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    Moving upscale, part 2

    Earlier today I wrote that moving upscale and focusing your services of Fortune 500-sized companies can increase profitability, essentially because you can charge more for the same stuff.I laid out a few reasons why, but each one of those reasons has a potential negative flip side:They will pay for “insurance” because they’re phenomenally risk-averseThey want robust experience and process-driven insurance. They may also want shitload of meetings and over-communication-driven insurance with a heavy dose of ass-covering in the mix for good measure.They are more used to the idea of assembling a team of specialists, some of whom may be purely advisory.They might not hire if you’re a small generalist. They’ll hire larger generalists for staff aug, but that changes your value prop vs. a specialist who might lead or advise on the project. And there’s a LOT of competition from the Accenture’s of the world on both the generalist and specialist end of things.They can be less price-sensitive.While rolling in the dough from one or two high-profit projects, you can easily and unexpectedly leave yourself open to a client concentration death-blow that kind of sneaks up on you. Whale clients are fun at first, but they can weaken your business long-term.They often have a larger “buyer surface area” – larger number of people who can make sizable discretionary spending decisions.Despite the larger buyer surface area, those buyers can still be very difficult to get in front of unless you have “door-opening” levels of credibility.None of these reasons, individually, are a reason to focus on F500’s or not focus on F500’s. But you should consider them all together when making a decision about what size company you focus on working with.

    Specialization School helps you specialize without the risk and learning curve of extensive market research. Go to to apply.


    Moving upscale

    On the surface, moving upscale and selling your services to Fortune 500-size companies seems like the quickest route to higher profitability.Here’s why that might seem to be true (and is true in some but not all cases):Bigger corporate clients will often pay for “insurance” on a project in the form of higher rates because they’re phenomenally risk-averse.Bigger corporate clients are more used to the idea of assembling a team of specialists and coordinating their efforts. Some of those specialists may be purely advisory (good for you, if you can qualify for the gig).Bigger corporate clients can be less price-sensitive. They’re simply used to seeing larger numbers. It’s not quite a conspiracy, but it sort of operates like one. Vendors know they can pay more, so they charge a premium. Buyers know that “nobody got fired for hiring IBM” and can spend as if they are hiring IBM.Bigger corporate clients often have a larger “buyer surface area”; a larger number of people who can make sizable discretionary spending decisions. This can make it easier to get to the money.Of course every one of these positive points has a downside as well. I’ll touch on those in my next article.

    I work with people one-on-one. One of the available slots could be yours if you need help with deciding how to specialize, developing a compelling, focused value proposition, or designing a lead generation program.Hit HERE to inquire.-P

    Location, location, location

    Whole Foods has been in the news quite a bit lately because of Amazon’s acquisition of their business.I’ll be honest, I was relieved to read a Washington Post article that indicated prices on some Whole Foods items will be lowered immediately. I buy most of my groceries from Whole Foods, and will be happy to pay a bit less when I shop there.You will find the following interesting.There are two grocery stores in Sebastopol that have higher prices than Whole Foods!Did you even think such a thing was possible? :)One has higher prices for obvious reasons. It’s called Community Market, and it’s more swanky, more upscale, and more eco-vegan-organic-handpicked-wildcrafted-local-artisanal friendly than even Whole Foods is.The other market with higher-than-Whole-Foods prices is an absolute DUMP:ImageImageImageAnd I LOVE the dumpy-place. I think there’s a lesson in there for service providers.The dumpy place is doing very well. I spoke to the owner recently during his shift on the register and asked about how his business is doing. He’s 5 years ahead of schedule on paying back the loan he took to buy the place, and he’s going to buying the neighboring coffee shop next.People, there are whole corners of this store that are covered in cobwebs. The stock room looks like some place the bad guys in a bad TV show would take their kidnapping victims. The building is literally a plywood shack.How the hell are they doing so well?Location, location, location.They are the closest grocery store to a critical mass of affluent people. In other words, they are a convenience store, and they can charge a premium for that 1 attribute.That 1 attribute of convenient location saves lots of people a 15-minute drive to the next most convenient grocer store (which happens to be Whole Foods), and that convenience is worth something extra to those people.What could you emphasize in your service offerings that would be worth something extra to your clients? Lower risk? Greater speed? Something else?There are 3 critical issues to consider before specializing. I’ve put together a free email course that covers these issues. Click here to sign up for that course.

    Let’s be clear

    Today a member of the US House of Representatives gave me his personal cell phone number and invited me to call him anytime.Is this because I’m some kind of baller; well-connected to the halls of power in Washington DC?Hell no.He gave me his personal cell phone and the invitation to call anytime because he’s a high school buddy and it’s been a while since we’ve spoken and he was reaching out by email to re-connect.In your business, do not ever confuse the role of un-earned relationships (and the business that flows from them) and relationships that you cultivate based on the strength of your focus, ideas, insight, and what Alan Weiss calls “marketing gravity”.Have a high school buddy who hired you to work on a project for them? That’s great! Really, I mean it.But that business is categorically different than business you’ve earned from scratch. The revenue it brought in might be numerically equal to other types of revenue, but it is strategically inferior revenue. It’s a windfall, not an asset.If you’re up for it, try this short exercise. It might scare the shit out of you:

    1. Get a letter-sized sheet of blank paper. Draw a line vertically down the middle of the sheet.
    2. On the left side of the line, list every project that’s come your way based on a pre-existing relationship. Use shorthand notation to keep it compact. Your list should include projects that came from people you used to work with before you went solo, people who you knew before you started working for yourself, and people you met after you started working for yourself but you met outside the context of your business. Referrals that you did not manage or ask for count too. Business that comes from family, friends, and friends of friends/family count too. In big letters at the top, write ACCIDENTAL BUSINESS.
    3. On the right side of the line, list every project that’s happened because someone filled out a form on your website, responded to an ad you paid for, responded to cold outreach, read your writing or heard you speaking (in a marketing context), met you because you intentionally joined a community or participated in an event where you knew your prospects would be, met you because you specifically reached out to them or asked for an introduction to them, or sought you out based on the strength of your positioning, focus, or reputation. In big letters at the top, write BUSINESS I CREATED ON PURPOSE (CAUSE I’M A BALLER).

    What does the balance between the left and right sides of your sheet of paper look like? Most importantly, are you comfortable with that balance?If you’re not, I can help you change it. It’s not an overnight process, but it’s worth two or three years of effort to get to the point where only 30 to 40% of your business is dependent on accidental relationships, while the lion’s share is generated by you and your marketing and is therefore much more in your control –>

    A pretty good positioning statement

    This is a pretty good positioning statement:a pretty good positioning statementI’d swap the tag line (“Don’t Just Dream, Do”) with the actual positioning statement, but otherwise it’s pretty good:Freelance services for the lean entrepreneurDoes it tell you who is the ideal customer? Check.Does it tell you what the focus of the company is? Check.Is it perfect? Maybe not.But it’s 1000000000% better than something like “We build elegant solutions for complex problems”!Get help with this stuff: Know a self-employed software developer who might benefit from specialization? Send ’em this free gift! Details here –>

    Risky business

    I’m going to add the following question to the (ever-lengthening) list of questions I ask new clients at the outset of an engagement:What is the most risky decision you have advised a client on or made on their behalf?What about you? How would you answer that question?-P

    P.S. Know a self-employed software developer who might benefit from specialization? Send ’em this free gift! Details here –>

    We have a world-class filing system

    Picture this…You’ve been (heaven forbid) diagnosed with a rare type of brain tumor. It’s operable, but fatal if not properly removed in the next 2 months.Your doctor refers you to a world-class specialist who has been removing these types of tumors with a 95% success rate for 2 decades.At your consultation with the specialist, he or she spends the first 45 minutes of the meeting describing their office’s world class filing system, the extensive training they provide their front office staff, how friendly their nurses are, how convenient the physical location of their office is, how they pass the 30% savings their efficient supply ordering system yields directly on to you, and how great a play space they have in their waiting room for patients with kids.This is an imperfect analogy for what you see dev shops that lack specialized expertise doing on their websites.The differentiators they highlight are all inferior to the ultimate differentiator, which is expertise that creates economically valuable results.It’s not that the filing system and all that other stuff in my analogy is unimportant. It’s that compared to expertise, those things are not compelling differentiators. Expertise is.How do you develop expertise that creates economically valuable results? You specialize.How do you best decide how to specialize? can help.-P

    P.S. Know a self-employed software developer who might benefit from specialization? Send ’em this free gift! Details here –>

    The cheese stands alone

    I really enjoy listening to the Tape Op Podcast, which consists of long-form interviews with people involved in the music recording business, ranging from artists who are obsessive about some aspect of music recording (ex: Jack White) to recording engineers and producers.Almost every interviewee talks about the changes that have happened over the last 15 years in the music business. Napster entered the scene in 1999, and it either caused or was concurrent with a sea change in how music was distributed, sold, and listened to, and that sea change–along with the commoditization of the means of production of recorded music itself–led to deep changes in how music is brought from idea to published media that you listen to.Things got better for some players in this game. You and I now arguably have more access to a greater range of music at lower cost and higher convenience than any other people at any other time in human history.At the same time, jobs went away. Overpaid middlemen got made redundant. They’re not happy about that, but I bet few others share their grief. Most people were happy to bid them good riddance.Jobs went away on the production side of things too.One of the jobs that largely went away is studio technician. Even studios that somehow survived the precipitous drop in demand for their services and were able to alter their business model to become more competitive have eliminated their technicians. Part of this is driven by technology, and part by economics.In the heyday for commercial studios, recordings were made using tape recorders and gear that was technically “mass produced” but was really just 1 step away from hand-made. That equipment really needed a skilled human being to maintain it. It was a serious capital investment, it was designed to be repairable over the long term, and so it made sense to invest in its upkeep.Technology really changed things. Grammy-winning albums have been recorded on laptops with a few thousand dollars worth of outboard gear (one example is “Scary Monsters and Nice Sprites” by Skrillex). There are fewer recording studios now, and fewer of the ones that remain use equipment that requires a dedicated technician. This has reduced the demand for the skills that studio technicians posses.But maintaining gear is not all technicians did. The really good ones knew their craft–a mix of electric and mechanical engineering–deeply, and when it was called for they could design and build 1-off supplementary hardware on the spot to make something happen. They could fix a guitar player’s misbehaving tube amplifier and keep a finicky tape machine operating to spec through undocumented tweaks that bordered on black magic.How could such a talented person become redundant?In many cases, the studio technician job got combined with the recording engineer job. Yeah, the combined engineer+technician is not as good as a dedicated engineer+dedicated technician, but if it’s a choice between an unprofitable studio that has one or more staff technicians and a mildly profitable studio without the technician, guess which path the studio owner takes?But why did the engineers get to keep their jobs and absorb the technician duties rather than the other way around?I think it’s because the creativity the engineer brings to the process is a bigger part of the studio’s value proposition.Or to phrase it differently, in let’s say the 1980’s… both the studio technician and the recording engineer offered strong value to the studio. In the 2000’s, technology had changed in a way that reduced the value the technician offered much more than it reduced the value the engineer offered.There was a time when the studio technician provided creative value as well, but the bulk of their creative value was ultimately contributing to making sure stuff worked right, while the engineer’s creativity contributes to how the recording sounds. If the recording sounds good, who cares what level of genius was or was not required of the technician? The effect of the engineer’s work is more visible (or rather, it’s more audible) to the end customer for the recording.Despite all the value that new music recording technology brings to the table, if you aren’t able to use that technology to make music that the right people want to listen to, you aren’t going to sell many records. Seen from this perspective, who does more to help sell records? The studio tech or the recording engineer? These days, the recording engineer arguably makes a greater contribution to how successful a recording is in the marketplace.— 🎶🎶🎶 —The farmer in the dell (2x)Hi-ho, the derry-oThe farmer in the dell…The rat takes the cheese (2×)Hi-ho, the derry-o…The rat takes the cheeseThe cheese stands alone (2×)Hi-ho, the derry-o…The cheese stands alone— 🎶🎶🎶 —Does any of this remind you of your situation? I suspect it might. It’s a story as old as time.Time moves on, things outside of us change, and our economic value changes as a result.Does your value proposition to your clients look more like the studio technician or the recording engineer?If it’s more like a studio technician, is there new technology coming down the pipe that would reduce your economic value to whoever pays for your services? For example…Remember how WordPress combined with themes like Divi became a “good enough” solution for a lot of businesses that formerly would have had no choice but to pay for a fully custom website?Remember how Rails changed the web app development world?This is how commoditization works. Increasingly better off the shelf software, frameworks, libraries, and established best practices eat away at the need for fully custom work done by early adopter experts.Make sure your value proposition is durable over the long run:

    P.S. Know a self-employed software developer who might benefit from specialization? Send ’em this free gift! Details here –>

    Lemons behind the counter, redux

    You’ve seen this XKCD comic, right?positioning services - Experiential marketing learning for independent consultantsIn yesterday’s post I was mistaken about why Chipotle moved the lemon slices behind the counter. Several of you let me know it was done for food safety reasons, not for cost reduction reasons. Yesterday I was the someone in that XKCD cartoon who was wrong on the internet. :)To make the most of my mild embarrassment about this, I’ll repeat what is a periodic public service announcement I make to this list….Email marketing is powerful. You should probably consider using it in your business.That said, if you’re totally new to doing email marketing, prepare yourself for the following:

    1. You will be wrong in public at least once and you’ll get called out for it. The worst thing that can happen in your marketing is being ignored, so take being called out on stuff you’re wrong about as a compliment because it means subscribers are paying attention to what you say, which is generally a good sign.
    2. If you’re wrong from time to time, you’re probably doing something right in terms of assertively exploring new territory. If you’re wrong a lot, you might be being sloppy or dumb.
    3. Good email marketing requires asymmetrical vulnerability; the willingness to go first, trust your audience a bit more than they trust you at first, to be more generous with them than they are with you at first, and really put yourself out there in service of them.

    If you’ve considered trying email marketing, I’d really encourage you to give it a go. Doing it well is not easy, but it’s really pays you back many times over the long run.All you need to get started is a reason for people to opt in (email courses can work well for this, and is a great resource for creating a good email course), some free or inexpensive software, and a clear focus for what your emails will be about.-P

    Know a self-employed software developer who might benefit from specialization? Send ’em this free gift! Details here –>

    Lemons are behind the counter now

    On a recent lunch run to Chipotle, I noticed a sign at their drinks/condiments station that said “Lemons are behind the counter now.”I should give the business the benefit of the doubt in thinking about why they’d make that change, but I’m in a crappy mood today so I’m not going to. (A friend’s house burned down in the Santa Rosa wildfires a few weeks back, and today I was remembering that.)What message is Chipotle sending about their business by moving the lemons behind the counter?I think it’s a cost-savings measure on Chipotle’s behalf. Add a bit of friction to the process of acquiring a lemon slice, and fewer people will do it, and their CoGS goes down a fraction of a percentage.What message are you sending about the health of your business when you…

    • Invest in creating and publishing more super high quality public-facing content
    • Invest in unique research that benefits your clients
    • Generously teach what you know

    And alternately, what message does it send when you stop or never get around to providing providing those kinds of benefits to your prospective clients?-P

    P.S. Know a self-employed software developer who might benefit from specialization? Send ’em this free gift! Details here –>