David Searns | Co-CEO
This is it. The FINAL sales idea! Okay, it’s not really the final sales idea…just the last in this series. It’s time to find your “X Factor.”
The problem with selling staffing…
There are 25,000 staffing companies in the U.S. and 3,000 more in Canada.
If you ask most employers, there is little difference from one to the next. And when everyone looks the same, low price wins.
But what if you could be the ONLY company that does what you do?
What if you had 100% control over the supply of an essential product or service?
If you could do this, you would have the ULTIMATE competitive advantage. You would have the most important driver of value creation available to a business – PRICING POWER.
What is Pricing Power?
In the book Scaling Up, author Verne Harnish argues that many companies compete on price rather than finding ways to deliver greater value. Pricing power is where you deliver such unique value to the market that you set the price for your services.
The key to achieving pricing power is to:
- Focus on the right customers.
- Offer solutions that deliver exceptional value.
- Ensure there is no easy substitute for what you do.
- Set pricing in alignment with the value you provide (in other words, raise your prices!)
Pricing power is a crucial enterprise value creator and companies that master it can achieve higher profitability without needing to expand their customer base dramatically.
So, how do you get pricing power?
Find Your X Factor
Last Spring, I attended year one of the Entrepreneurial Masters Program at MIT. One of the presenters was Barrett Ersek, and he told the story of how a tragedy in his lawn fertilizing business led to an epiphany that enabled him to 10x his growth.
The TL;DR version of the story is that 100% of his fertilizer inventory (and his warehouse) went up in flames. He lost nearly a million dollars in product…
And he had no insurance!
Most people would have thrown in the towel. Not Barrett.
He viewed the fire as a gift. A chance for rebirth.
Lawn care, as you might guess, is about as commoditized a business as there is. Companies drive a big truck up to your home. Spray a bunch of chemicals on your lawn. Stick a sign in the grass saying, “keep out”. And send you a bill.
For years, the industry was a race to the bottom…with low price driving purchases (sound familiar?).
After the fire, Barrett stepped back and asked himself one essential question:
What bottleneck, if my company could eliminate, change, or solve, would give our business a 7-10x advantage over our competition?
That’s your X Factor.
It’s the extraordinary capability that delivers significant, measurable value for your ideal clients.
That value is what gives you pricing power.
I’ll reveal what Barrett came up with shortly. For now, let’s get more practical.
How do find your X Factor?
In class, Barrett taught us how to find the X Factor in any industry. He challenged us to answer the following questions:
- What are the biggest bottlenecks in your company…specifically, the ones that impact everyone in your industry and not just your business?
- From the customer's point of view, what are the biggest bottlenecks (or headaches) in the delivery or use of your services?
- Where are there superfluous expenses in your P&L that you could eliminate to gain a significant increase in profits or an advantage over everyone else in your industry?
- What are the customer risks, friction points, and psychological barriers to using your services—things that stop people from buying or cause them to become price buyers?
- What are the negative externalities of using your services (i.e., the buyer perceptions about your industry that reduce their desire to purchase)?
- What do your employees hate about their jobs (what causes them to become disengaged)?
For each of these questions, Barrett suggests making two lists. On the first list, identify things that are specific to your company. These are opportunities for improvement and incremental growth.
The second list is the important one. These are things that you and everyone in the staffing industry must address. These are your opportunities for innovation and exponential growth.
Finding your X Factor is not easy.
Barrett recommends that you get your leadership team (or even better, your front-line staff) together to brainstorm these six questions. For each question, make a list of at least five company and five industry answers.
From the industry lists, select the top five from all the lists—the things that would have the biggest impact for your ideal clients.
And then select your top ONE to work on. Just one.
Once you have identified your #1 issue to solve, you can then analyze the root cause and potential solutions.
Why is this a problem for your clients?
Why is this problem inherent to your industry?
What could be done to solve it?
Your goal is to get to a metrically driven essential question that will become the focus for your organization. Here are a few examples:
How do we get our revenue per recruiter to $1M per year?
How do we reduce no-call/no-show to zero?
How do we reduce time-to-fill to less than 60 minutes?
For Barrett’s lawn care company, his question was how do we cut the sales process down from the typical three days to instantaneous?
He ultimately solved this question. He invented an entirely new way to quote lawn care services. Instead of sending out a salesperson to take measurements for an estimate, he created software using online maps to create an instant estimate. This was before Google Earth existed!
By creating the instant quote, a true revolution in his industry, he eliminated his sales costs and dramatically improved customer service.
And as you might guess, his business (and profits) skyrocketed!
If you want to sell more staffing services in a down market, find your X Factor!
I hope you have enjoyed this series on selling in a down market. If you missed any of the previous six issues, you can find them all in our
SMART IDEAS Weekly archive. |