
I was blind to its ads and positive Word of Mouth. I was unenlightened about the value one gains from Yorwin.
In the end, I didn’t buy Yorwin.
Marketing Lessons from Yorwin
There must be a message about value, one that solves customers’ pains, delivers their goals, and does so at a price much less than the cost of NOT fixing those pains or achieving those goals.
This universal message is for the mass audience in a marketplace.
Selling Lessons from Yorwin
The universal marketing message must be revised to fit an individual buyer during the sales process. Otherwise, it’s a hit and miss affair on a buyer by buyer basis.
The only way to target the universal message into a specific buyer is for the salesperson to ask the buyer questions and get explicit answers.
Only then can the salesperson define and communicate value to their buyer.
The Moral of the Story
You can’t sell a company’s wares without communicating the value their offering will provide to a specific buyer’s individual needs. Otherwise, there’s no point for a buyer to buy.
Just remember Yorwin.
~~~~~~~~~~
Chris Arlen
President
Revenue-IQ
July 9th, 2009
When the process becomes more important than purpose strange things can happen, some not so good.
Even responsible managers diligently working through a process, but without defining their purpose, can cause not so pleasant things to occur.
For example:
Q: What happens when Procurement follows a strategic sourcing process without requiring business units to define their purpose and goals?
A: Business units can end up misaligned with corporate strategy, and lack needed capabilities from selecting a less than optimal vendor.
Q: What happens when vendors setup a proposal process to write proposals as efficiently as possible?
A: Vendors can produce large numbers of proposals quickly, but loose their proposals’ effectiveness. Essentially lessening their ability to win bids.
No Purpose?
Without first defining purpose, time and effort is sunk into an unintentional, murky vision of the future.
Without purpose goals can only be guessed at and process choices become limited. And going forward, the long-term commitment to work through challenges again and again will be lacking.
Working a process without purpose is like horseback riding in a loose saddle – you’re not quite sure you’ll make the full ride.
Goals aren’t Purpose
Don’t confuse goals with purpose, they’re not the same. Goals define destinations, they describe where you want to end up.
Purpose is the mission we’re on, the reason our work exists, the reason we get out of bed in the morning.
And purpose is harder to define than goals or process. But by defining purpose first, goals become clear, and the choice of process(es) reveals itself.
Process in its Place
Being process-oriented is a good thing. Mapping, managing and improving processes makes purpose and goals achievable.
However, process benefits most when purpose and goals are defined first.
How do you define purpose and goals with your processes?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: process, procurement, proposal writing
April 16th, 2009
March 16, 2009 Unhappy Janitors at Microsoft protest subcontractor’s cuts
This article points to the janitorial subcontractor’s staffing cuts and unhappy janitors because of increased workloads.
It made me wonder about our last blog post A Janitorial Fable on Mar 12, 2009.
I wonder if specifications were changed at Microsoft to reflect higher workloads.
I wonder what, if any, communications went to janitors and Microsoft end-users to reshape their expectations.
I wonder how the situation would’ve played out if the subcontractor had read Continents of the Contract Service World?
What do you wonder about?
(Disclosure: SBM Site Services is not a client of Service Performance. ABM Janitorial Services is a former client. 17 years ago, as Sales & Marketing Director for ABM Janitorial, Chris Arlen (that’s me) wrote the proposal that secured the Microsoft contract for ABM.)
~~~~~~
Chris Arlen
President, Service Performance
Technorati: Microsoft, janitors, janitorial workload
March 19th, 2009
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