loading...

DEV3L on The Personal MBA 2

dev3l profile image Justin Beall ・8 min read

Table of Contents

  1. Part 1 : (Introduction) (Marketing)
  2. Part 2
  3. Part 3 : (Human Mind) (Yourself) (Others)
  4. Part 4 : (Understanding) (Analyzing) (Improving Systems)


Sales

The sales process begins with the prospect and ends with a paying customer. The best businesses in the world help their prospects understand why the offering will be beneficial. In sale situations, it's valuable to create exclusivity. An offer and which your perspective customer cannot get anywhere else.

A transaction is an exchange of value between two or more parties. Without a certain amount of trust between parties, a transaction will not occur. Ideally, common ground, you should want exactly what your customers want. The more your interest are aligned with your prospects, the more they will trust your ability to satisfy their needs.

Pricing

All prices are arbitrary and malleable.

Four Pricing Methods

  • Replacement cost
  • Market comparison
  • Discounted cash flow or Net Present Value method
  • Value comparison

Price transition shock, discounts work when the offering is a commodity, such as gas. Gas from one gas station is relatively equal to the gas of another gas station. Raising prices can increase demand by appealing to different kinds of customers, for example cars, some cars are desirable because they are expensive.

Value-based pricing, if the value of your offering is actionable, the new price is worth it regardless of production cost or what your competition is doing. Value-based selling is not about talking, it's about listening, find what your customers value.

Education based selling, present your offering to a customer in such a way that the value hey will receive from purchasing your product is unquestionable. Education based selling is the process of making your prospects better more informed customers. Instead of pressuring for the sale, educate the customer on the details that provide value and why. Warning, effective education requires your offering to be superior in one way or another, otherwise you may have just educated your customer away from you

Understanding a party's next best alternative product can provide you a major sales advantage, when it comes to negotiation. Structure agreement so that it is better than the parties next best alternative.

Negotiations

Your your primary purpose as a salesperson is to identify and eliminate barriers or purchase to complete the sales transaction.

Three Universal currencies

  • Resources
  • Time
  • Flexibility

Any one of these currencies can be traded for more or less of the others.

Three Dimensions of Negotiation

  • Set up
  • Structure
  • Discussion

Instead of taking the approach of a hard sell, aim for being looked at as an assistant buyer. An individual who is informing the potential customer of the best options to meet his or her needs. Chasing a prospect to make a sale is counterproductive. Prospects can sense desperation and pushes them away. Find a way to frame the conversation in such a way the prospect feels like they are chasing you.

Reciprocation can be used to manipulate a prospective clients judgment. For example, a car salesman who offers a cup of coffee if the prospect takes it, he/she is more likely to reciprocate unconsciously in concessions in terms for the sale agreement.

Five Standard Rejections

  • It cost too much
  • It won't work
  • It won't work for me
  • I can wait
  • It's too difficult

Always try to negotiate directly with the decision maker. That way you know the prospects authority will not be the reason for a missed sale. Risk reversal, by eliminating risk from the customer, you're able to convince more individuals to purchase your offering. Think, take home this puppy, but you can return it if something goes wrong.

Reactivation, reach out to previous customers on a regular basis, three to six months, to see if offerings and customer needs could overlap once again. These are cheap sales usually.


Value Delivery

Without value delivery, you don't have a business. The value creation process maybe raw goods to finished product, delivery from a factory, unwrapped placed on shelves, then customer purchases. Or, inception to delivery of a web application. Regardless of your delivery method, it is important to understand your entire value stream.

A value stream is all the steps and processes that take raw materials and create finished products for your customer. By understanding your value stream, you can then make process improvements to increase speed predictability and quality. Toyota makes over 1 million process improvements in a year.

The customer's perception of quality is based upon expectations and performance. The easiest way to to surpass expectations, is to give your customer a bonus they did not expect along with the value they receive from your product. The more predictable your offerings are, the more you'll be able to increase the perceived quality of the product.

Throughput is the rate at which a system achieves its desired goal. Measuring throughput is the first step to improving it. Incremental argumentation can lead to a high quality product in a relatively short period of time.

Multiplication is the duplication of an entire value stream process, such as chain restaurants. McDonald's knows how to duplicate Big Macs all day. Many companies do this. McDonald's can out multiply the competition at levels of scale.

As a general rule, the less human involvement required to create a product, the easier that product/business is to scale. Scalable systems amplify the results of small changes. Every improvement you make to your value stream makes it that much harder for competitors to keep up. Don't focus on competing, focus on value. Your competitors will take care of themselves.

If you are feeling overloaded, the best thing you can do is to create good systems. Effective systems of the lifeblood of a business


Finance

Finance is the art and science of watching money flow into and out of a business, then deciding how to allocate it. Finally, determining whether or not what you are doing is producing the results you want. Finance helps you watch your dollars in a way that makes sense.

Accounting is the process of ensuring the data you use to make financial decision is as complete and accurate as possible.

Profit, business is not about what you make, it is about what you keep. The higher the price, the lower the cost, the higher the profit margin.

Value capture is the process of retaining some percentage of the value in every transaction. Minimize value approach brings customers back, as opposed to maximization of value. Maximization of value may be beneficial for the business but tends to be a negative experience for a customer.

Sufficiency Parable

Once, a powerful executive went on vacation - his first in fifteen years. As he was exploring a pier in a small coastal fishing village, a tuna fisherman docked his boat. As the Fisherman lashed his boat to the pier, the Executive complimented him on the size and quality of his fish.

“How long did it take you to catch these fish?” the Executive asked.

“Only a little while,” the Fisherman replied.

“Why don’t you stay out longer and catch more?” the Executive asked.

“I have enough to support my family’s needs,” said the Fisherman.

“But,” asked the Executive, “what do you do with the rest of your time?”

The Fisherman replied, “I sleep late, fish a little, play with my children, take a siesta with my wife, and stroll into the village each evening where I sip wine and play guitar with my friends. I have a full and busy life.”

The Executive was flabbergasted. “I’m a Harvard MBA, and I can help you. You should spend more time fishing. With the proceeds, you could buy a bigger boat. A bigger boat would help you catch more fish, which you could sell to buy several boats. Eventually, you’d own an entire fleet.”

“Instead of selling your catch to a middleman you could sell directly to the consumers, which would improve your margins. Eventually, you could opening your own factory, so you’d control the product, the processing and the distribution. Of course, you’d have to leave this village and move to the city so you could run your expanding enterprise.”

The Fisherman was quiet for a moment, then asked, “How long would this take?”

“Fifteen, twenty years. Twenty-five, tops.”

“Then what?”

The Executive laughed. “That’s the best part. When the time is right, you’d take your company public and sell all of your stock. You’d make millions.”

“Millions? What would I do then?”

The Executive paused for a moment. “You could retire, sleep late, fish a little, play with your children, take a siesta with your wife, and stroll into the village each evening to sip wine and play the guitar with your friends.”

Shaking his head, the Executive bid the Fisherman farewell. Immediately after returning from vacation, the Executive resigned from his position.

Four Ways to Increase Revenue

  • Increase the number of customers
  • Increase the average size of each transaction
  • Increase the frequency of transactions per customer
  • Increase price

Not every customer is a good customer, some will sap your time energy and resources for little return on value. Always focus and majority of your effort on serving your ideal customers.

Pricing power, the ability for which you can increase price and still retain business. For example, commodity items such as toothpaste have a low pricing power. Luxury goods such as name brand handbags have a high pricing power, in which the high price is a value as a status symbol, exclusivity.

Lifetime value is the length at which a customer stays with a company multiplied by the value per duration. Subscriptions are great way to increase lifetime value of a customer over a single transaction. This makes sense because everyone wants you to sign up for their rewards program, plus membership, or whatever it is.

Amortization is the process of spreading cost of an asset overtime. For example if you wanted to buy a hundred billion dollar factory, what does that look like on financial statements.

Opportunity cost is the value you are giving up by making a decision. This is important because there are always other options. By vesting time energy resources and effort into any decision, you are foregoing your next best alternative. This is important because it is hidden. As humans we often have a hard time paying attention to what is not present.

The time value of money can help you evaluate how best to spend or invest discretionary assets. Investing $10 a day for 40 years at 8% compounding interest makes you a million in return, and the best part is you only contribute $146,000.

Compounding is the accumulation of gains over time.

Leverage is a form of financial amplification.

Funding is the business equivalent of rocket fuel. If your business needs additional capacity and is already pointed in the right direction, finance can help you accelerate operations growth. There are a wide array of funding types ranging from personal loans, family loans, secured credit, unsecured credit, bonds, angel investors, venture capitalist, and public offerings. With each one, there are certain risks associated and some may require relinquishment of control.

Return on investment, or ROI, is the anticipated value from the bet. Every future ROI estimate, is it educated guess.

Sunk cost is easy-to-understand conceptually, but is difficult in real life situations to make the appropriate decision. If the project cost more money than you intend to get out of it, do not continue to sink money into it. It is not a good idea.

Part 3

Posted on by:

dev3l profile

Justin Beall

@dev3l

Software engineer (Python/Node/Java), craftsperson, XP advocate, agile technical coach, product discovery/delivery/management/owner curious, data miner, believer in growth mindset, multiplier, servant

Discussion

pic
Editor guide