Services businesses may be easier to start, but growing can be a challenge. In this case study we tackle an IT services business that’s looking to generate business beyond referrals.
Trascript:
Raj: Hi there and welcome. This is our first case study that we’re doing together. I’m Raj Jha. I’m here with Hannah Mears, and we’re going to be doing a case study of a company and talk about their demand generation, their branding, and all things around that. If you’ve got any kind of business, listen to this today; you’re going to learn a few things. So Hannah, why don’t you take it away and talk a little bit about this case study and this question that we got?
Hannah: Yes. Our first case study says, “I founded a company that does IT consulting for mid-sized businesses that are moving from legacy systems to cloud-based systems.” First of all, Raj, this is not just a problem that IT consulting firms are facing. Why don’t you go ahead and explain how this issue is widespread across the business world while possibly touching on the difference between a cloud-based system and a legacy-based system.
Raj: Okay, a couple of things here, just some definitions for a cloud-based and legacy-based system. This organization is a consulting company, and they’re helping folks move from, for instance, I’ll give a high-level example. If you only used Microsoft Office on your computer in the old days, it would be something installed on your computer and then their cloud-based systems like the Google docs, and all of those. Now, of course, Microsoft has also gone from things that you install on computers on your premises, and then they’ve gone to the cloud as well. And there are so many different providers here. This particular company is a services-based company that’s helping companies move from here to there. What we’re going to talk about here today are some issues that they’re having around demand generation and how they’re going to be able to attract new customers and their customers. These consulting firms, companies, customers are companies, their businesses. So if you are anyone who deals with or sells to businesses, this is going to be particularly interesting.
Hannah: Great. Here’s the situation to further elaborate on what our client is going through. They said “our average contract is about $50,000 to a $100,000 per year. We have a team of 12 consultants, including myself, 4 of them senior. I founded the company 12 years ago, and I’m the sole Rainmaker. When I started out, it was just me, and I networked to get my first few clients. All our businesses now come from word of mouth, and we’ve plateaued at our current level. We have many steady clients, and after we do their initial migration, they usually retain us on an ongoing basis.” Let’s go ahead and digest this further. Raj, first of all, why do you believe that this company has hit a standstill? They’ve plateaued, right where they are.
Raj: Right. This is a really typical services business problem. And that is where a lot of services businesses started with a sole owner that is both the means of production and actually doing the work and getting the business, and then they can grow. The margins are pretty good growing in that way, but what’s happening is they’re doing the work, and then they’re getting some more work and then they’re doing the work, and they’re getting some more work, and that hits a certain equilibrium. Then they say, “Oh, well, I have to grow this somehow, so I’ll hire some more people.”
But there’s always this trade of time between doing the work and getting the work when the only means you have of getting the work is networking. It’s always going to reach some kind of equilibrium unless you kind of break out of that mold. Any kind of services business can face this because the owner is doing everything. And it’s really hard to break out of it unless you’re going to change the pattern.
Hannah: Right. Let’s say this company needs to break out of this pattern by separating some of the functions that they’re doing on a daily basis, but they’re not necessarily big enough to give everyone in that business a job. Someone may have to wear multiple hats per se at a time. So what are the major functions of that a business should look to separate at any level?
Raj: That’s a really great question. There’s something implicit in that question, which is that you need to separate the function from the person. We tend to think that there are small businesses where everyone’s running around doing everything, and it’s all just a big mush. Then there are big businesses where you have the accounting department, which is headed by the CFO, and there’s a controller. You think of those roles as people, but ultimately any size business needs to have roles that are independent of the business. You think of almost having an organizational chart, just like a big company. You’ve got the finance function, you’ve got a sales function, you’ve got a marketing function, you’ve got a delivery function, customer service. And then you write the names of those boxes, right? It’s a concept that if anyone’s read the book the E-Myth by Michael Gerber, he goes into great detail about that concept of you need to have an organizational chart, which is independent of the business. And your name might be in all the boxes. If you’re just a sole business owner or it, you might have a, Sally is in two of these boxes, you’re in one of these boxes, et cetera.
But as long as you have the big things handled, you need to attract your customers, you need to convert them into being customers. You need to deliver your product or service, you have to have good financial controls. As long as the big things are there, then you’re good. But just conceptually, separating people from a function is the way to think about that.
Hannah: To clarify a little bit with that, it’s okay. If one person is doing multiple jobs, as long as those jobs aren’t overlapping one another, they are separately functioning in the business as their own entity.
Raj: Correct. I mean, think about it this way. At some point you want to get big enough to hand it off to somebody else. You want to think to yourself, “okay, I’ve got multiple hats,” just like the owner of this business has multiple hats. One is the owner of the business as the investor in the business. This was a concept actually flagged to me by my friend, Adrienne Dale. And she encouraged me when I was running a business to separate myself from Raj, the investor from Raj, the CEO because the CEO is running the company, but I’m as an individual and also investing my time and effort into it. That’s one split that should happen.
This person who’s running the IT company daily, they should also say, “Okay, well, I’m going to dedicate 5 hours a week to do the finance function.” At some point, I’m going to say, “Hmm, if I took these five hours out of that finance function and I hired somebody to do it part-time and use those funds hours in the sales and marketing function, I could generate more business pay for the other.” You could start to think that way when you separate it out.
Hannah: Well, let’s start to utilize some of those then. This business also is facing an issue where they’ve said; “unfortunately, we’re not getting enough new clients to grow. And while our profits are good, they’re not great. I’m not sure my company is sellable at this size, which means I’m working at a salary level, and there’s not much equity in the business. Also, I can’t offer my staff a career path without growing the company. The question is, we’re stuck on how to generate new clients other than by networking. I tried advertising online but mostly brought in small clients with no budget.” Can you explain to them how they should set up a new business plan that focuses on generating new clients?
Raj: Yes. I can, actually. They’re stuck in this very typical business pattern of doing the work, getting work, doing the work, getting work, and kudos to them for trying some online advertising, because that is the way to go. But what they focused on really is not the best path for their kind of business, because for the kind of advertising that they were trying, Google AdWords, they’re there; that’s a bottom of the funnel. In other words, they’re looking for folks who are ready to buy now. Very often, that’s not how the decision-making happens at these larger clients. If you looked at what was their average client value, $50,000 to a $100,000 a year. So is a company that’s able to write that sort of check, searching on Google, best IT consultant they might be, but ultimately that’s not really going to generate them the kinds of leads that they want. Instead they need to take a step back and say, “okay, who am I now? How am I positioned in the market so that I can attract that right kind of clients?” I think the very first thing to start thinking about dispositioning, where are they? Who are they to the customer? What positioning they have in the minds of the market and their prospects? What do people think about them for?
Hannah: I think you’re talking a lot about something that’s called a target market. When they’re thinking about the target market, in this case, in particular, since we’re focusing on this client’s profile, who is their target market, and what’s the difference between having just a specific target market and a very, very specific target market? How can that change?
Raj: Yeah. Perfect question, Hannah. That is that most folks try to go too broad, right? They’ll either say it. You ask them, so what’s your target market? IT consulting company and say, “well, anyone who writes a check” is really what they’re going to say. But that sounds great. Doesn’t it? And you want to write a check, but that doesn’t mean that that’s going to be the right kind of business. The best way to do this, especially for any company that’s been operating for a while, is go back and think about who has been your ideal clients in the past and what are all the commonalities between them because let’s go try to find some more of those successful engagements and you’ll do this little analysis and take yourself for a day and just do nothing.
But think about what are the commonalities there? You’ll find it. Oh, well, wait a minute. We’ve had a lot of success with small to mid-sized businesses as our clients that are doing $5 to $10 million in revenue. And they’ve got a part-time IT guy, who’s just doing a terrible job, and they’re in manufacturing and you can find all kinds of weird things. You might find, what I do really well when the CEO’s a woman, you’ll find these really weird things that you would never think about. And then you can say, okay, you know, what if I’m going to specialize in that and really niche it down to women CEOs of companies doing $5 to $10 million in the manufacturing sector. Now you’re going to think, well, I couldn’t possibly do that. Right? It’s too small. There are only a few thousand of those.
But imagine if you were the only go-to solution for those 10,000 businesses. I’m just picking a number here, obviously, but how great would that be? You’re the name that they know that would be fantastic. You don’t need to be everything to everyone at $50,000 to a $100,000 per year per client. It only takes a few of them to really change the course of your business. That’s why I always encourage people just really niche down and be incredibly narrow, because for all the other stuff we’re going to talk about in a moment. It’s going to be really valuable.
Hannah: So you have that foundation of your target market. What you ultimately want to do is then take your target market and have them almost expand for you. How do you get people to just think of you? Something I did in a lot of personal branding is I want to be so obnoxious with my brand that when someone scrolling on LinkedIn and sees a job that may not apply to them, they’d be like, Hannah would be perfect for that. How can these companies learn to do that? Get everybody to instantly think of them when they see something applicable.
Raj: Yeah. That’s exactly what you need to do. You need to be unique, but really you have to spoon feed it to your audience that they don’t know when to think about you. For instance, I’ll give you a personal anecdote right now. I’m on like my 10th career at this point. I started out way back in the dark ages, and I was a computer guy. And then I went to law school, and I was a lawyer for years. Then I did marketing for attorneys. Being in my fifties, now I can have had slices of things like that. But you have to tell people when to think about you. What you and I are doing here, Hannah, people will now start to know that if they’ve got these branding, these demand generation questions where some folks that you should talk with us because we know a thing or two about that.
But you have to educate the market on the window. Think about you. These IT consultants need to start thinking about, okay, I now know that this woman CEO of this $5 to $10 million business in manufacturing is who I want to go after. What do they need to know about me to know that I’m the solution for X, for moving my IT to the cloud? Think about what’s the experience that they’re having. If presuming that the CEO is the buyer, the economic buyer of the service. Well, what are they feeling right now? What’s the challenge they’re having? What pain can I alleviate from stress? Can I alleviate from them? What do they want to hear about? And that will all roll into the marketing and the media and the branding. And that’s going to start to sharpen up, helping educate them about when to think about you.
Hannah: When they start thinking about you, and you mentioned a really interesting point, and there is a communication that’s going to happen eventually between you and the last thing you want to do is be vague. You want to be extremely specific and everything that you’re saying so that you’re not misleading them, steering them to a different company. It’s all unique to you. So it was prompt. They used words like quality and responsiveness that didn’t necessarily need anything. What words can you give them as alternatives that are less vague?
Raj: Yeah, exactly. Right words like, we’re the best, right? We’re the highest quality. That doesn’t mean anything, right? Because I can say that I’m the best cloud IT now, I’d be totally lying. “The best IT firm,” but I could say that too. So think about saying, is there an outcome that you can have. So either a benchmark or 99.97% customer satisfaction. Where you can say cloud migrations in two weeks or less. I mean, that might be ridiculous. I don’t know because I’m not an IT guy. But for instance, I think about the pain point that they’re having. “I’ve been with this IT company. I hired them for this engagement. It’s been six months, and it hasn’t happened. Everything’s a disaster.”
Oh, okay. Well, what is that? Are they not responsive? We respond within the hour. Maybe that’s something that the market really wants. So you really have to reverse engineer. What do they want? And that whole looking back over your successful engagements, your successful customers, seeing what those work and you don’t just pick up the phone and call folks. I mean, that’s actually a really good marketing tool in and of itself is get that list because you’re in B2B, that’s fantastic. You know exactly who your customer is. You can pick up the phone and say, hi, their CEO, we’re in the space. And I’m just calling to survey; what are you looking for in this? Because we’re trying to be better as a company. Just have that discussion. Make 20 phone calls, guess what? You’re going to get a client out of it, too, by non-pushy sales. And you’re going to learn a ton.
Hannah: How can you make sure that your target audience is also seeing everything? Because the last thing you want is to have this target audience and know that they’re loyal to you. But if they’re not seeing your stuff on media and web platforms, odds are no one is. How do you get someone to be directed towards you at every type of media platform they can go on?
Raj: I think there’s two parts to this. Number one is media production. You can’t expect this, we’re here in 2021. You cannot expect that all you can do is put up your website, and that’s enough for you or even a website and an email list or a website email list and a newsletter that goes once a month. None of those things are good enough. That was good enough in 1995, we’re not 1995 any more. It is really about having a platform and that platform being a media presence. You have to generate those assets. Again, you and I are going to do this a lot. Look at what we’re doing here. This is an example of what you should be doing.
But to be in the marketing business and have crummy marketing does not really work. You need to produce enough that if when someone goes looking for you, they’re going to find a whole bunch of stuff. And it is all consistent with your target market and what you’re trying to accomplish, et cetera. You have to have that presence. And then that’s number one. So thank you for yourself first as a media company that happens to have a business attached to it. And then, second of all, how do you get that shown? That kind of depends on the kind of business. Now, this is a B2B business. Linkedin is your friend. LinkedIn is a fantastic place. One of the best things about LinkedIn is organic reach is still really good on LinkedIn.
I did a post, I think it had three lines in it or four lines or a few sentences. Within three days, I had 3000 views on my posts, and that wasn’t even video or anything sexy. LinkedIn is a fantastic way of publishing for free organic reach. And then using paid media, and that’s the big unlock. Because the one thing that this company needs to understand, and anyone who’s got a higher ticket type of sale, they’re looking at $50 to a $100,000 per year per client. You’re telling me that you wouldn’t be willing to spend 5 grand to acquire a client, 10 grand. I mean, I don’t know what their margin is, but their services business pretty good margins.
To get a hundred thousand dollars customer, I might write a check to $90,000 if I had no cost of goods. A lot of these companies, they don’t have that marketing mindset, but if I can say, “you could pay X thousand dollars and get another client.” They’d say, “Oh, okay, well maybe I should start thinking about it then. Maybe this is a way to get out of that networking trap”. We talked about it at the beginning because you’re now leveraging assets. Using paid media, paying to have your post seen on LinkedIn, I think could be in this case with the best route they could go.
Hannah: And I think something let’s say, maybe even for people of older generations pre-technology, or in this case for everyone, maybe post-pandemic, we can hold an event. If I’m a company, I’m having people come and gather and say, “this is a fun environment to be a part of. We can help you with your professional needs, but we can also have a relationship on a personal level to make sure we’re both benefiting in the same amount.” Have you seen that work out for companies where they’ve had a fun event, and it’s really paid off?
Raj: Yeah, absolutely. In-person events always great. This has to do with geography, and if you happen to have really tight geography and you’re in St. Louis, and you’re going to get all the folks in that area together, that can be fantastic. But I think actually one of the few benefits of the pandemic situation is we’re all getting used to this. It’s really easy actually to hold a live web event. I think one of the key things to think about that is the event does not have to be about your service or product. It’s anything that could be of benefit to your target audience. Think about what are the challenges they’re having? What if we’re just going to do a round table, challenges that we’re having in the manufacturing sector or if it’s going to be about, how to make the most as a female CEO in today’s manufacturing world, which is male-dominated, you want to hold a round table about that. There’s all kinds of things that you can do about that. As long as it’s going to be valuable and you’re issuing the invites to the party, you’re going to be the center of this. If you’re giving them value, they’re going to look you up, and it’s going to be an excuse for further conversations, et cetera.
Hannah: Yeah. It doesn’t have to be holding a huge carnival, making it really hard to get an audience and beneficial information from people, bouncing ideas off of one another. We have talked about so many different solutions for this company, and it sounds like a lot of information to process. I’m sure, over a 20-minute span, all this information being thrown at you. Can you just sort of give a summary of where they should start? Just give them a starting point.
Raj: Okay. Yeah, we have gone over a lot. Haven’t we? So the starting point, I think, is a mental shift. And it’s a mental shift from realizing you need to separate yourself in your roles and your relationship with the company and not just think of yourself as I’m doing the work, blinders on. And then I’m getting the business, blinders on. If you detach yourself from the business, where do we need to go as an organization? What are the ways to get there? And in my hat, my marketing hat on, I’m going to stop thinking about just networking to get business. I’m going to think about giving value to a specific kind of person. And then how do I do that?
If you just make that shift, the rest is tactics. Whether you’re on LinkedIn or whether you’re going to do this on Facebook or even if you’ve got any listeners left who are in B2C markets. The medium is almost secondary to the strategy. And the strategy is to understand who you’re really going after and what are they worth to you as a business? What value can you bring to them, even outside of the products and services that you give? Just that mental shift, and the rest is details. And, of course watching Raj Jha and Hannah on future episodes, we’ll probably educate you a little bit, but that’s where I’d recommend for that.
Hannah: Yes, I love it. Keep us in mind for all of your future business needs. Hopefully, we have answered a lot of this consultant firm’s questions, but also, maybe if you’re just tuning in and you needed some tips and tricks, maybe Raj has helped you out there as well.
Raj: All right. Well, thank you, everybody. And we’ll see you on the next one.
