2Bobs

Blair interviews David about his new book, Selling Your Professional Services Firm: A Primer.

Links

Buy a copy of David's new book from him directly.

Buy David's new book and audiobook on Amazon.

Transcript

Blair Enns: David, when's the last time we recorded a podcast?

David C. Baker: It was before you canceled your trip to Australia.

Blair: Huh, you didn't think I'd answer it that way, did you? [laughs] I'll just get over my crying fit and then we'll resume recording. It's been a while. It's nice to be back recording. It's not nice to be back in Canada, but it's nice to be back recording. I'm holding in my hands a brand new book, Selling Your Professional Service Firm: A Primer by David C. Baker. Congratulations.

David: Ah, it sounds like a really good book. Oh, I wrote that. Yes.

Blair: You did write it. How are you feeling about it?

David: I didn't think I had another book in me.

Blair: Oh, come on.

David: No, I really didn't.

Blair: Really?

David: After writing the previous one, I was like, "Oh, I don't know if I can do this again." Then I wrote this and then I said the same thing. [laughs]

Blair: You not only wrote this, you outlined, wrote, produced, and printed a book in the time that my most recent book was in production.

David: Wow. Does that make me fast or are you slow or what?

Blair: I think both. Yes, I think both, but I'll state once again for the record, I am envious of how quickly you write books. You don't just write books quickly. You write good books quickly. You make it look easy, which is one of the few reasons I hate you, but there are others. Beyond that, you're a well-balanced individual. This is more of a limited audience for this book than, say, your books on managing or the business of expertise. I'm drawing a blank on your previous books, The Business of Expertise or Secret Tradecraft of Elite Advisors. Is that right?

David: Yes, that's right. It's correct in the sense that there's a smaller audience, but it's the same audience in a way. The last three books, unlike my previous ones, were written to the larger professional services space. Our advisory and M&A work is largely focused on marketing, advertising, digital. The last three books have been written to the same audience, but there's a much smaller portion of that audience that would be interested in this topic. In that sense, it's a pretty small niche sort of an audience because it's-- For one thing, there's hundreds of thousands of professional service firms, but not that many people are thinking of selling. I don't know. I really have no idea how well this book will do. In some sense, it doesn't matter too much, really.

Blair: Why is that?

David: Because the main two things that I wrote it for-- Money is a part of it. I would love for it to make money like the other ones have. It was just to force me to put everything in an organized box and think about the whole M&A process. The book forces me to do that. The other is that we love doing M&A work. It's busy, but we'd love to attract more opportunity there. Those two things are different from it being a bestseller. It's not in the right category to be a bestseller.

Blair: I guess the primary market is probably anybody who's looking to sell their professional services firm or specifically marketing, creative or digital firm over the next few years, I suspect. Talk us through the numbers. How many of these firms, maybe even are there, if you want to speak to that, how many actually get sold? How many are actively being shopped at any one time?

David: Depending on which source you look at, let's say there's 55,000 firms in the US Now, most of our clients are outside the US, but just using the US as an example, all things being equal. If you don't categorize anybody in there, just take the whole number, about 1 in 400 will sell over their lifetime. You can change those odds dramatically with some changes to how you run things and so on. I would say there are probably 15 to 20 of us in the M&A space just for marketing, advertising, digital and so on. I would guess that there are probably a thousand transactions a year, somewhere in there. I'm not sure. It's rare, but when it happens to you, it really matters. It's like the lottery, I guess, or getting struck by lightning.

Blair: You probably, if you're going to sell your firm, it's likely you're going to sell it once. Is that right? You'll sell one firm once in your career?

David: Yes. Right.

Blair: Although a small number have sold multiple. How many transactions have you advised on?

David: Between us here, more than 200, and then of course, know the inside of lots of other stories. Those 200 are of many different types, too, like traditional sales on either the buy or the sell side, internal transfers, roll-ups to the holding companies, mergers, acqui-hires, but more than 200. Then, I don't know, 500 or 600 valuations probably over the years.

Blair: You have some experience in this space. It's interesting, you point out at the beginning of the book that this isn't exactly a field where people say, "Hey, let's get into this business, spin something up, and then exit, then sell it." Is it?

David: No, and you're wondering why? That's something we probably oughta, "There's no money in it, is that it?" That's a small detail. No, this is something where it'd be fun to really put our heads together and figure that out. I was thinking about investing outside the stuff I read about, and I was thinking about that. I was thinking, "Oh, you know these young entrepreneurs, a lot of them male, want to buy something that they would view as a passive investment." In other words, they just buy it, and they've got to go poke their head in the door every once in a while, and then it grows pretty regularly over time, and then they have an exit, and then they can change their LinkedIn profile and all of that. W

When they look a little bit deeper into this kind of a firm, they realize, "Oh," in almost every case, "The president, founder, whatever is also working in the firm. That's interesting." Either you have to know a lot to do this, or is it a lifestyle business? I'm just thinking out loud here. That's part of it. They're not passive investments. By lifestyle business, I don't really like that term, because it's pejorative, but I just mean you're participating because you enjoy it, not just because you want to own a firm. Then in the scheme of things, they're smaller and probably nominally profitable as that lifestyle business. Somebody on the outside would say, "Ah, I think I'll buy a storage place first."

Blair: It's a services business. It doesn't have the same cachet or economics as a SaaS business. You look at, say, accounting firms. They're typically sold in roll-ups where the partners get to near the end of their career. They think, "How am I going to get out of this thing?" They sell it to a roll-up. We'll talk about roll-ups in a few minutes. That's just a natural exit strategy. I think maybe marketing firms are closer to accounting firms in that front than they are SaaS businesses.

I'm already dragging us on too long into places that I didn't want to dwell. You talk about 10 options in the book when it comes to selling your firm or a transaction. I want to list all 10 quickly, and then there are three that I'd like you to dive into a little bit. Then if there are others where you want to explain a little bit more, I'll invite you to do that as well. Your first option is to merge with another firm. Second option is to take on a partner. Third is internal sale to a key employee. I think that one's pretty common. We'll talk about that one.

Fourth is something that seems to be really common these days, and that's sell to private equity. Fifth is a sale to a client. I've seen that a lot. Sixth is an acqui-hire, where you are essentially selling to somebody who wants your talent, you to come on board in their organization. Seven is an orderly dissolution. Maybe we should talk about that one too. Eight is a roll-up. Nine is an ESOP, or an employee stock ownership plan. 10 is an outside investor. You're okay starting with internal sale to a key employee, because it seems to me that is one of the-- Over the years, some of these are more in vogue than others at certain times, but this seems to be the common one. Is that correct?

David: Yes. Sometimes it's the first choice. I've worked with this person. They've been a fantastic employee, key employee. I want this firm to continue. This is what makes it that most likely to happen. Then other times it's the very last choice, because no outside buyer appeared in the process. It can happen for all sorts of reasons. Frankly, I love to see it happen. Many of these are successful. I don't have specific stat, but I would guess that most of them are successful.

What holds them back is a couple of things, and it could be one or a combination of these. Often it's the money side. If somebody had the money, would they buy this firm with it? Usually, if that's the choice, they go start their own. They don't have the money. Then they have to look for outside money from friends, family, whatever. The most common place now is the SBA 7A loan, which you can use. I think it's up to 5 million or something like that. It's fairly easy to qualify and so on.

If that doesn't work, then the owner has to what's called carry the note. They have to loan the money. They have a really strong vested interest in staying around, at least close enough to monitor how the firm is doing. It gets a little yucky. Those are some of the challenges of it. The problem on the principal side is that if you have multiple people, it's very difficult for you emotionally to make a choice and to select one of those because of the signal it sends to somebody else. You'll often and inappropriately just approach the team to buy you out. That's one of the challenges there. Another is just whether the person who you're in discussions with is actually entrepreneurial. Some people are working for you because they're not entrepreneurial and they never will be. Other people are working for you as a stepping stone to be an entrepreneur somewhere. Anyway, I'll stop talking, but that's a rough outline of that stuff.

Blair: It occurs to me that of these 10 different options you have when it comes to selling your firm, we could do podcast episodes on all 10. In fact, we have done some of these. We have done dedicated episodes to some of these. I'm grinning as you described the principal trying to combine a team of people whom they think it would make sense to participate in the purchase of the firm, and basically saddling these team members with each other. What happens in an ESOP as well.

I've seen that go wrong. We could dwell on this but we won't. You say sometimes it's the last resort, sometimes it's the first resort when it happens. It's a pretty satisfying thing to witness, I imagine, when there's a clear obvious key employee where everybody's rooting for that person to be the next owner of the firm. I'm sure you've seen a bunch of those and you feel the satisfaction of participating in that transition.

David: Absolutely, yes. Especially the ones that are really fun to do are the ones where you make the announcement to the team and nobody's surprised. It's like, "Yes, we figured. That's a natural leader. We've been listening and we've seen the transition happen informally and so on." If it can happen, that's fantastic. There are a lot of really good stories of that happening. One downside to it is that once you start that process with an employee instead of just hinting at it, you're going to get an answer. It's going to be yes or no. They're either going to buy you out or they're going to be gone, right?

Blair: Yes, it's over.

David: You have to be serious. There's no turning point here. You're moving forward.

Blair: Fourth on your list where I wanted to spend a couple of minutes as well as private equity, because it seems to me there's something in the air. It's maybe a slight exaggeration to say every week I'm talking to somebody who has sold their firm to private equity or is considering it. Is that an exaggeration? Are you seeing it as more commonly?

David: No, that's same thing.

Blair: What's going on? Why is that?

David: You wonder when these PE firms are going to wake up. [laughter] It can work really well.

Blair: I think they're actually making money. I think most of them know what they're doing, don't you?

David: In many cases they are making money. When we're managing this kind of a sale either on the buyer or the sell side, the PE firm is always on the sell side. You can expect a very different transaction. They're going to have professional managers and negotiators on the other side of the table They may bring four people, one CPA and three attorneys. You have to be prepared. You have to know how to navigate that. They ask very different questions, and they'll say, "Can we get a copy of your last quality of earnings report?" Somebody who's running an agency is like, "Sure." Then they go ask somebody what that is.

Blair: It's something you have to go pay another consultant to do.

David: Right, exactly. They also care a lot more about your growth pattern. They care more about your profit percentage. They'll care a lot more about not so much your new business plan but how many of your clients are on a recurring revenue arrangement. Then you have to realize that they're going to sell your firm someday. There's no PE firm in the world that has kept a firm forever. They are going to sell it, so there will be expectations you have to decide. I think it can be a fantastic option and sometimes it's not. It's just different than selling to an internal buyer.

Blair: More than any other buyer, as you point out in the book, they are really focused on growth. They're not buying net present cash flow. They're buying an expectation of future cash flow at a significant increase. They're looking your firm thinking, "Can we buy this, grow it in top line and bottom line and then sell it again?

David: They're looking at you like they want to see a small really well-tuned engine with all kinds of processes in a way to fill the new business pipeline. They're just going to put more gasoline on that fire. They don't know how you do what you do. They're just going to say, "Hey, talk to me about these financial results, and do you need more money?" All of their interaction with you is about money, which is gasoline on the fire.

Blair: Are you encountering more and more PE firms that specialize in this space?

David: Yes.

Blair: I'm seeing them. I can't keep track of them, but I hear a small number of names that come up over and over again.

David: There's at least 10, probably closer to 15. They might focus on tech. MarTech. I know there's one on higher ed, for instance. Our friend Hamid Ghanadan, what's the space he's in?

Blair: Biotech.

David: Yes, there's ones on biotech and so on. Yes, for sure.

Blair: Of your 10 options here when selling, the other one I wanted to speak to just a little bit was roll-up. It seems to me, over the years, you see roll-ups come and go. They're in vogue or they're not in vogue. The difference that I see today, and you didn't really speak to this in the book, but I was hoping maybe we could speak to it, that's what PE is doing. I think the difference is PE is backing these roll-ups where it used to be a really entrepreneurial agency principle typically would start buying other agencies. Is that the difference?

David: With the PE firm, the exit is almost always going to be selling it to another firm or to go on publicly traded markets. That's not always the case with a roll-up. A roll-up might very well be doing one of those same things that PE firm is. In other cases, they just want to be the next holding company, so to speak. There's a couple of those growing that way. In other cases, they want to sell to somebody that wouldn't buy all these little firms and wouldn't pay exorbitantly for all of this together, but it's going to be a pretty decent profit. A roll-up basically spends very little money of their own. That's why it's bad for the seller in most cases because they're assuming that they get your balance sheet, which they're going to use to fund the next purchase and so on. There's a lot of overlap, and there are PE-backed roll-ups, but there are differences too.

Blair: Got you. Let's speak now to the listener who is considering selling their firm. They're trying on this idea. They're thinking about reaching out to you. Beyond profit, what are some of the less obvious things that buyers care about? I'm thinking maybe some of the things that might surprise the seller. It's not just profit that's being purchased. We've probably touched on a couple of these in other episodes, but can you hit the highlights here? What's a buyer looking for beyond just the obvious of profit and profit trend?

David: Half a dozen things come to mind, but the first one is just so glaringly different from the rest because it always happens and it's almost always a surprise. It's always a surprise in one direction or the other. What I mean is it's almost always a bad surprise. It's normalizing principal comp. If you have been achieving-- Let's just say you want to achieve a 20% EBITDA every year and you've been hitting it, but you've been doing that in part by underpaying yourself. The buyer, they're going to adjust all that or normalize it. That's probably the first thing I would say is the fact that you're not doing yourself any favor by underpaying yourself.

Blair: You think you've got a business that has an EBITDA of 20% and you're quite proud of it. Others look at the numbers and say, "You only paid yourself a salary of $50,000 when maybe it should have been $350,000." You're artificially inflating your EBITDA by decreasing your salary. Is that what you're speaking about?

David: Yes. In some cases, the owner, the principal of this firm is so unsophisticated financially that all along they've been assuming that their profit at the end of the year is their salary. The problem is you can't count it twice. It's either EBITDA or it's comp. That's a surprise. Other things that come up that maybe people, if they thought about carefully, they might've anticipated, but it still comes out of the blue for them is how the seller's really nervous about client concentration. Sometimes the buyer is, but sometimes they just say, "Oh, don't worry about it. We'll build that into the terms and not the price." That's a pleasant surprise for people to hear.

I think everybody expects that a multiple of EBITDA at your firm is where it's going to start, but they might be surprised that the buyer doesn't even pay attention to it if they're not buying it for financial reasons. They might be buying it for capacity or for a geographic presence or for a recruiting hub or something like that. Those are some of the surprises. I'll give you one other one. Sellers think that buyers are going to care a lot about that second level team. I think it surprises them most of the time that there's fewer and fewer questions about them. They just assume that you've made a good choice there. They know you're going to be, in almost every case, there for an early portion of the earn out. They figure, "If there's a problem, she'll take care of it." That's something that surprises them too.

Blair: That surprises me hearing that because I assumed that having that second layer of management team in place was important to buyers. You're saying it's not as important as either it used to be or as the sellers think it might be.

David: If the principal is leaving right after the transaction closes, then they care a whole lot about that and they'll have special arrangements for them. Otherwise, they'll want to meet them. They'll ask questions. They'll look at whether there's an employment agreement, what non-compete there might be that's enforceable and so on. No, they're just like, "Hey, we trust you. You've achieved this with them. Why would things be different?"

They also are usually experienced in doing previous transactions. If they are, they know that very seldom do employees leave at that transaction boundary. They'll almost always give the purchase firm nine months, a year, year-and-a-half, because to them, it may be better benefits and a salary bump. Mainly, it's now there are more rungs on the career ladder for them. Unless the purchasing firm really messes things up, then these people are going to stay. Plus, if the principal is staying, this team trusts that the principal will protect their interests along the way.

Blair: Let me jump ahead a little bit and just pull in this thread a little bit more. Talk about cash on closing and earnouts, because you're referencing the principal staying. I know of some examples where principals just sold at a discount so they could walk away early. That's not typical in this space, I don't believe, is it?

David: No, it's not. We've done the range of cash at closing as a percentage of the purchase price. That would range from 0 to 100 when I look across all of the deals that we've done. Typically, you just assume that the cash at closing is going to be somewhere between one-half and two-thirds, maybe, depending on the deal. Every once in a while, it's more. Other times, it's less. You really have to balance the price with the terms. People focus too much on price. They should be thinking more about terms.

You can sign whatever you want. Now, you can leave at any point. Your employment agreement will end, and the terms of the earn out might mean you get a whole lot less money, but you can always leave if you need to. More or maybe equally as important is how long the earn out is. If it's just a year, you probably can endure something more than you could if it was-- None of them are more than three years anymore. They used to be five years, but now they're all three years or less.

Blair: I saw a five-year deal at the beginning of COVID. I was talking to the principal who sold, and I just went, "Oh my God, you poor thing." She said, "No, no, I'm actually quite happy to stick around for five years." The numbers were massive, so-

David: Oh, yes, right. A little different.

David: -I understood why she was happy to stick around. I know it's a big topic and we don't have a lot of time, but do you want to just go over the broad strokes of how a firm is valued? We know it's a multiple of EBITDA, but it's more about the non-obvious things that might not occur to a first-time seller. Go ahead and speak to the multiple as well, but then maybe to some of the other key things that a seller might not have thought about.

Blair: Here, you could answer the question by saying, "This is how a valuation is normally done in a normal transaction." If that's the case, then you're going to answer a very specific way. You would say, "It's probably always going to start with some multiple of EBITDA." EBITDA has to be adjusted for all those four things, earnings before interest, taxes, depreciation, amortization. Then you have some add-backs that you might argue for and so on. Then the other elements that are built in would include normalizing your compensation, how to weight previous years, how to think about your client concentration risks and so on.

There is some judgment in there, but most of it is very scientific. That's how you would start with a traditional valuation. Like I said, there are many valuations that aren't traditional at all. That doesn't mean they won't use your poor financial performance against you, even if that's not the reason they're buying your firm. Some people, really, they just need talent on a team that has built the culture and knows how to work together. They don't even care if you bring clients to the table. In other cases, they really want to add an entire service offering to their portfolio, and they assume you're going to lose your other clients. They have to think about how that would impact evaluation and so on. You're always going to start with some multiple of EBITDA, but it's not as simple as just that. That's just where you start.

Blair: You've got a really interesting, to me, chapter on contesting the valuation. It's really a bit of a detailed negotiating playbook. It's probably too deep to get into here. In fact, we could probably do a whole episode on that if you want to do that in the future.

David: That might be interesting to do, yes. I don't remember for sure, but I think I apologized at the beginning of that chapter, because basically, this is how you screw the person who bought you and is not living up to their word. It's also because we design these, if we're working for the buyer, or we'll negotiate them if we're working for the seller. You know exactly what you would do.

It's like, "Ah, I've worked at that bank a long time. I know exactly how I would rob it at this point." [laughter] That's what that chapter is about. It's just all the ways that you can maximize your opportunities if the working relationship has faltered. If it hasn't, then you ought to stick with the spirit of the agreement and not use any of those loopholes. There are loopholes and there are ways to use them.

Blair: You talk-- I'm looking for the chapter now, it's escaping me, but there's a part where you talk about the letter of intent, and you basically say there's two different types of buyers where one will invest a lot of time ahead of the letter of intent, and one will invest a lot of time after the letter of intent. They issue letters of intent or LOIs pretty readily. This had never occurred to me before, but as you were describing it, I was thinking, "Oh yes, I've seen both of these."

David: How about requests for proposals too, right?

Blair: Yes, it's really the same thing, isn't it? The client who's just like, "Let's send an RFP to 12 firms. Let's issue an LOI to four or five different firms. We don't really have a strong preference for either. Let's just shake it out. Let's drag out the negotiation, the due diligence and negotiation process." That's beyond saying it's quite similar to the RFP behaviors that some buyers demonstrate when issuing RFPs. What else would you care to say about it?

David: If you have a serious, respectful buyer, they're also careful about how they make acquisitions. They're going to do a lot of thinking and asking questions before they send you an LOI. They also will probably not give you busy work because of their experience and because of their level of respect for you. When you get an LOI at that stage from that sort of a potential buyer, all they're doing after you sign it is just verifying the assumptions. They're not looking to change any of the terms. They're just like, "Verify these and make sure we're okay." That due diligence period is shorter too. It might be six or eight weeks instead of four to five months.

The other buyer is the one that they don't really have a strategy. They're hoping to see who will send signals of urgency or desperation. There's no cost to them, just like that client you were talking about that said, "Hey, let's send an RFP request to 12 firms." There's no skin off their teeth, just a little bit more to read. Everybody else is the one jumping around. They do this, and often you can spot these because they don't spend a lot of time getting to know you, and you're surprised that you got an LOI after that. It's like, "Wow, that's really flattering," when it isn't necessarily the case.

The other way to see them is that they will send you a list of materials to send that they just copied off of Google somewhere. It's like, "Please send your such and such." Like, "How frequently do you oil the tractors or something?" Those are the firms where they'll see how desperate you are. You'll have to do all this work to clarify their expectations. You'll send this stuff to them, and meanwhile, they're having to sort through four of these instead of one.

They get in and they say, "Oh, we didn't realize such and such." That's one of the most basic facts about your firm's performance. Then they want to change the terms, and then you've waited all this time and done all this work and you feel a little bit trapped. There's ways to see these signals all over the place. This is just one example of how professional, how serious it is, what the culture is going to be like too, because that's really-- How do you say it? The sale is a sample. The dating here is the marriage. How you're treated here, it should send you a pretty reliable signal about what life will be like a bit later.

Blair: It blows me away that Warren Buffett can issue a letter of intent on a multi-billion dollar business and close in 30 days. That's his commitment. We will close within 30 days. Then somebody buying an ad agency for $5 million will take the better part of a year to do due diligence.

David: Exactly.

Blair: You can hear it in my voice. I get riled up. I haven't been through these. Personally, I've never sold a business, but on behalf of my clients, when they're in this position, they've signed the LOI and they're just-- I see it as an ongoing negotiation in which you have no power. They just keep coming back and back and stalling and stalling and asking for more information and driving your sunk costs deeper and deeper to the point where you just want to be done with this, and you will cave. When they come back and inevitably say, "Yes, it turns out for all these reasons, your business isn't worth what we thought it would be."

David: The market has changed.

Blair: All these things. That drives me crazy. There's got to go be a way around that. Do you have any advice for people on handling the due diligence period and the negotiation other than not wanting it so bad?

David: The life-saving thing you could do is buy this book. That seems so obvious.

Blair: [laughs]

David: It seems so obvious. I feel very strongly, and every one of our clients gets this advice. The biggest danger is taking your eye off the ball and letting things-- the reasons you might be considering selling, letting things slide even further so that you're more desperate. You want to run your firm during this process as if you're not going to sell it because you have to be able to walk away from it. If it makes you mad enough, you may walk away and hurt yourself in the process. I'm a big believer in that sometimes too. It's absolutely, don't take your eye off the ball. Just assume it's not going to happen. Keep making the big choices you would have made before the courageous ones, and that way you'll have the power to walk away.

Blair: Negotiating, they refer to it as your best alternative to a negotiated agreement. Your point here is your best alternative to a negotiated agreement is to continue to run a profitable business. I think that's what you mean by 'don't take your eye off the ball.' In your chapter 23, D-Day, It's Time for a Decision, you list three things that drive people forward to maybe make a decision that isn't in their best interest. I'm just going to read them out here because I thought they were bang on.

The first one is you've encouraged sunk costs, time and money, but the distraction is actually more impactful than the money. That just gets me when I try this on, the distraction of always, is this thing going to close? Is this thing going to close? The second one I hadn't thought about, you've told some people about this already and you'd be embarrassed if you had to reverse course. That had never occurred to me, but as soon as I read it, I thought, "Oh yes, I can see how that--" I would do that. I would get all excited and confide in people, and then be like, "Oh, now I've got to go back and say, 'Yes, it didn't work out.'" Because they've already started to plan in their heads to spend your money. [laughs]

David: Right, yes.

Blair: Then the third one is you've allowed yourself to dream about that next stage in a way you've never done before and you can't bear the thought of abandoning that dream. That's sunk costs of emotional sunk costs. You've already mentally moved on. That's what you mean by 'don't take your eye off the ball.'

David: Yes. If for some reason that deal falls through, that person is a walking dead person after that until they find another buyer. I know you know John Warrillow and you've read Built to Sell as well. He really had a huge impact on my M&A career, because I saw so clearly what he was believing that you need to build your firm to sell it, and then adding the idea that if you don't sell it, you'll love running it so much more. It's one of those very rare times when you can have your cake and eat it too, essentially.

Blair: The better job you do of getting your firm in shape to sell where it becomes desirable to a buyer or multiple buyers, the more valuable that business is to you and the less you would want to sell it or the more money you would want for it. Therefore, you have this greater alternative, "If nobody buys it, it's still a profitable business, and if I've done this right, I'm not a slave to it." Would you ever sell Punctuation?

David: Ha, I've had nibbles. Went nearly to the altar with a 30% owner who's still a great friend. It was a really wonderful process that I learned a lot in. Yes, I would. If it was enough money for me and Jonathan, he and I do this together, and if it led to a role of me speaking, writing, and sales, then yes, but we're pretty darn happy and make a lot of money doing what we love here. The answer is yes. Is that an offer?

Blair: I'll have ChatGPT write up an offer, and then I will drag out the negotiating process for over a year.

David: Right, and send it to eight other people too.

[laughter]

Blair: Last question, you and I know lots of principals of these firms who have sold, and you can put them into two camps, never been happier, best thing they ever did, and also the other camp of, "Oh, he lost his identity and his sense of purpose, and he died six months later." Recognizing you have a bias here, you help people sell their firms. What's your observation? Generally, if you make a generalization, are these principals who sell, are they appreciative, grateful? Do they look back on their decision that it was the right one? How often do you see the pattern of, "Oh, I should have kept it?" That's Dan Sullivan's advice.

David: Really?

Blair: Founder of Strategic Coaches. You sell your business, then what are you going to do? You're going to start another one. Just fix the one you've got.

David: I think that, to answer your question specifically, that principal who sells very seldom regrets selling. In fact, once that idea is in your head, I don't know what percentage, maybe a fourth of people actually fix the problem that was underlying that hatred of your business, and then they go on and love it and just give themselves a dope slap that they ever thought about selling it. That happens sometimes.

For a lot of the people, once you have that idea of selling, you're going to sell. I don't think people regret selling. I think they regret selling to the wrong firm, the wrong buyer, and with the wrong terms. Maybe half the time, I would guess, they sold to the wrong buyer. For all of them, their worries about the team are displaced, and they wish they'd been a little bit more selfish. They don't come right out and say it, but if you get them talking after a few beers, I'll bet you they would say that. I have had many people actually tell me that.

Blair: Meaning they felt, in hindsight, they were too generous to their team in participating in a sale?

David: Yes, exactly. Then just thinking about the earn-out experience, roughly, I would say a third of the sellers really loved it. It was great. A third of them thought, "This is what I expected. It's okay. I like these people. I'll be fine quitting, but I like coming to work every day." That middle stuff. Then a third have renamed the earn-out to a sentence. They're like, "Ah, I got to go get out of here." They knew. It wasn't usually a surprise, but they didn't know it was quite that bad. They just hate every minute of it, and they cannot wait to get out. Frequently, they'll leave early.

Blair: I think that's about the pattern I see right across the spectrum. Interesting. There was a time when the obvious buyer was a network agency, especially when the agencies we were dealing with were more pure ad agencies before they became more specialized and more niched. There was a time when most of the principles of these ad agencies who'd sold to network agencies that I talked to stated their regret about selling. That time seems to be behind us. I think more frequently now, I talk to founders who have sold their agencies or their marketing businesses, whatever we call them now, and are happy and thrilled and have moved on to the next thing.

David: It really has a lot to do with the cycle that we find ourselves in. Having been in this space for 30 years now, I've been able to see some of those. Whatever cycle we're in carries with it certain expectations about sales, price, and about terms, and about how long you're going to stay, and why even it's being done. If you think back in the early days, the geographic moat was just destroyed. National businesses at the same time needed agencies that were more national. The M&A activity was being driven by finding representation in these cities. Then after that, it was the heyday of inflated stock from the holding companies. I know it's hard for people to picture that, but that was happening at one point.

They had all this stock. The purchases were made with stock and not with real money. Then you had Dentsu after that. Japan that had 90% of its revenue in that country alone, and they realized, this is, especially given Japan's financial growth stall and so on, it was just getting difficult for them. Then you had firms that-- More the consulting firms. Now, this is where people will start remembering, that needed creative, they needed data, they needed digital chops. They couldn't get any of that. You had the whole S4 thing when Sir What's-His-Name was banished.

Blair: Martin Sorrell.

David: Yes. He had to start another competing one, and that drove a bunch of prices high for a moment. Then you had COVID when agencies needed to smooth out their performance because of dips in certain areas. That drove a lot of stuff. Then right now we have lots more buyers than we have sellers who are willing to sell for the price they're being offered. There's lots of sellers, more sellers than ever, but they're more just like, "I'm tired of this business right now." Wherever you find yourself in this cycle, it's just interesting. It's better to see the arc of history over this stuff too so that you know what to expect.

Blair: That's a great history of M&A activity in this space. Nice summary. Thanks for that. This really is a good book. Even though the title Selling Your Professional Service Firm: A Primer is an accurate description of what it's all about, I would encourage the broader listener who is interested in getting better at running their business and who isn't currently thinking about selling. I think it's a great manual for optimizing your business today and optimizing it for profitability and enjoyment. I think it's got a broader audience than just the obvious one. I suspect it will sell very well like all of your previous books. I wish you the best of luck. Thanks for the conversation on the book, David.

David: Thank you, Blair.

Blair interviews David on his recent article about the idea that expertise does involve supplying answers, eventually, but mainly expertise is about asking the right questions, first, and then offering a few answers after the truth surfaces.

Links

“Expertise Is Mainly About Asking Great Questions” by David C. Baker on Punctuation.com

Transcript

Blair Enns: David, our topic today is a recent blog post of yours expertise is mainly about asking great questions. Just speaking for myself personally, but are you like me on this topic where you've gone from many years of seeing myself as the person with the answers and realizing, oh, I need to be the person with the questions?

David Baker: Yes. Everybody keeps telling me, "David, your answers kind of suck. Take a step back and work on your questions." Maybe that's what's happening. [laughs] I was taking a walk earlier today. I thought, well, how did I get to this topic? What is it that prompted me just to think about this a little bit more? It honestly comes from something that's pretty unique to our industry in the sense that the industry is started by people who are good at doing the work. They also are pretty good at entrepreneurship. They're pretty good at running firms.

Those two things sort of come together. If they don't get separated, then they have to hire other people. Those other people don't sometimes measure up to what they think their ability is as the owner. They have other people between the firm and the client. Those people need to represent the firm well. Then if you go even further and the firm gets professionalized, then, oh, let's have professional account managers. Okay. How smart do those account managers need to be? Do they need to be just as smart as our dev people or our strategists? If they do, then why do we have separate ones? Why don't we just have the people who are really good at the skill side be the account managers, too?

How can we have great account managers who don't have the answers? That's what really drove me to this. It finally hit me. It's like, no, no, no, no. Account people don't need to have all the answers. They need to have all the questions. Then you can work that problem backwards and realize "experts" whatever that means, they don't need to have all the answers, at least not right away. They need to have a lot more questions and then maybe the answers towards the end. We go straight into the answers when we should be having more questions. You talk about this in a sales context as well.

Blair: Do you think there's something about this industry where we talk more than we should listen? I know we do, and I know that's pervasive across the creative professions, but do you think it's more pervasive here than it is in other areas of expertise? I'll give you an example. On the weekend, I was listening to some old episodes of 20% - The Marketing Procurement Podcast, that other podcast I did for a year. I was listening to an interview with Caroline Johnson from the Business Model Company. She'd worked in agency and she'd worked in one of the big consulting firms.

She made an offhand comment that consultants are very good at asking questions and agency people are always showing up with the answers. They're trying to prove themselves. Would you agree with that? What do you think the cause of that is?

David: I absolutely agree with it, and I am dead sure I'm right, but I might not be. It's because of our inferiority complex. We come in, we don't have a seat at the table. We're already feeling like we're going to have to really do extra to prove ourselves, and so we just start foaming at the mouth, giving them all kinds of reasons to hire us because we're so smart instead of just luxuriating in what we really know and sitting back and relaxing and just asking really smart questions. I think her observation is correct, and I think it's because we are just insecure.

Blair: Do you think it's probably one of the reasons why the pitch is so pervasive in the creative professions? Because it's about us. We get to talk about ourselves.

David: Yes, and it's also not just the pitch itself, but if you back up a step, it's why we even agree to do it. It's like, okay, we're already a few steps behind here. There's already a few things against us. This party who has more power than we do wants us to pitch. It's like, I guess we have to. Some of that is just how we come to this field, this inferiority complex, but some of it is our own damn fault too because we view every opportunity as so precious that cannot be wasted that we just grasp it so carefully and don't let go until it's clearly dead because we just don't have enough of those opportunities. We don't have a tight positioning, or maybe we do, and we don't have a good marketing plan. I know I sound like I'm ranting a little bit, but some of it we deserve, some of it we don't.

Blair: As an advisor serving this space, I'm prone to this too. I've made the comment many times that I did off the top that I've had to go from seeing myself as the person with the answers to seeing myself as the person with the questions.  Years ago, I was a member of the Canadian Association of Management Consultants for one year and they sent me the introductory material, and there's a little booklet. The booklet makes this claim I'd never heard before. That says there's really two forms of expertise. There's subject matter expertise and there's process expertise. I scoffed. I thought, yes, I know people who are facilitators. I really looked down my nose at somebody who had process expertise, who knew how to facilitate a conversation, because I really believed that being a consultant was all about having the answers, about being smarter in the subject area, certainly more removed than your clients. Man, it takes some humility and some maturity. Maturity is a hard one, but humility is maybe something I've struggled with over the years.

David: [laughs] You left something unanswered just for a year. Did they kick you out or were the dues too much? Why were you just in there for one year?

Blair: If I'm fully honest, it helped me with my visa application, with my US visa.

[laughter]

David: I've never really thought about whether there's subject matter expertise or process expertise, but I do think you eventually have to come up with the answers. No, let me restate that. You don't have to come up with the answers. The client needs the answers. They don't have to come from you. They might come from them. They might come from other people on your team. They might come from additional research that you might do, or they might come from you, right? Eventually, there has to be some answers from somewhere, but that's at the very end of the process.

Here's another example. I was teaching motorcycle racing and high-performance riding for a while with a supervised school. They didn't care how good a rider you were. You couldn't be turned loose to work with their students on the track until you mastered their way of teaching. They were so insistent that as the instructor, it didn't matter how much better a rider you were, you could never tell somebody what to do. They would follow you around the track. You would try to illustrate something. Then they would go in front of you, and then you would watch how well they picked it up, and so on.

In the end, when you were debriefing over in the paddock, you could not tell them anything. The only thing you could do is ask them questions. You would say, "Did you notice anything in turn three at the apex? What did you notice there?" Oh, okay. What would make you not go so wide at that point?" They would give you two or three things. You'd say, "Okay, why do you think--" and it was like you could never tell them the answer. I was so frustrated with that when they were teaching me how to teach.

Later, I realized, oh my goodness, this really drags someone along so that they feel they are involved in the process. They come up with the answers on their own because of the questions you've given them rather than giving them the answer. I just thought it was brilliant.

Blair: That's hard-earned. A lot of studies show that learning sticks far better than somebody just giving you the answer. I'm all for it. You make the point here in this article, "Expertise is mainly about learning and teaching through questions." I really like this idea. Let's drill down on it. When I launched Win Without Pitching in 2002, I actually had this idea that I had a couple of years of learning ahead of me. Then I would know everything I needed to know, and I would just be a teacher. Then fairly soon into it, you realize, oh, that's not how it works. It's how it works is really about this point in your article. Do you want to unpack that a little bit?

David: Yes. I think we have this weird idea that experts have all the answers. That sounds pretty good on the surface. Just academically, that sounds pretty good. Oh, they have all the answers. It's like, wait a second. If they have all the answers, then are they really just applying the same things to every situation? Isn't every situation really different? How do you reconcile those two things, somebody that is going to bring all the answers to a specific scenario but is going to do it uniquely so that you aren't just sort of selling a book or a manual or something that doesn't change from time to time, and presto, people leave with all the answers and their situation is so much better?

It's like that doesn't make sense either. I think the way to just picture this in your head is that experts have all kinds of tools, and over time, slowly, they save up money and they buy another tool, and this is really cool. You don't start out with lots of tools. You start out with just a few. Each of these tools are questions, different kinds of questions. When an expert is called on to solve a particular situation, they don't usually have to bring a new tool that they don't have already. They're using different tools in different combinations in a different order each time they come to solve a problem, and it's driven by curiosity. It's like, okay, I've seen all these things before.

Every client brings their own  unique form of dysfunction. You wouldn't necessarily come out and say that. It's my job to figure out what's unique about this situation so that I can solve the problem correctly. The solving the problem correctly part, it's very compressed, it's towards the end. Everything up to that point is just asking the right questions in the right order. Every once in a while you find that, oh goodness, that's new, I haven't seen that before. That prompts you to go out and learn a lot more about it and then be open to adjusting your model, adjusting assumptions you've brought to a particular thing. It's just a different way of thinking and it's driven by curiosity and not having all the answers. It's having a high level of confidence that you're bringing some assumptions to the table and we will solve this, but it's too early to take a stab at it. Let's just figure out some things first.

Blair: I really like the metaphor of questions being the tools in your toolbox. We use that too. We have different frameworks for each conversation in the sale. We talk about the frameworks being the toolbox itself with multiple shelves. Then the questions are the tools. A skilled mechanic in this metaphor or advisor would ask some questions and then reach for the right tool. There are tools beyond questions. There are frameworks and there are other processes you would bring to bear, but it starts with these largely diagnostic questions. I've seen the flip side of that where we've helped our clients build a suite of diagnostic tools.

Then what usually happens first is they fall in love with their tools and they hurriedly use all the tools in all their engagements. It's like going to the doctor who's got a new fMRI machine and you don't need an fMRI, but he gives you one anyway because he's got this new tool that he's in love with and he thinks it's the bee's knee. I have seen the flip side of that. I do love the metaphor, questions are tools in the toolbox. You make the point that great questions equal better outcomes. Do you want to speak to that or is that the writing discussion?

David: I'll just illustrate it by reading a few questions and you could see how you could turn each of these around into a statement, but instead you're inviting somebody to pause to look a little bit deeper at what they're facing and to see if we can get at some root issues. You might say something like, why is this upcoming conversation difficult for you? What are the possible reactions you might face and how do those fit into the bigger picture? Somebody might come to you in a consulting or a marketing relationship and say, how do I handle this? What's the best way to do this? Instead of answering the question, you ask more questions like, why is this difficult? What are you afraid of?

The transcript of the call you just had with that big client captures what was said. I wasn't there, but I wonder if there's something we can infer from what she didn't say when she answered that question you asked. Is there something else going on there? It's this really interesting dance in holding two things at the same time. One is a tentative conclusion in your mind that you probably haven't shared with a client yet, but this driving curiosity to make sure it's correct. You keep asking questions, and in asking those questions, you are sort of giving them clues to where the answer is going to be and what it's going to look like.

I feel like this is just one really, really interesting idea, the idea of questions. I don't know how to talk about it too much, but it just makes so much sense when you start reorienting your advice-giving in client relationships this way.

Blair: There's some really good books and maybe I'm jumping ahead a bit on asking questions. One is called The Answer is a Question. I forget his last name is Dominic somebody, I have it upstairs. Another is called the Coaching Question and I'm also thinking of Robert Cialdini's book, 75 Cage Rattling Questions.

David: Oh, wow, yes, that sounds interesting.

Blair: I need lots of books on questions because of my old calcified habit of having the answers. You've mentioned curiosity and you make the point in this post that questions keep curiosity alive. You mean keeps the curiosity in you, the expert advisor, is that what you mean?

David: Yes. I also mean that I want to be epistemologically humble in the sense that-- this is a restatement of basically holding those two things in tension all the time. I want to have a tentative conclusion. There's only five or six things I want to utter that I'll never change my view on. The rest of them, it's like, nah, I'm open, just talk to me. What am I missing here? It's sort of a constant curiosity, but you can't have 100% curiosity because then nobody gets anything from working with you as a firm. There has to be some basic principles.

Blair: Yes. You're trapped in a riddle somewhere. It's this recursive thing where, okay,  how many questions before we get to the answer?

David: Yes. At some point, it looks like you're just stalling for time. There is some element of stalling for time. If you ask more questions rather than just blurting out the answer, you're going to give the client some clear signals. One is, hey, I'm listening to you. Because this question that I'm going to ask next, it follows on your answer, so I'm listening to you. That's one thing it does. The other thing it does is it just gives you more time to formulate, oh, I wonder what needs to be said here. At the end, don't make something up. If you're not sure, then say, listen, I need to think about this more. I want to go back over everything we've talked about, everything you've sent, what we know about your firm.

Let me give this some more thought. I have an initial idea, but there are enough questions about this, so I'm just not ready to talk about it yet. I just think there's really no downside. I guess the downside is in never having answers. This frustrated me one time. This is maybe why I've worked through three therapists.

Blair: I was thinking, are you going to bring up therapy as an example? Because I have very little experience with it. You're an old pro.

David: [laughs] Yes. It's like, stop with the questions already. At least give me some answer.

Blair: Do you feel crazy?

David: Yes. [laughs ]Oh, it's got crazy. Anyways, there is some balance here. What I'm hoping to sway people at is, okay, you could stand to give people answers a little bit later. You could stand to be more curious. I'm talking about this in a business setting, but my God, some of you would be so much better at being friends if you would just quit talking so much and just listen a little bit. That would be a great thing too. I'm talking in a business context here.

Blair: Yes. I think the more expert we are in our domains or feel we are, probably the more prone we are to asserting too much and not questioning enough. I'm really struck by your statement that you think there are really only five things that you'd feel confident enough to assert in almost any situation, whether the number is 5 or 15 or whatever it is. That's a really interesting idea. What is it that you know to be universally true that would not change from situation to situation? You could say point blank, carte blanche to the client, this is a problem, or something to that extent. The rest of which their ideas more loosely held their hypotheses in the moment where you would be better served posing questions around that.

David: Yes. Right. Especially when you approach something from a research mind and you try to be a scientist in a business setting. That's my goal. I don't have any training or much training there. My goal is, okay, this hypothesis is always subject to-- We're not afraid of data. We're not afraid of information. Let's look for the truth here, wherever it takes us. Neither one of us need to be afraid of that. I was thinking about this the other day. There's some people that I've never had any interaction with. What I would give to have a dinner with this person?

It's like somebody that I've really admired, a writer or something. If finally this happens, I'm telling everybody how excited I am about this, and we sit down, and they express a genuine interest in me and they ask me some questions to see if what I say fits their model of the world. I will never forget that meeting versus somebody who just sort of spills all the same stuff. I already know they know because I've read all their stuff. It's just such a difference in terms of how the world works and how the world when you approach it with questions rather than answers.

Blair: Yes. I'm thinking of some conversations as you speak about that. You sit down next to somebody at dinner on an airplane and they're transmitting information to you about how much they know. The conversation you have with somebody who's like-- let's say that they're smarter than you, they're more accomplished than you, but they're deeply interested in something that you have and you know, and they just start with the questions and they pull and they pull and they pull. My brother-in-law is a bit like this. He is a sponge. He meets somebody new. It's like, "This person has something. I want to know what they know." He just keeps pulling and pulling and asking and asking and learning and learning. It is an impressive trait. I think people like that make naturally good advisors because it's in their nature to learn what they teach.

David: Your brother-in-law is the kind of person who would look across a group of people, and he would assume that almost every one of those people could be an interesting conversationalist. "If they will allow me to ask them some questions, genuine questions, I can pull." I try to do that if I have an Uber ride or something and I'm not like lost in myself and I really want to have a conversation with a human, which is rare, but--

Blair: 1 in 10.

David: 1 in 10, and just like, okay, we've got 20 minutes here. Let me figure out  how interesting this person is. The only way you can discover how interesting a person is, is by asking them questions. Question number three needs to indicate that you were listening to their answer after you asked question number two. It's like, oh, this expanded my body of knowledge. I learned something. That's what I mean by expanding my body of knowledge. I also learned so much about this person, so that if this person asked me a question, let's say at the end of the ride, they said, "Hey, let me ask you a question." I'm going to be able to give them a much better answer because I've spent the first 20 minutes learning about them. I just love this whole thing. It probably has nothing to do with what people are listening to 2 Bobs for, but I just wanted to talk about it. [laughs]

Blair: Yes. I like the subject too. I'm reminded since we're a little bit off-topic. My dad was telling me a couple of weeks ago that when he meets somebody new, he comments on their name and he says, "Do you like your name? Hi, David. Nice to meet you. Do you like your name?" They're taken aback by the question. They say yes or no. Then his follow-up question, and I might be getting the order wrong, is, "Who are you named after?" I've since found myself asking that second question to a few people. When I hear a unique name, I ask who you're named after. Then the conversations that flow from that are fascinating and they often go in very different places.

It just goes to show that curiosity is one of the major tools or set of tools that just like a macro tool. Curiosity and the specific tool is all these different sets of questions just makes you so much better at what you do. I don't think it's in your post here, but do you have any advice to the audience on where they're taught, or it's modeled for them that no, no, no, no, we're the person at the front of the room. We're the one with the deck pointing to the slide. We're on display. All the wisdom is emanating from us. How do you overcome that? I guess I'm asking to help myself. How do you get past that? Because I've been working on this and not very well, but I've been working on this for years. How do you get past that?

David: Yes. The post which you can find on the site has I think eight or nine recommendations. I love every one of these recommendations are so good, like the coaching habit. One of my favorites is the 36 questions that lead to love. That is a very specific prescribed way for-- before you date somebody is like if you get through these 36 questions, if you decide to build a permanent relationship, you have done it on the right foundation. If you aren't meant to do it, these questions will surface that ahead of time. It's really interesting to read these things.

To me, the answer to the question is simply the people that you're around regularly that make you feel heard. How do they do it? How do they do it? Then take that and translate it into sales. This is one of the things that I'm drawn to your model about sales is you talk about it as a conversation. What is the conversation? It's a lot of questions. It's a few tentative opinions. I think the same thing ought to be true when you're delivering expertise to which after you get through the sales process. I think just assume that business is really a representation of personal life. Listen to the people who make you feel seen and heard and take that over into your business world. I think it just automatically improves. It just does.

Blair: That's a great wrap-up. I think maybe a good way to try it out in the next business conversation you're having with a client or a prospect, see if you can get through the whole conversation without making an assertion. If you end up driving the person crazy and losing the deal, don't blame me, this was David's idea.

[laughter]

Blair: Thanks for this, David.

David: Thanks, Blair.

Blair shares how to determine whether or not we are the advantaged player the “polite battle for control” within the game of sales, and how we can get the odds of winning the sale to be more in our favor.

Links

“Assume an Advantaged Player” article by Blair Enns on WinWithoutPitching.com

Transcript

David C. Baker: All right, Blair, today we are going to pull a concept out of your forthcoming book, The Four Conversations. This one, you've used sort of some insider coded language, Assume An Advantaged Player.

Blair Enns: There is some distinct energy missing from your voice, as you mentioned, my forthcoming amazing book.

David: Well, I'm interviewing you. [laughs]

Blair: I expected a lot more excitement.

David: I could go into my sing-songy voice. Actually, I really do love the book. We've talked about this concept before, but not really in this much depth. I really like the concept a lot. It's one of those things like, "Aargh, I don't even need to see any research." This just passes the smell test. Assume An Advantaged Player. Define what advantaged player is first, other than soccer terms, please.

Blair: An advantaged player is this idea that somebody has the advantaged. You go into any competitive sale, you should assume there is an advantaged player, a player with the advantaged. That means they might have inside information from somebody on the client side. They have an advocate working for them on the inside, working on their behalf. In some ways, they are already the favored candidate.

Maybe they've been told outright they're the favorite candidate. In the most extreme examples, the advantaged player, the fix is already in. It's basically, there's an understanding, an agreement in principle that, listen, we're going to use you. We just have to go through the motions. That's what I mean by an advantaged player. If it's not you, it's somebody else.

David: If you are not the advantaged player and you're in that conversation, but you're in a conversation with, say, let's say it's not a client either. It's a new contact. You're just one of the few or multiple people that were invited to submit for this. What questions would you ask if you're trying to figure out who the advantaged player is? A little role-playing thing in a way. What are those questions? How do you do it without offending them?

Blair: Three normal qualifying questions. The questions that you ask to determine whether or not there's a fit suitable enough to proceed. There are different frameworks for this. We use a version of BANT, which stands for Budget Authority Need Timeframe. Under the banner of authority is the idea of, are you the decision-maker? Who are the other decision-makers? What is the decision-making process? Under the banner of decision-making process, there's this question of, are you talking to other firms in addition to us or just us?

There are different ways to ask that question. It's one of the questions that you want to have multiple ways of broaching the topic. You do want to determine whether or not it's a competitive sale. When you hear, "Yes, we're talking to three other firms in addition to you," then you start asking questions like, "Well, tell me why you reached out to us?" If you hear, "Well, we Googled ad agency Houston and you came up sixth."

David: That's great news.

Blair: You are not the advantaged player. If you hear, "Oh, a board member suggested that we reach out to you," doesn't necessarily mean that you are the advantaged player, but that's a good sign. It may signal that you are the advantaged player. It may signal that you can become the advantaged player, but it's not the bad news of, "Oh, we just Googled generalist provider and you came up in the top 10.

David: Denny's near you. There's actually a firm named that, I think.

Blair: Yes, right.

David: Let's say you're having this conversation. It's pretty clear you are not the favored party or the advantaged player, but the conversation isn't going great. You're having to push, trying to get something out of them and you get a pretty clear sense that somebody else is the advantaged player. Can you stop there or should you keep navigating this discussion that's getting awkward to find out who it is?

Blair: Well, I really like the direct conversation, like so direct that it sometimes disarms the client. I can think of two occasions where I have said to a prospective client who reached out to me where I said outright, "We're the third bid, aren't we?" I just stopped. It's clear to me that we have no power in the relationship. I get a sense that there is another advantaged player. I just call it like it is and say, "We're the third bid, aren't we? You need to get a third bid and it's us."

In both times, these people have protested that, "No, no, no, you're under serious consideration. Why would you say that?" "Well, I've asked you for a few things. You seem to be unwilling to share the most basic information. There's just something about the tone and tenor of this conversation that tells me that you may have already decided who you want to work with and you're looking for bids from others."

David: Yes. Maybe we're not number three, but not sure we're number one.

Blair: We're the fourth bid?

David: Somebody's listening to this and the idea of the advantaged player, it's something they've known by instinct, but all of a sudden they're seeing a spotlight shine on it. One of their first reactions is that isn't fair. We need to find out because we shouldn't be even asked to participate in this with us not being the advantaged player. How do people react to this?

Blair: I'm not sure if there's something in the air these days, these last few years, or I'm just becoming more sensitive to it. I am encountering, at least I think I am, more people who are talking about what's fair and not fair in business and in the sales process specifically. Maybe it's just become a hot button of mine because fairness, like I wrote about in my previous book, Pricing Creativity, fairness is like beauty or value. It is in the eye of the beholder. It's not on us to decide what's fair for somebody else.

When I hear, "That's not a fair process," my point here is just that life isn't fair. If you're assuming that every prospective client is running some sort of purchasing or procurement process to hire a firm like yours and is running a fair process, you are horribly naive. Not only is it not fair, it's not even rational. The expectation, like they're going to show up all rational and they're going to claim, we've got a selection process and we've got the scoring matrix in most bureaucratic examples, et cetera, but that's just a smokescreen. It's what a friend calls a veil of legitimacy and transparency.

It's human beings making the decision. Human beings are largely irrational. The entire field of behavioral economics is built on this idea of the irrationality of human beings in decision-making. There are fields on this. We've done podcast episodes on this, the one on "Bounded Rationality." It's really naive to go into a competitive sale and to think the process is going to be fair to you or anybody else. Somebody is going to gain the advantaged. The winner will be chosen often well before they are declared. The reasons they're chosen won't be rational and they won't be fair, accept it.

David: Other than that, Mrs. Lincoln, how was the movie?

Blair: Sorry, was that a bit of a rant?

David: The objection you're getting from people who say this isn't fair, they're just observing something that they obviously must assume must be happening, right? If they get the advantaged, they wouldn't have any objection in using that, would they?

Blair: Yes, right.

David: Oh, okay.

Blair: It's not like I hear a lot of people complaining that it's not fair in the sales process, but I'm trying to strip away the naivety that the client is going to be as rational as they say they're going to be. They're not going to be rational. They're not even going to be fair. Once they decide that they want to hire somebody for whatever reason, they're going to be prone to all kinds of biases. They're going to be talking themselves into things. They're going to be giving behavioral concessions, and this is the key we'll get to in a minute, to the ones who ask for it if they're the firm that they want to work with.

David: It's sort of basic understanding, but then it just starts to feel weird when you let this drip through your consciousness and you realize all of the bad purchase decisions that I might've made. Really? Is there no logic? Are you telling me that all the hours I'm spending comparing products doesn't matter? You're not saying that. You're just saying that in the end, there's one human on the other side. They can do what they want. I guess that's the big principle. You could decide whether you want to participate in this at all, right?

Blair: Yes. Where do you think buyer's remorse comes from? It's not because, "Oh, I weighed all the criteria exactly appropriately, and it turns out I was wrong." No, there's something about, at the end of the day, the criteria lined up to support a rational decision, but there was that feeling in your gut. No, that's my person. That's my firm. They're the ones for reasons of chemistry, in air quotes, for reasons I can't explain.

That happens a lot. Let's just accept that these are humans making decisions and they're using a process. They're trying to be fair. They're trying to be rational. At the end of the day, there's going to be a firm that they want to hire. They might not even be able to articulate why they want to hire that firm, and they will treat that firm differently if the firm asks to be treated differently.

David: Basically that leads into the next section here. In our scenario, you are one of many, you found out, and you are not the advantaged player. What's the helpful generalization that you would use if that's the situation moving forward?

Blair: The helpful generalization if you are not the advantaged player?

David: Right. Exactly.

Blair: Let me just stop you here. I'm checking my notes here. You're at two ways.

David: I'm at a helpful generalization.

Blair: Oh, a helpful generalization.

David: [laughs] Oh my God.

Blair: Marcus, you should leave that in. People need to know what a shit show this podcast is behind the scenes.

David: I handed you to this spot, yes.

Blair: Listener, I wrote my notes, a helpful generalization, and I had skipped ahead. Okay, so I'm actually prone to this idea of helpful generalizations, and my book is filled with helpful generalizations. This idea that you're the advantaged player or you're not, those are really just two different endpoints on the spectrum. It's like how much advantaged, how much leverage do you have? I think it's actually really helpful for you to think in black-and-white terms.

You have the inside track. If not the chosen one, you are the one in the lead, or somebody else is in the lead. I think in reality, there will be sales and times in sales where it is a level playing field, and often that would be at the beginning. I do want you to hold this idea in mind that at some point, you're not in a race to win the business at the beginning. Let's imagine it's a level playing field. Everybody's starting from the same line, mixing sports metaphors here, but it's completely fair.

You're not in a race to win the business. The first race you're in is the race to be seen as the advantaged player. If you think of that, you keep that helpful generalization in your mind that if you're not the advantaged player somebody else is. Then keeping that objective in your mind will be a helpful tool for you because it keeps you from deluding yourself into thinking that your odds of winning are one over N, where N is the number of firms under consideration. It's really two different distributions of games here.

There are the games where you have the inside track, you are the advantaged player, and you're more likely to win than you are to lose. Then there are all the other games where you are not the advantaged player, somebody else is, and you're far less likely to win. You look at your closing ratio, and a typical firm listening to this would have a closing ratio of between 25 and 30%. That's between one in three and one in four of the proposals you write, you win.

That's actually pretty low, but that's an average, but I want you to think of it as an average of two different distributions. The one distribution is the ones where you are the advantaged player. The other distributions are the ones where you are not. In the first one, your odds of winning are significantly higher than one in two. In the second distribution, where you're not the advantaged player, your odds of winning are significantly less than one over N, where N is the number of firms under consideration.

Four firms under consideration, your odds are significantly less than 25%. If you can do a good job of discerning whether or not you are the advantaged player, your overall win ratio will look more like the first distribution, greater than one in two. You'll have a closing ratio of greater than 50% because the other ones where your odds are low, you accept that you are not the advantaged player, therefore you don't play, you don't waste your time. Does that make sense?

David: Yes. In just a minute, I want you to take it away and talk about how you can tell whether you're the advantaged player or not. If you determine that you're not the advantaged player, would you just drop out at that point? Are the odds bad enough if you know with enough certainty that you're not the advantaged player that it probably isn't worth continuing?

Blair: The textbook answer is yes. I say the textbook answer is that's where the rational player who isn't under a large amount of stress, financial stress, emotional stress, et cetera, would look at it and say, "It's not worth it. The cost of sale is too high. It's too distracting. It's too mentally painful to play these games and keep pitching business or pursuing business where it's clear somebody else is going to win."

If your deal volume is high enough, so if you're playing enough games, if you're at the table enough times, then you would do well to just quit playing the games where you are not the advantaged player. Now, the reality is in difficult times, and as of this recording, we're recording in late August of 2024. There are a lot of creative and marketing firms out there that are having difficult times. The textbook answer is in most circumstances, you should walk away from those opportunities where you're not the advantaged player. I know the reality is sometimes you have to chase everything.

David: Especially if you're just sitting around rather than continuing the process.

Blair: Yes, you go for it. It's a Hail Mary, right? I'm not saying never throw a Hail Mary pass in your career. I'm saying if you can get to that place where you become good at discerning whether or not you're the advantaged player. Your deal volume is high enough or your opportunity volume is high enough, then now you have the luxury of just not playing those long-shot games.

David: The ultimate power essentially, the ultimate leverage. The two ways to tell if you want to know for sure if you're advantaged because the odds are so much different on the advantaged side. You're saying that there are two ways to determine if you are the advantaged player. The first one is they just come out and say so.

Blair: They just tell you. They just say, "Hey, listen, David, we really want to work with you. You just have to play ball with us here. You just have to respond to the RFP. You just have to do this stuff. We've got to get three bids. We've got to do all this stuff, et cetera. We've got to run through the process. You're even going to have to meet with procurement. Whatever it is, you just got to play ball, but we're going to work with you." They come right out and say so.

David: Then the second one, if that doesn't happen, that's the preferred one, most efficient. Second one is what?

Blair: Then short of them saying so or beyond them saying so, you want them to prove it. Think of this idea of stated preference versus revealed preference. Economists talk about this a lot. Stated preferences. "Oh, this is what I like." That's the first one. The client saying, "No, we like you. We really want to work with you." Stated preferences often diverge from revealed preferences. When somebody states you as their preference, you get them to reveal it through their behavior. You get them to prove it. This is where we start asking for concessions.

David: Disrupting the pitch would be under that phrase, right? They've heard you say that before or not.

Blair: Yes. Disrupting the pitch. Well, if they let you disrupt the pitch, that's a pretty significant concession. If we talk about what type of behavioral concessions do you want to extract from the client for them to prove to you, for them to reveal to you that you are indeed the advantaged player. You start with the little things like moving the date and location of the meeting and then you progress to higher ones. We could talk about an infinite number of behavioral concessions.

They're all meaningful somewhere on the scale from somewhat meaningful to extremely meaningful. I'll just list a few more. They share information with you that they're not sharing with the other firms under consideration. That's an important sub point here is if you extract a behavioral concession from the client in a competitive sale and then they feel compelled to turn around and make the same concession to others-- the other firms they're talking to-- that is not an indicator of you being the advantaged player.

They're trying to keep the process fair. That means they don't see you as meaningfully different. Sharing information with you that they're not sharing with others, access to missing decision makers, usually senior decision makers, especially access when you're told, initially told that access is not allowed. Anything you're told that you can't get, you're not allowed to have this, whatever it is that you end up getting, that's fantastic.

That's a more meaningful concession. Then a significant one would be getting them to rethink the brief, the RFP, or the problem as they've defined it. There's a book, The Challenge of Sale. The whole book is written around that idea. The idea that in the sale itself, you should be challenging the client's assumption of what their problem is, what their solution might be. I would add their path to procuring that solution.

David: Just finding out whether you're being treated differently than other people could be a sign that you're being treated differently. This is where human conversational observational skills are so critical. This is not an intent to sort of pitch the book, but it really is conversations conducted by very intelligent people who are looking for the signs and know what those mean. Then can just seamlessly transition into the next part of the conversation.

I would imagine if somebody on the sales side, the person who's trying to get the job is really good at this. The person on the other side may not even recognize that they revealed something. Unless they recognize they revealed something, it's not going to matter. You might just say, "Hey, were you supposed to tell me that right there," and just see their reaction? There's not a formula for this. You just have to understand what you're looking for and then be pretty good at seeing it.

Blair: Yes. I would even push back on the need to be an intelligent person. I think a person of an average intelligence, but who's not swept up in the moment of the sale. Who's not carried away with excitement at the idea of what they might win? Who is discerning and who really does think through this model of advantaged player? It's me or it's somebody else. Then in that moment, rather than

trying to convince the client that you should hire us. They're actually quite discerning.

They're more like a detective, a sleuth, who's asking the right questions, trying to get a sense of, "Am I the one, is this worth it to me, or does somebody else have the inside track?" I've said before, I think sales, new business development, whatever label you use for it, it's a game, and I think it goes by the name the polite battle for control. This is a polite battle. You're kind, you're smiling, but you're thoughtful. It's a cagey back and forth. You're trying to see if the client will give you control in the sale.

If you are the advantaged player, they will grant you some control. They will give you behavioral concessions. They will allow you to determine what the next step in the sale is. If you're not the advantaged player, if you're just seen as a vendor, one in a sea of many, the client's going to dictate terms of the sale. Not just the engagement, but dictate the terms of the sale to you, and say, "Here's what we're doing next, and you can have this, you can't have that. I'm in control. If you want this business, you follow my lead."

I think early in my career, I didn't think of selling as fun, and it wasn't until I saw it as a game. I understood it is this jostling for control, and it is this sleuthing out of information. It's better played when you're less excited, and you're more thoughtful, and you're tuned in to the near-term objective of A, determining am I the advantaged player, and B, trying to become the advantaged player. Rather than just being all giddy and trying to win the business right away.

David: Tamping down your childish glee, as I think how you said that in an earlier episode.

Blair: Yes.

David: Well, this has been very interesting. I think one of the most pivoting points for me is you reminding me again about how the odds are so different. The odds are so much better if you're the advantaged player than if you aren't. Thank you, Blair.

Blair: Thanks, David.

David interviews Blair about his new book, which lays out his proven framework B2B service providers can use to increase closing ratios and average proposal values.

Links

Order The Four Conversations: A New Model for Selling Expertise by Blair Enns

Transcript

David C. Baker: All right, Blair. This is going to be a little bit of a departure from our normal stuff.

Blair Enns: It's going to be good.

David: Actually, I prepared. That's the other thing. It's different.

[laughter]

David: No, we're going to talk about your book that's going to be released very soon.

Blair: Let's talk about me.

David: Yes. I know this will be such a relief to you. The Four Conversations and then subtitle is, A New Model for Selling Expertise. I'm going to let you talk a little bit today about your book, but mainly I'm just going to be talking and making observations and I'll let you slide in [chuckles] every once in a while.

Blair: Observations and jokes.

David: Yes. I'm excited for you about this book. I'm excited for the audience, too. I remember the first, the large notebook, I don't even remember what it was called, and then the Manifesto, and then Pricing Creativity, and now this. I see the impact that your previous books have had and how they've been perennial bestsellers, selling more and more every year. I'm excited, not just for you because I don't have to hear you whining about writing this thing anymore, but I'm excited for the audience. Really excited.

Blair: Thanks. Yes. I think I'm excited. Honestly, I'm not fully at the excitement part yet. Everybody keeps asking me, "Oh, the book's done. You must feel relief." "No."

David: [chuckles]

Blair: [chuckles] "You must feel excited." "No. I'm still waiting for that." Maybe I better fake this because we are in full disclosure, we're recording this a couple of months before the book actually is released. By the time the listener hears this, the release will be right around the corner. You'll be able to pre-order it on Amazon and other places. Maybe I should fake the excitement that I almost certainly-

David: [chuckles]

Blair: -will be feeling by the time this episode drops. David, I am so thrilled. I'm so proud of this book. Actually, I am quite proud of it. I'm so thrilled. I'm very, very excited.

David: Yes. Yes. Okay. Let me just set the stage here a little bit because you're going to be interviewed literally on hundreds of podcasts about this book from not just the industry that you and I have typically served, but in the broader professional selling expertise market. You're going to be on hundreds of podcasts. I want to ask questions that they are not going to ask you. This is not the episode to get a full, complete, detailed summary of the book. It's more background stuff. You haven't seen these questions either, right? You have no idea what I'm going to ask. Are you nervous?

Blair: I'm slightly fraced.

[laughter]

David: Okay. We've talked about the title, The Four Conversations: A New Model for Selling Expertise. How do you feel about this book compared to your previous ones?

Blair: [sighs]

David: When you think about your four children.

Blair: Yes. It's like comparing your children. How do I feel? Here's how I think about this. I think about this as the, here's how to follow up to The Win Without Pitching Manifesto. The Manifesto is a manifesto. Early on I received some feedback, I remember from one friend in particular, "Ah, I liked your book. There's not much how to in it." I said, "Well, it is a manifesto. It is about principles and beliefs."

There is enough how to in that book. 100,000 people have read that and I've heard from not a lot of them, but a bunch of them who've been able to put the principles into action without the detailed here's how to. This, The Four Conversations is the framework. It's the framework off of which we hang everything that we teach at Win Without Pitching.

You and I did an episode called The Four Conversations, I think two or three years back. It really is the here's how to. If you've read the Manifesto, you're inspired by it, but left wondering, "Well, how do I put this in action?" This is really the here's how to. I'm not sure if that answered your question about how I feel about it.

David: Yes. I've been preparing for this for about two weeks. You sent me a copy of the manuscript and every two days or so, I get back down into it and think about something. I just wrote this statement out to myself this morning. What you just said made me think of this. I said, "You'll probably write another book or three, but this also feels like you don't need to write another book."

In reading it, I was struck by how it talks about so many other things besides sales. Almost like telling us everything you believe about being in the trenches for more than 20 years. I really love this quote from Simon Sinek in there, it said, "The goal is not to do business with everyone who needs what you have. The goal is to do business with people who believe what you believe."

I turned that around and said, "The goal is to write a book to align people on not just sales, but all these kinds of things." It almost felt like you weren't intentionally and you could write another two or three books, but it almost felt like this is a compilation of my career.

Blair: Yes.  There's something a little bit scary about that. I think you're right. I set out to write a 30,000-word book, and I ended up at 50,000, and I really didn't want to write a 50,000-word book, but by the time I was done, I got it as short as I felt I could, given the book that I wanted to write. This is our training in a book. I actually feel like if you're a real self-starter, you could read this book and then know not everything that I know, but if you can act on this book, I'm going to say it, "You don't need to hire training." [laughs]

David: This is quite an ad for your training service.

Blair: Yes. No, it is really the training program in a book.

David: Right. It's not just a manual, a compilation, the training, but it's, as I understand it, not just for the industry you've traditionally served as well?

Blair: Yes, it's not just for the creative services, marketplace, creative businesses. I intentionally wrote this book to a broader audience of anybody who is an expert advisor or practitioner of any kind, but who also has to sell as their second job. They don't, for the most part, see themselves as natural salespeople. Some do and some are quite happy and comfortable with both jobs.

Really when I was writing it, I was thinking of the person whose job is being a creative, or a marketer, or a financial planner, or even an accountant. All these people who I've never targeted over the years, but have read the Manifesto or Pricing Creativity and sought us out, it was always my intent to write a book for them, for the broader audience that doesn't walk away from my core audience of creative people, but is much broader.

David: Yes. Professional services and anybody in that space, all of this is adaptable enough to their particular-- Like how somebody sells professional accounting isn't far enough away from how somebody sells professional consulting that this book will be equally applicable to them. Is that fair? I don't want to put words in your mouth.

Blair: That's my intent, but there's always a danger in writing a book that's so broad. There are broader sales books. One of my beefs and it's one of the core premises of the book is that selling is not universal. There are aspects of the selling or sales function that are universal and that do apply regardless of whether you're selling Timeshare condominiums, or SaaS, or marketing or financial services.

Equally, there are aspects of selling that don't apply. Certain goods and services need to be sold differently than other goods and services. It's my premise and listeners to this podcast will know that I believe that if you sell expertise, the sale is the sample of the engagement to follow, so you have an obligation to sell somewhat differently.

David: Let me read the title again in the subtitle, The Four Conversations: A New Model for Selling Expertise. Let me pull that title apart and tell me if you would change any of these statements or are uncomfortable with them. Selling is not a dirty word. I can assume that. Expertise requires a different way of selling. A model is an important guide. It's a useful way to apply this. It really is a series of distinct conversations. Of those four things I said, probably expertise requires a different way of selling might be the most important.

Blair: Yes, I think you nailed all of them. Those are all the variables in the title that I speak to and they're all important to me and I think important to the reader. I think there's a broad assumption out there among many, certainly not every salesperson, but a lot of people that sales is universal and the way you sell one product or service is the way you would sell another-- Even I have been guilty because I'm so focused on, historically, creative services firms, but you can broaden that out into professional services firms and you can broaden that out into, still, into expert advisors and practitioners.

I'm sometimes guilty of thinking that this is the only way to sell. Then we've been approached by product companies over the years and we've even taken some engagements where we've done training and I get into it and realize, "Oh, SaaS is completely different. These high volume transactional sales, how they're sold has to be different than a deep and probably longer relationship." Even I'm guilty of taking the domain that I know and extrapolating to other domains and think, "Well, the way you sell in this domain almost certainly has to work in these other domains." It's just not true and I've been guilty of that.

David: I was surprised at how many things were stirred up in my thinking, reading through this book, even though you and I have been friends for decades and we do [chuckles] a podcast together. Our minds are melded in some ways, but I don't know that I fully understood the difference between selling expertise and selling a product. I started thinking about that a little bit. I said, "Okay. One of the things that you say early in the book is the salesperson's behavior communicates untold information to the client about what they are buying." That's what you said. "The salesperson's behavior communicates untold information to the client about what they are buying." What struck me about this is the difference between selling, say, a $7 million yacht and a $7 million consulting engagement. The salesperson for the yacht, you're dealing with this person, and when you're done with it, you've got a yacht. You don't have the salesperson, right? If you're buying a $7 million consulting package, you've got these same people doing it. That's where it hit me. I've known intellectually what you've said all these years about the difference between how we should operate and then how we sell that stuff is so different. This just really brought it home for me.

Blair: Yes. I love the yacht analogy. I don't use that one in the book, but I do talk about other domains. Selling is an interesting thing to write about because we all know quite a bit about selling from our experience, not necessarily as salespeople, but as buyers. We can think of numerous examples of us holding our nose through a sales experience to get to the other end, and that is enjoying the product or the service.

In those examples where we're holding our nose and we're thinking, "Oh, this is really uncomfortable. I don't like the way this person is behaving," et cetera. In every example, we don't have a relationship with that person afterwards. If we do have a relationship with that person, we're not going to put up with an unpalatable sales experience from them. It just says too much about the relationship that we'd be getting into.

David: Yes. Like, "Okay. I'll buy a roof from you, buddy, but I'm not buying anything else because you're gone. I'm dealing with other people." Now, at this point, listeners are saying, "Ah, can you just tell me what the book is about?" Right?

[laughter]

David: Title again, The Four Conversations: A New Model for Selling Expertise. The four conversations are in order, probative, qualifying, value, and closing. Can you just, in a few sentences, summarize each of those four and then I've got two questions for you.

Blair: Yes. Four conversations, three of them are quite similar to each other. The first one is quite different from the other three. The first conversation, the probative conversation, where your objective is to prove your expertise to the client and move in their mind from a position of a vendor, a needy vendor to the expert. We can unpack that. We have in a previous episode, but that's the probative conversation.

The key to the probative conversation and why it's so different from the other three conversations is the probative conversation happens without you present. It's really a function of your reputation preceding you and how you build that reputation through word of mouth or thought leadership or those who refer you. The probative conversation sets the stage for how the first human-to-human conversation is going to happen, or at least begin.

The first human-to-human conversation is the qualifying conversation. That's where you vet the lead to see if there's an opportunity here and then determine the next step. You might think of that as a prototypical sales conversation. It's the first interaction where both parties are vetting each other. Now, typically most salespeople feel like they are being vetted and they are letting the client vet them. We offer a framework for vetting the client.

It's more than just a framework. The third conversation is the value conversation. Once they're vetted and you determine there is indeed an opportunity here worth spending time on, you now move to the value to be created. The objective is to determine the value to be created and then to determine the share of that value you might command in the form of fees or compensation. Then the fourth conversation is the closing conversation. It's like it sounds, it's where you close the deal. You transition from the sale to the engagement.

David: Two questions then. In order, probative, qualifying, value, and closing. I think I know the answer to this first one. I'm not sure about the second one. You are saying that the better your marketing is, the less likely you have to have any conversation in that probative stage. Let's say that a firm hasn't done any of their own marketing, so they're starting from scratch. Might that probative conversation actually be a conversation?

Blair: No. It's a good question and I think it's the one place in the model where people are most likely to get tripped up, and that's all on the author. The probative conversation either happens or it doesn't. Skip ahead to the second conversation, the first person-to-person conversation, a qualifying conversation. An opportunity comes in, a lead comes in, somebody says, "Hey, I want to talk to you about engaging you."

You get on the phone or Zoom with them and you have a conversation, and it's pretty clear that they're talking to three others. They don't see you as meaningfully different. You're a name on a list. They Googled X service provider, Y geography, and you came up 14th, and you're just a name on the list. From that first moment of the sale and the first person-to-person interaction, you are in the vendor position. The goal of the probative conversation, which again happens without you present, through your thought leadership, your marketing, the reputation that you build in the marketplace, is for that interaction, that outreach to come to you with you already positioned as the expert, where they've done some vetting, jumping ahead a little bit, but they've realized, "Oh, this one's different." They see you as meaningfully different, they do not see you as having numerous direct competitors.

The conversation is a little bit different. It starts with, "Hey, I've read your book," or, "I've been reading your blog or following your YouTube channel for a while. I've always wanted to work with you. Now's the opportunity, here's what we need." Those two conversations, those qualifying conversations, again, the first person-to-person conversation, they sound markedly different depending on whether or not the probative conversation has happened.

David: Yes. Okay. That clarifies that. The second question, again, we're talking about the four conversations, probative, qualifying, value, and closing. Second question is, the fourth stage where it's particularly tempting to abandon that expert position you talk about because you're looking for a decision, like you're closer than ever to crossing the finish line or not crossing it. Where do the temptations crop up the most in these four conversations?

Blair: Oh, that's a great question. They pop up everywhere, but mostly in the beginning. In the second conversation, the qualifying conversation, the first time you speak to a client, if you have a pattern of general behavior where you have behaved like a needy vendor, you've leaned on passion and enthusiasm throughout the sale, and that's the way I was taught to sell when I was a young buck in the advertising business, if that's been your pattern, it's really hard to unlearn that.

The mistakes happen early where you start proving that you deserve to be vetted. You deserve to be on the inside rather than using your own vetting framework, or they happen late to your point in the closing conversation when all the chips are down and you think, "Oh my God, it's all coming down at this moment. I'm going to push harder, smile brighter."

David: [chuckles]

Blair: All of these things. Yes, so it happens earlier or late.

David: It's June 29th. I know we're going to have an all-hand sales team meeting on the 30th when the quarter closes.

Blair: I had that happen to me recently. I think I talked about it where the salesperson is coming up to the end of the month of the quarter. He didn't need to cut price, but he immediately cut price. I thought, "Oh, you'll cut that much without me asking. How low will you go?"

David: Then the game began, right? [chuckles]

Blair: Yes. Well, the game's still going on. I'm waiting him out.

[laughter]

Blair: I know I've already won because of the price he's given me, and I'm convinced I can get a better price.

David: That brings up a question for me that I was going to ask. As the guy who writes sales books, do you feel particular pressure to not veer off of the stuff you write when you're on the buying or selling side, like more on the selling side? Do you feel that unique pressure? I don't see it as pressure.

Blair: I actually really enjoy the fact that I am a meta salesperson, that I sell selling. Then when I am in a conversation selling our training, people are keenly tuned into what it is that I'm saying and doing and how I'm doing it. I'm keenly aware of the fact that they are trying on, "Can I do to my clients what he's doing to me right now?" I get a lot of joy from that.

David: Yes, the reverse of joy is when somebody that you want to hire has read your book.

Blair: That's actually an ongoing. It's one of my biggest frustrations is I think I'm going to hire somebody, they read my material, and then they make me eat my own dog food.

David: Yes. It's like, "I've heard this before, right?" All right. Pretend somebody who's never heard of your book, this is a woman who's head of revenue somewhere, let's say a big law firm. She'd never heard of you, but somebody gave her the book and she got lost in it on a week-long vacation and she's catching up with a colleague of hers after work at a bar. What's the big message that she says? Like, "This is what changed my entire thinking about sales in this book." How does she summarize the book?

Blair: No, that's a great question. I don't know if I can do this justice because there are a few different key points that people could take away. I think one and it's not just specific to this book, it's also a core message of the Win Without Pitching Manifesto. It might be something like, what, I just finally got the freedom or the backbone to say no. We just don't do that anymore. Whatever, cave on this, cut price, get drawn into unnecessary, lengthy and onerous sales processes. It's probably a sense of freedom that comes from a stiffer spine and a realization that it's okay to say no.

David: Maybe she had some instincts about what should happen and the book just confirmed him. It's like, "Yes, now I see that. I've been thinking about that." All right. Let's say  somebody, again, a different person, but who has had no exposure to you except for this book, they immediately begin applying it. When do they really start to see some different ways of interacting in a sales setting? How long does this book, is this something that could still be having an impact on them 10 years later?

Blair: As you pointed out off the top, I purposefully try to write timeless books, so it's my intent that this book, like the Manifesto, I expect it to outlast me. Some things might need to change about it down the road, but I purposely try to keep it timeless. Is it still relevant 10 years from now? Where do the results first start to show up? I guess I'm talking more broadly about all of the work we do at Win Without Pitching. That work is poured and delicately arranged into this book.

David: [laughs]

Blair: Two things. The first one is closing ratios go up, and that sounds like such a sales thing. We've done many episodes on pricing. If you read my book, Pricing Creativity: A Guide to Profit Beyond the Billable Hour, and you're using the three option pricing approach, just that alone, your closing ratio goes up. We've talked about why that is. You just increase the odds by putting three options in front of the client. That's not the biggest reason why your closing ratio goes up. There's more, but the listeners are going to have to dive into that and probably read the new book.

David: Yes. There's an idea.

Blair: Your closing ratio is going to go up through some adjustments to your pricing. Your closing ratio is going to go up by you being more discerning and quit wasting your time writing proposals for people who were never going to buy from you. You always knew they were never going to buy from you. Then you just get better at selling. For those three reasons, your closing ratios just start going up right away.

The second area of improvement is average proposal value. Now, in some businesses and I talk quite a bit about this in the book, where in some businesses it makes sense to productize the services and productize the prices to price the actual service rather than the client, whereas in a lot of businesses, it doesn't make sense to do that. I talk about the decisions around that.

If you put aside the businesses where the prices for the services are set and the salesperson has no impact over them, every other business, the average proposal value, the average effective fee should go up. It goes up for a variety of reasons and some of them are the pricing reasons that are also explained in the book, Pricing Creativity. Through the combination of the four conversations, of understanding the four conversations, using the frameworks to guide you through the four conversations, those are the two levers that should move. Closing ratios, average proposal values.

David: Those are even more measurable than I was expecting. I thought you were going to give me an answer around confidence or navigating a conversation by or with silence or something, but I like the fact that you went straight to something very measurable. If you'd written this book before the pandemic, would it be different? Because there's something about how that pandemic impacted. I don't mean so much the downturn, I mean more how it impacted the way business is done. Would the book be different if it were written four years earlier?

Blair: Yes, it's a good question. I hadn't considered that. I don't think it would. The title would almost certainly be different. I found my first note for this book, and it was in 2014. The working title was called Selling Expertise, and it has been for almost 10 years, and I only changed it in the last, time's all funny now, a year or so. Beyond the title, I don't think anything would have changed. I guess that's my way of saying I'm no smarter today than I was four years ago. [laughs]

David: Why'd you change the title?

Blair: I had a lot of people tell me it should be Selling Expertise because that is a more SEO friendly title, and I just refuse to write for SEO. I actually think The Four Conversations, the title begs a question.

David: That's easier to own than Selling Expertise.

Blair: Yes, it's easier to own. I think anybody could write Selling Expertise. I'm the only one who could write The Four Conversations: A New Model for Selling Expertise.

David: I love that answer. You've talked recently about how you never could have come to some of the conclusions you have because you didn't write a particular article. There was one you wrote recently you talked about. I don't remember which one it was, but where did you gain significant clarity in the writing of this book?

Blair: Oh, that's a good question. There's not a lot in this book that I haven't said multiple times in our training programs, in conversations with clients, even in this podcast, or thought deeply about. Where I grew the most and learned the most was in providing examples. I made a point of including writing to a broader audience and so it made me realize that for a long time  I've been locked into still old ideas of the creative firm business model, which haven't really been valid for four, five, six years or so. The business models of our clients, yours and my clients, those who listen to this podcast, assuming that they're owners of creative businesses, they started to fragment within the last decade, but really in the last four or five years, and maybe the pandemic has really accelerated that fragmentation. My thinking didn't keep pace with it. I'm guilty of thinking in terms of a universal agency business model.

When writing for broader audiences, I've gotten to know these other businesses like financial services, accounting, management, consulting, et cetera, et cetera. In writing for these other audiences, I realized there are a lot of creative firms or marketing firms whose business models are a lot like an accounting firm or a financial planning firm, et cetera. When I say models, I mean specifically the productization or customization, think of those two things on an axis, of the service and of the price.

Think of productized versus customized on an axis and think of a two by two, and I spelled this out in the book, where you have the delivery of your expertise on one dimension and the pricing of your expertise on another dimension. In thinking through that for the broader audience and coming up with that framework to organize the various business models of anybody who sells and delivers expertise, it made me see that, "Oh, yes. I've made too many generalizations about what a creative firm looks like."

David: One of the things I was looking for when I was reading the book is like, "What took him so long?"

Blair: [laughs]

David: Then I realized, "Oh my goodness." I kept reading there's compact meaning, like sentence after sentence after sentence where you could actually write a whole nother chapter about that one sentence.

Blair: Yes. What took me so long? I'm a horrible writer of books. It takes me forever to do it. There are parts of it I enjoy, but most of it, as I've said in earlier episodes, it's just pain, pain, pain, pain, pain, pain, euphoria.

David: [chuckles]

Blair: I'm still waiting for the euphoria.

[laughter]

Blair: Even when you ask me, "What did you learn while writing it?" I haven't been writing it for a couple of months now, so I don't remember. Once I'm through the pain part of it, I purposefully forget a lot of what I went through.

David: [chuckles]

Blair: I am not a good advertisement for authorship. If you listen to me talk about writing a book, I would just say, "Don't do it. It's hell."

David: [laughs] I heard you say one time, an interesting way to sort of think about positioning is pretend that you are invited to do a TED Talk, not one of those TEDx things, but a TED Talk. The person introducing you says, "Now I'd like you to hear Blair Enns. Over his life, he has," and then you fill in the rest of that sentence. What's the big thing that you did in the industry? I used to hear you say sort of like, "Change how professional services are bought and sold," or something like that.

Blair: Creative services.

David: Creative services. Right. Is anything different from that?

Blair: Yes. I feel like I've had 20 some years of focusing on the creative services space and I'm not abandoning that space, but I am ready to broaden out and to see that if I cannot also change the way expertise is bought and sold around the world. I would take that initial vision of where I'm introduced as somebody who's changed the way creative services are bought and sold around the world, maybe not so much bought on the buying side. I would hope that in 5 to 10 years, I can be seen as the person who has changed the way expertise is sold around the world.

David: I think that's quite doable, honestly. I think you're really well on the way to that. I just love this book. I should ask you if there's something that you were just dying for me to ask, but I also want to know like when's this going to be available and what formats will it be available in?

Blair: You'll be able to pre-order it on Amazon. By the time you listen to this, it will be available in all the usual formats.

David: Anything I forgot to ask you?

Blair: I don't think so. I'm in the gap in between being finished and being done with it behind me and the excitement of the launch in front of me. If I'm sounding a little bit flat about what I think is easily the best book I've ever written, that's why. I'm still in this gap between recovering from the pain, [laughs] not yet feeling the euphoria that will come from launch. I see this book as a marathon, not a sprint. I'm not trying to game any bestseller list. I'm not trying to do anything in the first week. There will be a little bit of a launch. I'll make a little bit of noise. The day that it's finally available for purchase, as you know yourself, that's an exciting day.

David: Oh, it is. Folks, again, the title is The Four Conversations: A New Model for Selling Expertise. Thank you, Blair.

Blair: Thanks, David.

Blair and David reminisce about their podcasting journey since Blair first pitched the 2Bobs idea to David back in 2016, sharing what they've learned along the way, and what they might like to try with the podcast in the future.

Transcript

Blair Enns: David, can you believe this is the 200th episode of the 2Bobs Podcast?

David C. Baker: I can't. I wasn't sure we'd make it to 100. It just seems like such a long time ago when we were planning to do this, your crazy idea. I can't believe it's 200. It's taken on a life of its own, hasn't it? It's almost like we started this thing and now the podcast is dragging our lives around with it. It's bigger than we are.

[laughter]

Blair: Let's talk about that. We thought we'd do a little trip down memory lane. We'll try to keep some benefit to the listener in this. Talk about what we've learned, what you might learn, whether or not it might make sense for you to get into podcasting at this point, but this is one for you and me. It's our 200th episode after action review. We started recording, I think it was late 2015. The first episode dropped in early 2017. We're recording this in August of 2024. That's a lot of numbers.

It's been on air for seven-years-plus, if my math is correct. We've been recording it for over eight years. When we decided, "There's something good enough to launch a few episodes," we did say to each other, we would go to 50. I guess that was two years.

David: Two years worth, right, every two weeks.

Blair: We'd go to 50, then we would make the call. Then at 50 we decided, "Let's go to a hundred." We checked in-- I think we did a podcast after action review somewhere around episode 72 or 74, but I don't think we checked in at 100 to see if we wanted to keep going. Here we are.

David: We were engaged when we crossed a hundred.

Blair: Let's talk about where we are now. Are we engaged? Does it make sense to keep going past 200?

David: Oh, I am more engaged than I ever have been. I don't even know why you picked a hundred. That wasn't me just to clarify. I thought, "Okay." The whole idea of the podcast was yours too. Something happened to me. I don't know if it was just my own mental something or business influences or what, but I've also taken my cue from you. If you are engaged, I am really engaged. If I sense that you're losing it, then I feel like I can't carry it by myself. I don't feel that strong to do it.

To answer your question, I am more engaged now than I ever have been. I have never come close to not being able to come up with a topic. I'll come close every once in a while and say, "Oh gosh, I got to come up with a topic." There might be a time pressure thing, but I could list a hundred things we could talk about still.

Blair: What's your measure of my sense of engagement these days?

David: It's the highest it's ever been.

Blair: Really?

David: Yes.

Blair: Then we'll keep going.

[laughter]

David: There's a decision. I can tell because of how excited you are about a topic. You'll tell me, a couple of weeks in advance, "Hey, I'm going to talk about this next." Then you start thinking about it. I can also tell by the level of energy you bring to it. Of course, that has something to do with whether you texted me a few minutes before we start and say, "Hey, I need to go grab a coffee. I'll be 10 minutes late."

[laughter]

Blair: Let's have the airing of the grievances now. There's the coffee, there's the audio equipment failures. Let's come back to are there things that we might change about this? Let's talk a little bit about something you alluded to which is under the banner of production function, taking a note from Tyler Cowen's podcast. What's your production function? Basically, I'll post some questions to you and then I'll go ahead and share a little bit about how I do these things too.

Let's start with how you come up with a topic. Let's tie this also to the other content you create because you write a post weekly and then we record this biweekly. Ostensibly, I pick a topic, you interview me on that topic and then you pick a topic and I interview you on that topic. If you're using your blog posts as a source for content, then about one in four posts of yours and about one in two of mine, because I'm currently writing every two weeks, gets turned into a podcast. Is that how you think about it or do podcast episodes get turned into posts or what's the relationship between those two?

David: Some things that I write about don't seem really appropriate for a podcast topic for some reason. I would say half of the things that I write about would make a good podcast topic, but I haven't necessarily already written about them. I'll tell you what, and I don't know if this is odd or what, but it's just true. It's like all of my ideas for topics come when I'm in a conversation with a prospect or a client- -where something will just click and I'll madly scribble it on a whiteboard that I keep next to me and then after the call is done, I'll say, "Oh, that's a really good idea." Then I let it sit for about a week and then if it still seems like a good idea, and some of them don't. They're like those things you write when you're in your bed at night and you wonder like, "What in the heck was I thinking? That was not a good idea." Some of them are and then I'll say, "All right, Emily, can you do an illustration?"

Then it might sit in a folder for seven years or it may be the very next one. At the moment, for me, the idea comes up and then I decide, "Is this an article or is this a podcast episode?" Sometimes it's both, but it's always the idea that comes and those ideas always come when I'm talking with a client or a prospect. Then once I have the idea as a valid idea, then I start to notice things. It's like when you're driving down the Interstate and you bought a new car and now you see everybody else driving the same model, and you wouldn't have noticed that before. Or you're in an RV and it's like, "I didn't even notice how many RVs there were before."

Now I start noticing all the things that relate to that, an article I might read or a podcast I'm listening that somebody else does and then it just gets added to that outline, so to speak. Then I ignore it completely, I write my outline and then I go look at those articles that I've collected to see if I've missed something. Recently, I've been using an AI search engine too at the end of something to see if I missed something. That's my production function.

When I decide on a topic, I've already got a bunch of thinking on it, I just need to organize it. That's probably my favorite part. I know this isn't really part of your question, but my favorite part about doing 2Bobs is it is constantly forcing me to develop a point of view on something and I just love that. It's like going to the gym. It forces me to do good things and it keeps my brain alive. That's what I love about it the most.

Blair: I identify with all of what you said. I'm curious about the distinction between podcast content and blog post content. You've already said some of it doesn't really translate to a podcast medium for whatever reason. As an example, here's how I do it. Like you, I'll be talking to a client or I'll be writing something else. Then the ideas come up and I drop them into Evernote as future topics. I'm thinking first and foremost as a blog post. I'm thinking, "I'll write a post on this."

Then I do a very cursory outline of just the key bullet points of the idea or the topic. Then my intent is to write a blog post, publish the blog post, and then we will have a conversation about it. Every second or so blog post then gets turned into a podcast episode. What I've noticed lately over the last year or so is I make the outline and then I'm more likely to record the podcast first and then write the blog post second. If the listener is interested enough, they could go back and do a comparison between the conversation we're having on a topic and what I've written on the topic.

The pattern that seems to be emerging for me is you and I have a conversation about a topic before I've written deeply on it. I've only written superficially. I've done an outline. Then I use that conversation to refine the blog post. I don't know why it's happening this way. I don't know that it's going to continue to happen this way because it's basically a reversal from how I've previously worked. I'm not sure it's better this way. It's just something that seems to have happened. My need for variety, maybe.

David: That's interesting. The reason some of the topics I come up with are not really great for a podcast episode is because there's just not enough meat there sometimes. This is a 400-word article. I'm not sure there's enough to talk about sometimes or I just don't want you influencing me at all, so I just write the article so that I stay away from it. No, just kidding.

Blair: No, that's a valid point. I get that. How much work is it for you to prepare for a podcast? We schedule an hour for the recording. We probably use 45 or 50. We use a bunch of that to catch up at the beginning. Sometimes we talk so much, we end up not recording the podcast. We have to do it later. How much work is the preparation for you?

David: Probably 20 to 30 minutes, something like that. That's what it takes to put the outline together and think through it enough. How about you?

Blair: It depends how I'm thinking about it. If it's just the outline, yes, 20 to 30 minutes, maybe a little bit more. If I've already written the full blog post, it's almost no time. It's a quick review. Every once in a while, you and I will just share a link to a post that we've written and said, "Let's just use this." More often, we actually take- -that post and we distill it into a more concise outline that allows the other to navigate through the conversation.

David: When I send you an outline for an episode where you're going to interview me on a topic, what do you do with it when you get it from me?

Blair: Wrap fish with it.

[laughter]

David: Do you make notes or do you just read it?

Blair: Sometimes. I read it. Sometimes I'll go read the supporting post if you've written a post on it. Sometimes I make notes in it. I always make notes for myself somewhere. Sometimes they're actually in the document so you can see me in a Google Doc making notes, call-outs, highlighting things, or even sometimes reorganizing things. That's not so common. I'm almost always making written or typed notes separately on a piece of paper or on Evernote.

David: Do you think we disagree enough or is there too much mind melding in our approaches?

Blair: I think eventually our thinking on a topic coalesces. It's pretty rare where we would have a sustained conversation or talk about a topic for a sustained period of time where we don't come to agree on something. I can't think of any examples, but I think there have been some examples where you've put forward points of view on something where maybe I could have pushed back more, but I'm not sure that it's my job in that moment. Sometimes I feel like it's the appropriate thing to do and sometimes I feel like, "That's an interesting point of view. I'll let him put it forward."

David: Let him look stupid. Let him deal with it.

Blair: No, it's more like, "I'll have to think about this because you're causing me to rethink my own point of view." I'm not sure what the listener would prefer, for me to stop and challenge and push back on that or to let you put forward the point of view. If I flip that around, I wouldn't be able to tell you when to do what because I think there are times when I actually don't care what you think. I have a thesis I'm putting forward. It's not that I don't care what you think, but I want to put my full thesis forward without you picking apart every little piece of it.

Then there are times when, "No, let's go at it. Let's have a to and fro on this." I think we can both agree that there are topics that we've done where we look back and think, "I'd like to have that one over again." I don't think that way anymore. I don't believe that to be true anymore. I wouldn't follow that advice now. Maybe in those situations, we would have appreciated some pushback. What do you think?

David: I actually don't feel all that much pressure to be right. I don't want to be an asshole and just question everything at all. I just think that's just stupid and annoying. I really want to believe the stuff I say, but I don't feel like it needs to be fully tested. It's enough if it just gets somebody to think a little bit differently. The reason I ask that question about whether we agree too much or not enough is because I find myself in this very annoying situation of defending something you've said on a podcast.

Like I'm working with a client and they say, "On your podcast, you said that." I say, "No, I didn't say that. Blair said that." It's like, "What do you think of that?" That's not what this engagement is. This engagement is not to pull apart everything where there's just not quite exact overlap. It's just so funny. It's almost like I'm taking responsibility for the stuff you believe, and that's probably true in reverse too. It doesn't have to be that way. We can have very different perspectives on things.

Blair: It's interesting. The listener listens, a little bit of time goes by, and often they will attribute to the other person, the other person's ideas. You and I get this quite a bit. I saw something on LinkedIn the other day where somebody had quoted a Dan Sullivan quote that I cite often and had attributed it to Chris Doe and Chris replied and said, "That's not me. That's me quoting Blair." I replied and I said, "That's not me. That's me quoting Dan." We don't seem to parse that in our minds. The net takeaway is you and I have had a conversation. The subject was X. You and I must therefore both believe X. Maybe we do need to push back a little bit more on each other.

David: Do you remember when we first had the meeting? I think it was when I lived in Nashville. You were in town for some reason. It must have been a new business summit or something we were doing together and we had Marcus there. I remember the layout of the room. It was in my little low ceiling office. Had we already thought about doing a podcast and we wanted to talk about it or was that just some random idea that popped up? I don't remember.

Blair: I don't remember that meeting. I remember being in that office many times. I'm not sure I remember being there with Marcus, although I'm almost certainly was there many times because Marcus used to produce your events and then the events that you and I did together. I don't remember the origin of it other than me suggesting the idea and thinking that's a pretty good way for you and I to continue to have a conversation, just regular exchange. Why not just press record? I guess it turned into a little bit more than that. No, I don't remember the initial meeting. What do you remember about that?

David: I remember you suggesting it. Marcus had never done a podcast before and he was really excited about it. There was no learning curve for him. He knew exactly everything about audio editing so it was pretty easy for him. Then I remember one of the first things that happened is he recommended certain audio setups for us because he was a real stickler for the quality of it. In retrospect, yes, it was definitely your idea. I thought, "Oh, I'd love to do something with you. Let's do it." I wasn't even a podcast consumer at the point.

Blair: Are you now?

David: Oh, I am now. Yes. A really big one. I don't experiment a lot. I have six or seven that I listen to regularly. Why do we think this podcast is successful? By successful, I mean you and I, we can't have a new business conversation without somebody bringing it up, it seems like. Also, the feedback we get and the downloads are really good and they've been growing since the very beginning. Why is it successful? I'd like to think that it's because of the quality of it.

One thing that people say constantly every time I ask them about it, they always say the chemistry between us. I take that for granted, but they always say that. I think there's something else too. I want to mention this because otherwise people could misunderstand. The discoverability of podcast is really poor. The fact that you and I already had an email list of people who were getting our stuff so we could tell them, "Hey, you want to listen to a podcast? Here it is." That was why it took off.

Sometimes you have to just be honest with yourself. If you don't already have an engaged group of followers, it may very well make sense to do a podcast, but you have to be reasonable about how discoverable it will be. Sometimes you do it just because you learn a lot. Sometimes you do it just to connect with your prospective customers who wouldn't respond to an email, but they would respond to an invitation to be on your podcast and they are a good enough guest that it's not a sham sales thing. That's another good reason to do it. I do think when we launched this thing, podcasts were much newer than they are now. The world is pretty saturated with podcasts right now.

Blair: Most of those podcasts don't last. For example, a couple of years ago, I launched a second podcast with Leah Power from the ICA in Toronto and it was on a very niche topic. It was called 20%, The Marketing Procurement Podcast. We recorded one season, went into hiatus before recording the second season. Then during the hiatus, I said to Leah, "I think I've thrown as much of myself at this topic as I care to," as much as I really enjoyed that experience.

You can still find that podcast. It's got the little twilight or icon next to it that says this podcast. It's still there. You can still download it, but it's not being added to-- Maybe it's inactive is the term. I think it's far over 90% of the podcasts ever launched are inactive. If somebody says, "Hey, congratulations, you're in the top 50%." If you're in the top 10% of podcasts, that doesn't mean anything. It's a meaningless number because only 10% are still going.

If I look back, I don't consider that experiment, that one season of a podcast to be a failure at all. I loved the opportunity to interview other people. You and I don't do that here. We interview each other. Obviously we have a relationship stretching back over 20 years now, but it's another reason to do a podcast. I learned so much from that podcast, from interviewing people in the marketing procurement profession. It was a very legitimate reason to do a podcast. I got an incredible amount of value out of it, but I got all the value out of it that I wanted to get out of it.

I think there's lots of reasons to do a podcast. To your point though, you and I already have audiences, the marketing procurement podcast got a pretty good bump from my existing audience. You have to have a smash hit me doing something really interesting that really goes viral for you, for people to start discovering your podcast beyond your own marketing though.

David: Right. Absolutely. One advantage of a podcast is that you own it. Should we talk about our worst performing episodes?

Blair: Yes. What are they?

David: Oh, I love this because our very worst performing episode.

Blair: I saw your list. It's An Introduction to Blair Enns, isn't it?

[laughter]

David: Oh my God. This is just giving me so much joy.

Blair: That just tells you everybody knows who I am.

[laughter]

David: That's the very worst performing. Next is What Happens When You're Away. That was my topic. Apparently everybody was away or something. I don't know. Next was Paid Time Off Is Earned Time Off. I thought that was a really good concept. That was yours. Mea Culpa. What was that one about? I don't know. Then the fifth worst performing was an introduction to me, but it wasn't as bad as the introduction to you.

[laughter]

Blair: Paid Time Off Is Earned Time Off. Was that my topic?

David: That was you.

Blair: Was it?

David: Yes. The basic premise was you don't work in order to get time off, you have to take time off in order to earn time to work.

Blair: That's a good premise. Maybe it was poorly named. Maybe you came up with the name.

[laughter]

David: That's the other thing. If you want to talk about what we each do well and don't do well, you are so much better at naming these things. Actually, you're better at making fun of me for the way I named them.

[laughter]

Blair: Yes, I am.

David: What you're not good at is ever having all your gear ready when we're ready to start. I could show up five minutes late and you'd still be saying, "Hey, give me a minute. I need to reboot this."

Blair: Hey, in defense, a certain percentage of those are you trying to figure out your audio equipment too. Yours is all set up, but you'll show up and it won't be coming through the right mic, et cetera. In terms of actual hardware equipment set up not being done properly, yes, that's my thing.

David: What's the other thing you don't do well? Oh, you don't carry any of the load in promoting this shit on LinkedIn. It's like I'm the only guy that ever talks about our podcast. That's not really true, but I'm carrying the load of carrying this on LinkedIn. Are you going to come back to LinkedIn-

Blair: Yes.

David: -at some point?

Blair: Very, very soon. I'm going to rise like a phoenix on LinkedIn, not on Twitter. I never say never. I don't have a strong feeling about this, but Twitter hasn't done anything for me for a couple of years mentally, emotionally, business-wise.

David: You just checked out.

Blair: I've checked out.

David: How about best performing episodes?

Blair: What's number one?

David: I'm not sure if these are in order, but the top five for sure, if I discount the recent ones that haven't been around, because these are evergreen where people will listen to them years later. Designing Your Service Offerings, Five Levels of Pricing Success, Secrets Behind The Killer Proposal.

Blair: Original spoof episode.

David: Right. The Power of Process and 10 Set Pieces. Three or four of these are yours. That's pisses me off. Usually that is absolutely true. If you look at the broad context, your topics perform better than mine. Is that because sales and pricing are such hotter topics? You bring the beef and the sizzle to it and I'm making people eat their vegetables.

[laughter]

Blair: I think that's probably somewhat accurate. I'm bringing the cotton candy. Maybe it is beef and you are making people eat their vegetables. I think selling in particular is just such a universal-- As long as you don't call it selling, it's such a universally interesting or relevant topic.

David: Let me ask you another question. I listened to every episode, not right away, sometimes within a week or so. You listen to them, I think, too. What reactions do you have when you listen to the episodes themselves after they've been edited?

Blair: First of all, if I'm walking around the house doing something and listening to 2Bobs, I'll be laughing and my wife now knows that I'm not listening to a comedy podcast. I'm listening to us. I've admitted this before and it's like, I don't know. To me, it's a comedy show. The first thing I notice is my own energy level. There are some episodes where I am seriously over-caffeinated and there are some episodes where I need a shot, I need a B12 injection or something.

The variance in my own emotional level that I bring to it, it's really striking to me. I think I've reigned that in a bit over the last couple of years, but the first five years, it would be, my God, some of them were just night and day different energy-wise. The other thing is, you and I, after we record an episode, we sign off, then we each have a short pithy assessment of how it went. It'd be like, "I think that was pretty good." Or, "Marcus has got his work cut out for him on this one." Then after it airs, I'm almost always surprised, the ones that I'm bracing myself for, I'm thinking, "Oh, I don't even know if I want to listen to this." I listen to it. My reaction is almost always, "Wow, that's a lot better than I remember it being. Marcus did, in fact, work his magic." What do you experience when you listen back?

David: It's the same thing. I'm so impressed with how Marcus has edited these things. This is probably a bad admission, but when I'm listening to the episode after it's been published, I listen to you a lot more carefully than I am when we're recording because when we're recording, I'm trying to think about, "Where do I want to take this next and how do I weave this back into such and such?" It's a lot more work for me to interview you than it is to be interviewed. When I'm listening to the podcast after it's come out, I always hear things that I didn't hear because I was concentrating on something else. I am often pleasantly surprised. I'll text my wife or one of my kids and say, "Wow, that was a good episode." After we finish recording and sign off, I'll say something like, "I think that'll work," which basically means that was shit. Then when I listen to them, it's like, "No, I think this is good. This actually represents what I think or what you think."

Blair: At the time.

David: Right, until it changes three months from now. I just feel so much joy that this is going to help some people. I just feel so much contentment and gratitude that we get the chance to do this because I know that there are people listening and some of them are going to say, "How did you know I needed that topic right now?" Of course, it's just all pure chance, but people benefit from this. I listen mainly to comedy on SiriusXM and that's just to relax.

When I listen to certain topics of other podcasts I listen to, I'm so grateful. It opens up a world for me and I feel a real deep privilege to have the opportunity for people to be spending time listening. It's like, "Wow, that is such a commitment and it's such a statement that we need to treat really carefully." I admire the fact that you and I put a lot of effort into continuing to do this and it's not a chore anymore. It has been a chore at certain points, but I feel so good. I listen to the episodes and I think, "Oh man, that is great. I'm just so glad we did that."

Blair: Even the ones that don't age well, it's fine, it's part of the history. Hey, I wanted to ask you, you and I talked before, we always talk about what should we do differently? We talked about ads or sponsors or interviewing people. We've messed with the length a little bit. We're trying to keep them under 30 minutes, so we need to wrap this up. I think the last time we saw each other, and I don't remember where or when that was, but oh, I remember now, it was in Chicago, we talked about actually doing these live.

We experimented with this a few years ago where we used Riverside and we were on video, because you and I, we're not looking at each other when we record these things. We do audio only. We were on Riverside, and I think we even invited some people to sit in on the session as an experiment, but you and I agreed that we were going to use LinkedIn Live to actually record these things live so people could participate and maybe post questions afterwards or whatever, but just as a novelty, as an experiment.

Then we would still hand the local audio files over to Marcus, and he would work his magic and edit together the usual episode that people hear, and that's what they would download in their podcast feed, but maybe it was on me. I got distracted by other things. Is that an experiment you still want to do?

David: Yes, I would. That wasn't a full-throated excitement, but I would like to try it. We'd have to stick to a very specific schedule, which if we just did it as an experiment, that would be easy, but I don't like the idea of having to wrap my schedule around a weekly appearance or every two-week appearance on LinkedIn and then I can't travel on that day or something. I think the idea is really worth pursuing somehow, even if it's just occasional, and say, "Hey, tomorrow we're going to do such and such." I think we probably should do that.

Blair: We know at least a day in advance when we're going to record. We have recording dates set out weeks in advance. If it changes, there's usually a 48-hour notice. I think that's probably enough time. We'll continue this conversation offline and then maybe, for those of you who are on LinkedIn, maybe you'll see a LinkedIn Live notification and you can listen to how the sausage is made and marvel at the number of times that we back up, start over again, clear our throats, say all these stupid filler words that Marcus ends up cutting out.

David: One thing I like about the podcast, too, that I haven't mentioned yet, that I really appreciate the fact that we both made a commitment to this. We don't have sponsors, we don't have ads. There's a little mid-roll thing that basically we could drop because everybody's memorized it. When I'm listening to other podcasts, I'm hitting that fast-forward 30-second thing all the time because I don't want to listen to the ads. I appreciate the fact that this is a listener-friendly thing and I'm glad we can do that.

Blair: Nobody has met our price yet.

[laughter]

But we are for sale. Any other last points you want to hit on before we wrap up and think about what we're going to do for episode 201?

David: Just a huge thank you to the audience for sticking with us. I'm just very grateful for their attention and I love the opportunity to keep doing this for people. It may go another 20 episodes, another 100, who knows? Thank you, audience, for honoring us with your time and your energy. We really appreciate it.

Blair: In the words of Dexter Guff, "Thank you for letting us put our lips on your ears."

[laughter]

Thanks to Marcus for all the great work that he does. Thank you, David, you've been a great partner on this. I'll be back next week. Let's do 201 and we'll just take it episode by episode from there.

David: All right, thanks, Blair.

Blair: Thanks, David.

David unpacks six principles that can help creative firms benefit from delivering strategic guidance through their account managers.

 

Links

"Account Managers and Strategy" by David C. Baker at punctuation.com

Transcript

Blair Enns: David, we are talking about account managers once again today. I think we've done a few topics on that role. This one is delivering strategic guidance through account managers. Before we get into the content here, you do what has turned into a fairly sizable seminar every year on account management, don't you?

David C. Baker: Yes. In March in Atlanta every year, I partner with Jenny Plant from London. She's really good on the account management side. Then I usually bring another guest in as well. I love it. Plus listeners everywhere saying, "Yes, another episode about us forgotten account managers and project managers too" It's like the people who get the glory in these firms are the skill players, the subject matter experts. I'm always beating the drum about account managers and project managers, so much so that I just like to do events for them too. For one thing, they're fun people. Who wants to do an event for researchers? By God, they're boring.

Blair: All right.

David: Sorry.

Blair: David Baker, the account manager's hero. I think your post dropped today. We're recording in the middle of August.

David: Yes. It's blowing up too like, "Oh God, what did I forget?" Somebody out of the woodwork. Here are the three points where David's wrong. I'm going to have to go slay some LinkedIn keyboard warriors when we're done. [chuckles]

Blair: All right. You lead off by saying account managers are the most confusing role players in our field. Do you mean the field of creative and marketing, digital?

David: Yes.

Blair: What do you mean by that? Why are they confusing?

David: They're not confusing to the ad agency people who are too dependent on account managers, but they're very confusing to probably the biggest group in our field that doesn't utilize them. That would be digital firms, dev shops, and so on.

Blair: These are the firms that are more likely to use PMs or project managers than account managers.

David: Yes, or have the people who are actually doing the work interface directly with the client. There's this sense of like, "I don't know what they do. I'm open to it, but what do account managers do? Aren't they just going to make this more expensive?" As a firm develops a deeper perspective on all of this, you realize that alongside the growth of account management would also be strategy, account planning, research, which are very necessary. The account manager then who has had the spotlight on them, and account managers love the spotlight on them too, they're thinking, "Okay, what is my role against a strategist role?

If there's this strategy function, how do I interplay with that? Because before that person was introduced, I thought I was the strategist on behalf of the client." That's where there's some confusion that comes into this role. You and I have talked a lot about it. I've written a lot about it. We've had past episodes about it. This is really just dealing with that one little teeny kernel of what's the role of account managers in strategic work. What's the interplay between strategy and account manager?

Blair: In my first agency job, I was an account manager. There was no such thing as a strategist or a planner. Fast forward a couple of agencies and get to much larger agencies, then I find myself working with a planner. It was interesting to go from the person who was seen, or I guess I thought I was seen as the strategist on the account. In truth, I was 22 years old when I started, so I don't know how much strategy was coming from the 22-year-old, but I saw myself as the strategic guiding light on the business. Then all of a sudden, I'm working with people with multiple PhDs in really obscure disciplines, not in account planning per se.

Cognitive psychology and women's studies is one combination that I remember.

David: I worked with a firm in New York City one time that had six PhDs, and they had nothing to do with the advertising field, so it was really fascinating to talk with them. In one of the interchanges I've had after that email went out to people, they were trying to see the difference between the two. It was like, "Why do you want to separate these two? We want our account managers to be the smartest people putting together the strategy like the conductor of the orchestra." I said, "Okay, let's put Elon Musk in as ambassador to some country. How do you think that's going to work?

Let's put some ambassador, so somebody you thought of in reaction to what I just said, a really good ambassador. Let's put an ambassador in charge of innovation and getting to Mars. How do you think that's going to go?" Now you start to see the difference between an account manager, an ambassador in this story, and a subject matter expert who has no-- maybe some, but not a lot of people skills. The interplay between those two needs to be handled really well. That's the dance that we're trying to manage. Now, a lot of people disagree with me. They're all wrong, but they all disagree with me.

A lot of people disagree with me on this thing. I think it's hard to see the nuances until you've seen it work until you've seen the dance between account management and strategy.

Blair: As I've already said, I've been the account manager who has been the strategist, and then I've been the account manager who's bringing strategists to the table, planners in the case of a multinational ad agency. I see the friction here. You've got six principles here, and they're the principles of not just account management, but how the account manager interacts on the strategic front, I guess you would call it. I'm going to give you the first two at the same time because they're seemingly contradictory, but you can unpack them one at a time if you like. The first one is no client interaction should occur without including the account manager. "Amen," say all the AMs out there.

The second one is we should not shield other employees from the client.

David: I almost said, "Hey, let's do these first two together." I'm glad you did that because they really are tightly wound together. The first one, no client interaction should occur without including the account manager. People misread that and they say, "Oh, see, what you're saying is that you don't want the client to talk with anybody else?" No, I'm not saying that at all. In fact, sometimes it's very appropriate to not interpret what a client is thinking through the account manager. Sometimes you need to have the person who's doing the work actually hear the client directly.

Sometimes you need that person defending their work and falling flat on their face too, to realize how some of the ideas that they thought might fly are just not going to work in front of the actual client in real life. The first one, no client interaction should occur without the account manager. There are meetings where the account manager is not present. In fact, if the client's not willing to pay for an account manager's time, assuming you're charging by time here, of course, then don't have them in there.

You never leave the account manager out of that loop. They need to be copied on emails. There should be no surprises. They're the consistent thread through everybody and everything. Exactly right. Then the second is we should not shield other employees from clients. I just want to make sure that people don't misunderstand this. We do want direct contact between the client and other people, but not leaving the account manager out of the loop. As long as we don't leave them out of the loop, it's great. It's actually beneficial to have other people. You do not want your agency to be experienced entirely through an account manager.

For one thing, that just puts you at risk if that account person leaves. You also need backup and you need checks and balances. You need people listening differently. Those two things are together for sure.

Blair: Then the third one builds on it. Knowing when to involve an SME, a subject matter expert, a strategist being one example of those is a critical skill. It seems so obvious, but when I read the words the first time, I thought, "Oh yes, I know just firms that I've worked in," This is going back a long time now. "there were too many meetings where everybody was in the room." If everybody's in the room all the time, what do you need an account manager for?

David: We need to protect these SMEs, their time too. Sometimes a client's going to want direct access when it's just a control power play. That you can just push back on it. There are really three instances when an SME is brought in. Now the client could ask for it. If the account manager deems that this is a reasonable request, then they would bring him in. Maybe the client doesn't ask for it, but the account manager says, "Hey, you know what," in their head they say this, "This would be an opportunity to really shine. Let me bring her in here to just show the depth of our knowledge on this thing and be able to just have a freewheeling discussion."

Then there are times too when the account manager who is going to be very smart and who is going to answer most of the questions, when the strategist sees those answers, they're going to say, "Oh, I wish you hadn't said that. Hey, let's manage this this way. I want to turn this project we're doing a slightly different direction. I understand why you said that. I think we can save face here." There's those three. The client might ask for it, the account manager might ask for it, and the subject matter expert might ask for it. Knowing when to involve that external player is something that an account manager is really good at.

It's not just about knowledge, it's about politics, it's about social. It's just listening for some of the unsaid clues. There's nobody else at the firm that can do that other than salespeople. They're really good at that too.

Blair: I can see how that skill would build over time, over somebody's career because early on in my mind's eye, I see junior account managers defaulting to whatever their comfort zone is, which is to involve too many people in the meeting as a default or to go it alone. I think it's just one of those things that comes with age and experience and time where you learn when it's appropriate to bring somebody in.

David: Yes, you might've gotten burned too. That was a good way to learn. [chuckles]

Blair: Always is. Principle number four, an account manager knows what questions to ask.

David: This sort of turns things on its head because I think we're under this wrong impression that strategists, researchers need to have all the answers, even if they have to go look for them. That's just not how I feel. I feel like the answers are usually there somewhere. The skill is in asking the right questions and that can be learned really well. A subject matter expert already has a lot of the answers and knows where to find the rest of them. An account manager knows what questions to ask. They're not caught off guard because the client is asking some very difficult question and they feel the pressure to answer it correctly. No, they can turn that around.

You learn so much more by going deeper and asking better and better questions than by having all of the answers. If you start to think of an account manager as the best question asker, that doesn't demean their role in the relationship. They are the best question asker. The subject matter experts that you might bring in are sometimes the best question answers, but not necessarily the best question askers. I just want to shine a light on what it really means to be a great account manager. They don't have to have all the answers, but they have to have really good questions and that is a skill to learn.

Blair: That's an interesting way of thinking about it. I like how you break it down. I spend a lot of time thinking about how the account manager role relates to sales, how new business development and account management, there are some skills obviously that overlap. One of my beefs with salespeople generally, and I think this is across the discipline of sales across numerous industries, is they see themselves as the person with the answer rather than the person with the question. I like the way that you break it up, that the account manager is the person with the question and the SME or strategist is the person with the answer. That's a great way to think about it.

Principle number five on your list of six principles, great account managers are too accessible to be viewed strategically. This is interesting.

David: Yes, this is my blanket excuse if I piss too many people off. What this allows me to say is that "Okay, account managers, you're really strategic. You're just as strategic as the other people, but clients won't see you that way." I really do believe that. I do believe that some of these account managers are really good, but the reason they don't have the sort of influence they could is because they are too accessible. We can see this principle happening everywhere. By the way, this principle is reversed in developing cultures versus developed ones. I'm hesitant to say that we live in a developed culture given all that's happening nowadays, but for the sake of argument, we'll just stipulate that.

You're an employee, and you're impressing your new boss a lot. Then you're there for five years, and it's like now you annoy them in new ways. They take you for granted. It's just like the person that bounces in and out of a relationship who says the same things that you've been saying there every day somehow gets the glory, and you're looking around and saying to yourself, "What the heck? I've been saying that this whole time." I think this might happen in marriages, too. I'm not sure. It's never happened in mine. You just get too familiar. To be a really great account manager, you have to be very accessible.

That very act of being very accessible means that you are not viewed as strategically as somebody that you bring in, and thus we have two roles.

Blair: I've always thought of this hierarchy of account managers because I grew up in ad agencies. I was hired as an account coordinator. I was promoted to account executive. Then at some point I was an account, it's funny, managers after executive. I went from a coordinator to executive. Then I left, became an account supervisor, then account director, then a director of client services. There's this massive hierarchy of account people in agencies, unnecessarily so. Within that hierarchy, I've noticed that the best junior account people, don't necessarily make the best senior account people for just this principle that you're talking about, but I frame it in different language.

The junior person is in server responder mode. They're in the business of client service. As you have said many times, and I've quoted you, it's sometimes attributed properly, you don't get hired for client service or customer service, but you do get fired for it. These junior people who are in server responder mode, they're taking care of the client. They are readily accessible. When you need that, we'll get that to you right away, et cetera. As you get senior account people over top of them, now we're assuming the account is large enough and there are multiple account people on the same account.

Those more senior people should be less server responder and more challenger-like, more strategist, less available. I didn't really think of them that way, but less accessible to the client. They're the ones who step in, push back, and have a difficult conversation. For that reason, it struck me that in smaller agencies, you get these junior people who are great at server responders. We promote them to senior role and they continue to be server responders. I guess that works in a model where you have an external strategist, does it?

David: It might, but I think you put your finger on the reason why these account people change jobs because they need a whole fresh set of clients with a different perspective, a higher perspective that otherwise they're working with these people that they were waiters before and now they're supposed to be strategists. Sorry, I knew you back then, right? It's just, that's why they change jobs.

Blair: I'd never thought about that before, but that makes a lot of sense. The principle is great managers are too accessible to be viewed strategically. I really like it. That might hurt for some people. Your sixth and last principle here that we'll unpack, the best account people can present recommendations better than anyone else. Why is that?

Blair: I think it's because-- this is where I should probably hand it off to you, but it's because they're really good at sales and they're just selling to somebody that's already on board. They have all those qualities of listening and not pushing too hard and being the experts rather than falling into some sales trap like you talk about a lot. The point I really want to make about this is that you could have other people on staff, these SMEs that are really whip-smart, but that doesn't mean those people are great at making presentations to a client to persuade them of something.

These account managers, that's what they are good at. they can send you to hell and help you enjoy the trip and you just wonder like, "What happened here? I just agreed to that." It again says, "Okay, there may be other people who are better at answering the questions," acknowledging that you're better than anybody at asking those questions, but whoever comes up with a strategy for the client, whether you're running a dev shop or an agency or a PR firm, man, whoever's presenting this needs to have account management skills. I don't care what you call them, but they better have account management skills because that is really rare.

If you think that you are going to effectively combine an account manager and a subject matter expert, another way of saying that is you don't believe in separate account managers. By God, your people better be really good at account management, even if they don't have that title. The truth is that only about 40% of the population has those abilities and the other 60% don't. Here's where this whole thing falls apart for me.

If you expect your subject matter experts to have really excellent account management skills, you are in essence assigning failure to 60% of the people who might work for you. There might be somebody who is just sharp as a tack, but they don't have those people's skills and they cannot partner with an account manager who can cover up for that, then that person's going to fail at your place just because your expectation is that they also be an account manager beyond being a subject matter expert. I'm feeling pretty passionate about this. I guess I just don't see how people don't see this, right? Anyway, that's my end of my yelling here.

Blair: When you say only 40% of people have those skills, what skills are you talking about?

David: The social, outward, relatable, listening skill.

Blair: Got you. As a former account manager, even more so than as the strategist, I would see myself as the client's voice within the agency. We talked about bounded rationality before and I've made the point that it's my belief that people are aligned to the goals of the department they are in, not the organization they work for. If I think back, going back decades now, and I think of media, I think of creative, I think of research, those three big ones, but media and creative would be the big ones. If I put the creative director in front of the client, my fear as the account manager is they're going to sell the client something that is just too creative.

Examples are coming flooding back to me, and if I put the media person in front of the client, they're going to sell a high volume of whatever. Maybe that's not the best example. I was always more comfortable putting the media people in front of the client than the creative person. I always felt like it was my job to balance the inputs of all of the subject matter experts on the team, and I would present them to the client because I felt strongly like I was the only person on the team who actually had the best interest of the client at heart.

It's not that the others weren't there to serve the client, but they were there to serve the client from a very narrow point of view. It was my job to balance everybody's point of view, and therefore, if something was going to be presented, in particular, strategic recommendation, it made sense for me to present it. I would even go further and say that whether this is true or not, I don't know, but in my mind, my clients expected me to do that balancing act, and they would listen to everybody else, and they would look at me and say, "Blair, what do you think?"

Now, whether that was just delusional on my part or not, I don't know, but that's how I felt like the dynamics were working, so of course, it would be my job to present strategy or anything else to the client. What do you think?

David: I don't think I've ever seen quite so clearly that through line between selling as an expert, which you talk a lot about, and then when you hand that new relationship off to an account manager, you're almost saying, "Hey, this is a neighborhood kid of mine. Take good care of him." That's like the account manager, you're saying, "All right, you're in charge of ensuring that this relationship that we hope will last a long time is going to be good for both parties. Do not sell them something that they don't need," and that's what an account manager does. It is sort of like the conductor of an orchestra, but an ambassador in both directions, like you were saying.

I don't think I'd ever seen that throughline before about thinking about the client's perspective as well. It's not the most important job in a firm. I think that's project management, but it is absolutely the most difficult job because it's like you're getting your paycheck from the firm, but you are doing what's in the best interest of the client, and sometimes those clash. That's what it means to be an expert is to balance those two things all the time.

Blair: I used to always say brand first, client second, agency third, me fourth. I know I was the only one in the team who was putting those priorities forward in that order. I'm reliving some moments from my past, as I always do when we talk about account management. Once again, David, this has been great. I'll just read these six key principles of delivering strategic guidance through account managers. Number one, no client interaction should occur without including the account manager. I think we all agree on that. Number two, we should not shield other employees from the client. These are seemingly contradictory, but they're not.

Number three, knowing when to involve an SME, subject matter expert, or strategist is a critical skill. Number four, an account manager knows what questions to ask. Number five, great account managers are too accessible to be viewed strategically. Number six, the best account people can present recommendations better than anyone else on the team. Thanks for this and the trip down memory lane once again.

David: Thanks, Blair.

Blair sees four common behaviors when business owners are looking to get deals moving in times of economic decline, stagnation, or uncertainty that end up doing long term harm to their positioning and pricing.

Links

"Four Ways to Commodify Your Offering" by Blair Enns on WinWithoutPitching.com

"Phase Your Client Engagements" 2Bobs episode

Transcript

David C. Baker: You remember, Blair, we did two podcasts that were spoofs. One was on your website, the other was on the perfect proposal or something?

Blair Enns: Yes.

David: I wonder if this one ought to be better? [laughs]

Blair: Oh yes, this one should come with a warning.

David: How to commodify your offering, as if we want you to do that.

Blair: I guess maybe we change the name of this episode because people looking at it going, "I'm not interested in commodifying my offering." You shouldn't be.

David: How not to commodify your offering.

Blair: Listener, as of this recording, this title is called how to commodify your offering, but it may change by the time it goes to air.

David: The thing I like when I get the notes from you send them a few days ahead of time and I look through them and the first thing I do is I try to guess your mood and it's like, "Geez, you were a little full of yourself with this one."

[laughter]

David: Some of it's self-deprecating, but some of it is like, "Dang, I'm funny." That's how you're thinking about yourself.

Blair: Oh my God, I don't know what you're talking about. I may have been high when I wrote these notes.

David: It was something like that. What we're talking about in this episode is four ways you might not want to commodify your offering, and so here are the warnings about how to do that, right?

Blair: Yes, that's right. I think in times of economic downturns or uncertainty, which I think as of this recording, late July of 2024, that would be one of those for most of our audience. I think we push and pull on all the sales levers that we have. Some of those levers, the things that we push or pull on, depending on what it is that you do with the lever, the goal is to increase sales, but it causes some damage, some collateral damage.

A common form of collateral damage when we're trying too hard to generate sales is we water down our positioning. We end up commodifying what we do. We take what we do, which in our minds, we should see it as something that's very unique and specific to our firm and not easily replicable or substitutable by the offerings of other firms, but in the things that we do, we actually send these messages to the marketplace that what we do is just like what other people do, and it's probably not worth as much money as we're asking for it.

David: "Please hire me. I'm not desperate." I'm struck by how, without thinking about context, you might ask yourself, "Why in the world would I ever do this?" You mentioned a few minutes ago the time period we're recording this in, which is not the best time for the industry, and so you know in your heart and your head, "I want a really strong long-term business, but I've got payroll right now," or, "I just lost this big client, so maybe I'll eat away at this reputation that I've slowly been building over the last seven years," and these temptations are real and they're natural. They're the kinds of things that no matter where we're positioned, we all face these things. They're real.

Blair: Yes, agreed.

David: The first one is sell thinking in units of doing. Sell thinking in units of doing. This one, if we were going to anticipate what would be on your list of four things, we know this would be on here and this one's first.

Blair: I've talked about this before. We did an episode called Phase Your Client Engagements, where I talked about the four phases of your engagements with your clients. They are diagnose, prescribe, apply, and reapply. You diagnose the problem or situation, then you prescribe a solution, then there's the initial application of that solution, of that therapy in medical terms or solution, and then ongoing reapplication is necessary.

Those first two phases, diagnose and prescribe, are what I call the thinking phases. Then the second two phases, apply and reapply, are what I consider to be the doing phases. The mistake is to sell the first two, diagnosis and/or prescription, which together I would refer to as strategy, to sell those thinking services in units of doing, and that means charging by the hour or by the day.

David: I refer to that sort of as room one, the first two, diagnose and prescribe. I'm going to say this, but I'm not sure you'll agree with it, so tell me, but that's why you might productize the first two because in productizing a service like this, you are unhooking it from certain specific units. It's like, "We're going to do this for you, here's the cost, you're not thinking about how long it takes."

Blair: Yes, productize is a bit of a trigger word for me and it probably shouldn't be. I need to get over it, that's my shortcoming. I think you're right, I think they should be productized, meaning you should package up a standard diagnostic service or a standard set of diagnostic services. What causes my hackles to get up is the corollary danger of pricing those products.

Now, that's not a universal danger in some businesses, in productized businesses it makes sense to price the product and not the service, but for most of our listeners, certainly not all of them, and less of them as time goes by, but still for most of our listeners, when you package up a service like that, you should not put a standard price on it, you should continue to price the client, but yes, you're right, you should have a standard diagnostic product or service and it should be written up in a one page description, you should be able to share that description with the client and say, "Here's how we begin, here's what we do, there should not be a price on that and you should price the client."

David: Something I noticed recently that I'd never noticed before is that PR firms around the world and video production firms all around the world typically price by the day, but all the other creative service firms in the US and also dev shops are more by the hour, but those same firms overseas in Western Europe are by the day, it was sort of an interesting thing. Whether it's by the hour or the day, it's still a unit, it's still charging by a particular unit and you're arguing that should be uncoupled. You've got a thought here about whether certain people's labor should have an hourly rate attached to it and you make a distinction there.

Blair: I'm imagining a scenario where you're getting pressure from the client to put an hourly rate on thinking, which when you think about it is really just a silly idea. They're trying to measure something, but it's like the drunk looking for his lost car keys under the street lamp, not because that's where he lost them, but because that's where the light is good. That's the old joke. They're trying to measure something, even if it's just a ridiculous thing to measure. I'm imagining that scenario, you, the listener, you're getting pressure from your client. You've quoted say $20,000 for the initial thinking work, whatever you want to call it, strategy.

Now, I'm keenly aware of a recent episode we did, have we hit peak strategy? Whenever I use the word strategy--

David: This is going to bite you in the butt.

[laughter]

Blair: What's the sign of an advanced mind is the ability to hold two seemingly opposable ideas in your mind at the same time and still be able to function? That's my fallback. I'm imagining the client pushing back saying, "No, break out the strategy for me." They might be as indirect as that. "Just break it out and show me how you arrived at the cost," or they might be more direct and say like, "What's the hourly rate on that?" You want to push back and say, "We don't charge for this by the hour."

If your firm is large enough, ideally you want to be in a position where you have certain people, if you do in fact have billable people, if you are selling time at all, and that's a conversation for another day, but if you choose to do so, and your firm is large enough, you would have your key people like your strategists and maybe your creative director not have an hourly rate. You're in a position to be able to say to the client, "We can't break this out. We don't sell thinking in units of doing and the people who do this type of work, they don't even have an hourly rate. I couldn't even do that for you if I wanted to." That's the position you want to be in.

Now, a lot of listeners would have personnel that would execute on the more thinking phases of the engagement and the execution phases so that argument goes away. In those situations, you just simply say, "We don't charge for thinking in units of doing." If a client says, "How do you come up with the price?" I've modeled this language before. You would simply say, "This is what we charge for clients like you for work like this." That opens the door to other interesting conversations. "What do you mean clients like us? Would you charge us more if we were larger?" "Yes." "Unless if you were smaller?" "Yes."

David: There's more at stake, less at stake?

Blair: Yes, there's more at stake. We've covered this in other episodes on value-based pricing. The listener can go back and search for those in their podcast feed. When you think about it, the first way to commoditize your offering, and I say this in the wind without pitching manifesto, the fastest way to commodify your thinking is to sell it in units of doing. You think of it, it's really just silly. The idea that you are selling thinking in the units of how long it takes. They're just wild, ridiculous guesses. Why don't we just cut it out with the lies and the guesses and just put a price on it, however you care to put a price on it and don't feel like you have to justify that to the client.

David: I've decided that I'm not going to sell my thinking by the hour anymore. Of course, I actually respond to about one email a week saying I don't do hourly stuff, but I'm going to start selling showers for $4,000 because that's where I come up with my best ideas, doggone it.

Blair: You're saying for $4,000, the listener can shower with you?

David: No, no, no, no, no. Let's just make this clear.

Blair: You're going to starve?

Blair: It's $8,000 if you want to shower with me, $4,000 alone. That's the first one, sell thinking in units of doing. That's one of the quickest ways to commodify your offering. The second one that you have here out of four is cut price early and without reciprocation. I expected the first one. This one I really, really love because it's something that we need to be reminded of a lot.

Blair: I think I've said in two books, and I think it's probably in the third book that's coming out shortly, I don't think you should cut price to win new clients. I think you save price discounts for your very best clients who need a break. Every rule deserves to be broken. If you are going to cut price, there's a right way to do it. The way to do it, the proper way to cut price if you are going to cut price is to effectively not negotiate with yourself. You know the phrase, "Don't negotiate with yourself. "What that really means is don't cut price when you aren't absolutely sure or as sure as you can be that cutting price will lead to closing the deal.

I think I spoke about recently in an episode me buying something and the salesperson doing a stellar job. I was in admiration of how they were navigating the sale. Then at the first obstacle, they just cut price. They cut price by a third. It was crazy and I still haven't bought. I still intend to buy and I know I'm going to get not only the cut price, I know they will go lower. I know I will get my price. You don't do that. What you do if you are going to cut price is you simply trial close first and you make sure there are no other obstacles to doing the deal that you would have to remove before cutting price.

It simply sounds like, "If I were to be able to give you that deal, then do we have an agreement, or is there something else standing in the way?"

David: I would say, "Oh, I would do that deal." Then you'd say?

Blair: I would make sure, okay, there's nobody else. There's nobody else that needs to approve this. You don't need to run it past somebody.

David: Of course, you still don't believe me yet, but I would say nobody.

Blair: There's nothing else you need because I'm just making sure, like if I were able to get you that price, and I'm implying that I have to go back and see somebody to approve this, but if I were able to get you that price, we have a deal. Great, we'll sign today. You say to me, "No, no, I'm telling you, Blair, you give me that price, we've got a deal." If you're going to cut price, that's when you would do it. What I mean is the fastest way to commodify your offering is do what this salesperson did to me recently that I keep talking about is to cut it really without provocation too early and without getting the appropriate quid pro quo, which is, "If I'm able to do this for you, will you sign off on this today or is there something else you need to do?

The answer would have been, "There's a little bit more work we need to do, but we're not buying today." That's what he would have heard from me. Then the appropriate response would have been, "When you're ready to buy, when you get these two or three things done, and it's time, come back to me and we'll have this conversation again." He should not go there now and signal his willingness to cut price, although he is signaling that it is on the table for discussion, but he's not cutting price before it's appropriate to do so. That's what I mean. You'll commodify your offering by cutting price early or without reciprocation or this quid pro quo of, "If you give me that price, I will sign."

David: I'm picturing the auction for some farmland next to ours that was two months ago, I think. My wife and I wanted to buy one of the lots and we put our heads together. We went and visited a bunch of auctions just so we wouldn't get taken advantage of. Alas, that didn't work. Anyway, and then we said, "We think we can go up to $20,000 an acre for this small lot.

The bidding went up to $42,000, and that's it sold at $42,500. We lost out on it, which is fine. I'm picturing myself as being the only person at the auction rather than the 49 people who were there and saying, "I'll bid a little higher here, but will you give me this?" It's like being the only person at the auction and keep outbidding yourself. It's just a ridiculous concept. Hey, I got one question. Is the person that you're negotiating with, do they listen to this podcast because you might be screwed?

Blair: Every time I mention this person, I run that mental check. "I wonder what the likelihood is that he listens to this podcast. I might be screwing myself."

[laughter]

David: The first is self-thinking in units of doing. the second is to cut price early without getting something for it, and the third is to use tech to scale your delivery?

Blair: Yes, the first two are the most common patterns I see. You know what's not on this list of four ways to commodify your offering? Pitch it for free.

David: Oh, yes.

Blair: You would think the win-without-pitching boy would put that on the list. I think it's just so obvious it didn't merit talking about. These next two, these are the more obscure ones that maybe people wouldn't have thought of. This one of use tech to scale your delivery.

I'm really at a loss to think of good examples beyond the one piece of technology that is online courseware, but I cannot tell you how many times I've had the conversation in the last five or six years, I think it was pretty common during COVID, where I talked to an agency principal whose sales were down, and they had this point of view, this knowledge on how to market or whatever it is they do for whomever they serve, they've decided to launch a course. The idea is we can't charge much. It's not like an advisory engagement or us being hired to execute.

David: There's a lot of people who need our stuff but can't afford the way we normally do it, but they would buy this. That's what they're thinking.

Blair: Yes, that's exactly it. We'll charge a little bit of money and we'll get a higher volume. The volume never comes. These models of essentially productizing your services, driving the price way down, they work when you drive the volume way up. In a typical agency, creative firm, dev shop, et cetera, whatever it is, there just is not the volume to support that. Five, six years ago, I started saying to people who would inquire about this approach with me, usually clients of ours, I would say, "Be careful. The mechanism by which you scale your offering is also the mechanism by which you will commodify it." That is one of the more genius things that has accidentally come out of my mouth.

David: What you said in your notes to me was this quote by Blair Enns', boy, genius.

[laughter]

David: That's why I thought you were full of yourself.

Blair: That's what you meant. Point made.

David: There's a couple other references in here too. I know exactly what you're talking about. Sometimes I'll come around and say this, but when I don't even come out and say it, I'll think it is like, "Yes, the world needs another one of those."

Blair: In the notes here, I said, "Remember SurveyMonkey?" Some of the listeners might not be old enough, but when online surveys became a thing, and it was like all of a sudden you could so easily deploy surveys to your clients and prospects, we were drowning them. Everybody was sending online surveys to everybody else and nobody was filling them out. It was like e-greeting cards. This is going back, I don't know how many decades now, when this became a thing, "Oh, man, I can just email a birthday card to somebody by going to ecard.com," or whatever it was, then we were all inundated with these stupid e-cards. We were inundated with stupid surveys.

Now, I put in here, remember Kajabi? Still a thriving business. Online courses became relatively free and easy to deploy. Now, we're drowning in them. What the market says is, "The billion-dollar idea packaged in a book is worth $25. The billion-dollar idea packaged in a self-guided course is worth $47." That's what the market says. There's something about the way you package your advice or your IP and deliver it to the market that signals what people should pay for it. "We'll just do a self-guided course, if we can just get 1,000 new students a month," and then you end up getting 1 or 4 or 40.

David: There's something about this field that deeply understands innovation, and usability, and quality, and creativity, but does not understand funding and scaling and marketing and basically just what it takes to bring the huge audiences to something like this. It's not as if the courses that people are creating aren't fantastic, it's just they don't know how to create the demand for it.

Blair: My friend, Mike Lander, pointed this out to me a while ago. A big Fortune 500 company did some research on the value of training. What they found is that about 15% of the value is in the training itself. That's human guided training, not self-directed training. I would say the likelihood of your self-directed course catching on, first of all, to your point, you're going to have to fuel this with all kinds of marketing dollars.

You're going to be adding to the coffers of Facebook and Google via AdWords at an even faster pace. It's an entirely different business model, not something that you can dip your toe into. We're a training company and I know how hard it is to sell a massive volume of training to just dabble in it and have the revenue, a, be meaningful, and b, more pertinent to this conversation, not commodify the value of your core offering, it's really difficult to pull off. MOOCs were big a decade ago. MOOC stands for Massive Open Online Communities. This is like Coursera and I forget the other ones, but these massive training companies where you'd have hundreds or thousands of people piling in to do these online courses. I just wanted to point out that the M in MOOC stands for massive. For this to work, you need so much scale. If you don't get that scale, what you're going to do is you're going to cheapen the content of your offering.

David: Not make a lot of money off of it.

Blair: Now, a self-directed course of some kind as a lead magnet, that is a different kettle of fish. I'm not dismissing that, I'm just saying that if you're doing it to generate leads rather than generate revenue, that's more valid, but it's still going to have the negative effect. You start giving your thinking away for free or for $47, what does that say to the audience about the value of your consulting services or your advisory services?

David: You're putting downward pressure on it, so in the spirit of an own goal in football, you remember when these surveys came out, a friend, you and I, the three of us, put together 132-question survey.

Blair: Oh, yes.

David: [laughs] We were shocked at more than 100 firms answered it. We were right on that bandwagon too. The first one is sell thinking in units of doing, don't do that. Second one, don't cut price early without getting something for it. Third, which we just talked about is to use tech to scale your delivery. The final one is to use your efficiency advantage as a reason to hire you.

Blair: Yes, this is maybe the less obvious one, probably not as obvious as using tech to scale your delivery, it's basically using technology to scale a production advantage or to deliver a production advantage. That's obviously something that we should all be looking to do. In the brand new gold rush of AI, everybody, every listener to this podcast is almost certainly using AI to explore some sort of production advantage, to get work done faster.

We should all continue to do that. It's a fun thing to do and it's yielding some advantages here and there and some dead ends elsewhere, but the mistake I'm talking about, what everywhere is we are an AI-backed, blah, blah, blah. We use AI too. That's all fine because AI is the latest bright, shiny thing, so there might be some advantage to that. In fact, I was reading a website yesterday, somebody referenced, I pulled it up, and I caught my positive reaction because this service that's described on the website, I won't even say what it is, but it said, we are an AI-enabled blank, essentially service provider. I thought, "Ooh, they use AI."

Then I caught myself and started laughing. Everybody's using that claim. Everybody's using AI to some extent, but the point I want to make here is if you are using AI or any other technology to gain a production advantage, the last thing you want to do is openly leverage it as a reason to hire you. "Hire us because we use AI to do work quicker." Because that message says to the buyer that your costs are lower, and the buyer says, "Those savings are mine." The larger the buyer, or the more sophisticated the buyer, the more likely they are to claim those savings as their own.

If you are using AI or any other technology to bring yourself a production advantage where you can do work cheaper, the best thing to do is to not talk about it.

David: "Let me buy a 12-core Mac, so I can do Photoshop faster and charge you fewer hours." It's the same sort of thinking. I was shopping for a massage chair yesterday. Mine died after like eight years.

Blair: You have a massage, how old are you?

David: I'm 39. Shopping for a massage chair. The high-end ones were all AI massage chairs. It's like, "What? Tell me what AI is doing for me here." Pretty soon, the most valuable things in the world are going to say, "Free of AI. No AI involved."

Blair: My washing machine still has the blinking Wi-Fi light on it that says, "Hey, I'm not connected to your Wi-Fi." It drives me crazy. like what were we thinking when we thought we needed our washing machine to be Wi-Fi enabled? I'm waiting for the AI washing machine. I won't use the AI, but they're going to use it to charge more. Sorry, go on.

David: What's another example of this besides AI? Does anything come to your mind in terms of how we might tout something we're doing as if this is a significant advantage? What was it before AI?

Blair: It's any production advantage, so offshore labor.

David: Oh, right.

Blair: If you have a labor advantage, or you've built some special software internally. There are a lot of infrastructure plays where an agency develops its own software. I think the first ones you and I were aware of were around timekeeping or project management. Then they decide to spin these off into separate companies. That's all fine. Bragging about production advantages of any kind is not a wise idea unless there's a corollary drop in price.

If you're using a production advantage to go to the market with a more competitive price, then absolutely leverage that. I referenced our friend, Matt Bishop. He owns an engineering company in New Zealand, and he's got a engineering product company called Penguin with an R in front of it, where they use AI to generate engineering drawings. They're pretty open about it because they use the technology to deliver it in less time at less price, and that's something they want the market to know about.

Unless you're doing that, building a new business or your pricing strategy is to put pricing pressure on your competitors by leveraging your cost advantage, then do not talk about your production advantage, even though it is the bright, shiny thing that is AI.

David: It's okay to talk about the production advantage if you are intentionally doing it to lower the price. If you want to make more money and hold more of that profit, then don't talk about it.

Blair: Yes, or if you have built some black box technology through AI that is a production advantage and also a sales advantage, by that is you can legitimately or confidently make the claim that, "We can do something that our competitors cannot. We have built a better mousetrap by using this technology," and there happens to be production advantage implications, that's okay too. You go to the market and you can keep that extra margin but this AI arms race is happening pretty quick. The idea that you're going to have a sustainable technology advantage for too long, I wouldn't bank on it.

David: I've helped quite a number of clients over the years develop their own unique proprietary IP. The way we'll inevitably talk about it is that this helps them arrive at a higher level of certainty quicker. The key there is higher level of certainty, so whether it's testing some sort of package thing, or whether it's like a more scientific way of interviewing people, or something like that, it arrives at the truth quicker, but the key in that phrase is truth, and, "Oh, yes, it happens to be quicker, but we're not charging you less for that. We're actually charging you more because it's more accurate."

Blair: Yes, and I think to your point, as you were describing it, the real advantage to the client is not that it arrives at the truth quicker, that it arrives at the truth with a higher likelihood of certainty. It's either a better-quality outcome or a better likelihood of a high quality outcome. Implied wrapped up in all of that often is speed to those outcomes too but the advantage to the client typically is in the likelihood of high quality or the quality itself.

David: All right, so let me wrap this up and give you all the four things again. Don't sell thinking in units of doing, that's typically hours or days. Don't cut price without getting something for it. Third, don't launch something that you're supremely confident of selling at a massive scale unless it's really going to be high volume. In other words, the same technology that you can use to spread something is also what might commodify it. Then don't use production advantages, like AI is our big example, as reasons to hire you unless you're openly using it to tell a saving story. Have we summarized it correctly there?

Blair: Yes, that's four ways to commodify your offering. Again, to be clear, we do not want you to commodify your offering. These are things that you should think twice about doing. The fifth one that I felt like it went without saying, but here we are saying it is, for God's sakes, if you're pitching your highest value product for free, what are you saying to the marketplace about the value of that product?

David: Thanks, Blair.

Blair: Thanks, David.

Every few years we’re told that we need to move on from using email newsletters as a part of our marketing platform. And David says that advice has always been wrong.

Links

David’s article on Punctuation.com (subscribe to his newsletter at the bottom of the page)

“Email is the Most Consistent, Reliable Marketing Channel on the Web and I Can Prove It” by Rand Fishkin

Transcript

Blair Enns: David, I have a question for you that I've put to many of our clients. If you had to go all in on one lead generation mechanism, you had to take all your lead gen chips and go all in on one square, what would that square be? Before you answer, obviously, the subject of this episode is, are email newsletters even viable anymore? I'm not necessarily setting you up for the email newsletter answer. I honestly don't know what your answer would be, but if you had to go all in on one and you couldn't do anything else, what would it be?

David C. Baker: I would hire one of those guys that rides around neighborhood on a bicycle for the Latter-day Saints that just sells like crazy or a used car salesman.

Blair: The guy with the spinning sign at the side of the road. [laughs]

David: That one, I like that one. Yes. Oh. I would actually say a book. If I was capable of writing a really good book, that's probably where I'd put it.

Blair: Yes, because you're so horrible at writing books, but go on.

David: [chuckles] For something that's definitely in my wheelhouse and available to people, it would be email marketing in the mix for sure. A lot of it has to do with the industry in particular, right?

Blair: Right.

David: Email marketing for a fashion firm, that'd be a little bit different, right?

Blair: Right.

David: It fits me because I come from an academic background, and it doesn't necessarily fit anybody. Actually, that's one of the important points. When you and I look across the stable of the very successful clients we've worked with individually or maybe together, there's thousands of these firms out there, and you and I know hundreds of them that have no disciplined marketing plan are very successful.

Others that are just really great at networking or they rely on referrals or they do email marketing, or they do digital SEO, SEM spin, something or other. I'm not saying that you have to do this. I'm just saying, really, let's quit saying that email is dead. Email is still just as relevant as it ever has been. There's some unique qualities about email that make it that way.

Blair: You've got a list of reasons why email leads all other marketing options. Before we get into that, let's pick apart your business a little bit more. You write an email a week and you've been doing so for-- Maybe the weekly cadence is a few years now, but beyond that, how many email newsletters, if we're using that old term, do you think you've sent in your career?

David: Oh, goodness. I have them all. I've saved them all. I hate to go read those early ones, it's pretty embarrassing. Yes, from '96 on.

Blair: Did they even have email back in '96?

David: They did, but there weren't any ESPs. I had a server rack in my home with a T1 line. We had a DNS server, a web server, and an email server. That's how it started. Then it's just migrated since then. Hey, here's a question for you while we're thinking back in time. What's the largest computer disk size you remember? You remember three-and-a-half-inch disks, right?

Blair: I remember the five and whatever floppies.

David: Five and a quarter.

Blair: Yes.

David: That was earlier. Then do what was earlier than five and a quarter inch?

Blair: The first computer I had was a TRS-80 with 4K of RAM.

David: Yes.

Blair: The disk was an external audio tape cassette drive.

David: Oh, wow. Yes. Eight inch was before the five and a quarter.

Blair: Eight-inch disks.

David: Yes. Then they went to five and a quarter, then three. Then, of course, disappeared. What's interesting to me about all of this is just thinking through all the technology that is not a part of our lives at all, but the technology where you can see a thread all the way back. Email is one. The other is discussion boards. I used to log into a discussion board, this was 35 years ago, and get updates to software. Those two things are still here. Just because something's been around for a long time does not mean that it's no longer relevant. Email is smack in that category.

Blair: Yes. Let's go back up and set some context. You say here in-- I don't know if this is a blog post that you've written already.

David: It is, yes. It's out there. Yes.

Blair: It is. You start with the goal of get famous however you can. Are you saying that's the goal of your marketing, is to get famous?

David: Yes. Get famous so the right people know about you for the right things at the right time. That's really a simplified way to think about it, and there's just lots of ways to do it. How you decide to do it has a lot to do with where you focus because people gather in different places based on your focus. Your personality as a person, that has to be factored into this. The assets that you bring to the table.

Then the other one that I've been thinking about a lot more than I used to is, do you have more time or more money at the moment? If you've got more time, then you probably ought to do this, figure it out for yourself. If you've got more money and you're really busy, then you probably ought to just job it out to somebody to do. Those are the things that you would weave into your answer about how to get famous. Whatever that answer is, it doesn't have to, but it might involve some sort of email marketing because there's some pretty unique advantages to it.

Blair: Yes. As you pointed out, if you're a marketing firm focused on fashion, probably email isn't the way to go. There might be a role for it, but probably Instagram or even TikTok, something more visual might be more appropriate for you. If you're an interior designer, you're almost certainly using Instagram. This isn't universal. You're not universally saying that everybody should see email as their primary marketing channel. Your point is that it's been here forever, but it's still one of the best channels. Of course, it depends on these variables of your personality, whether you have time or money, the nature of your focus or specialization.

David: Yes. When you look into the future at what's going to happen, what'll happen to social media if some of the laws are changed, or what'll happen if TikTok is banned? You look at all of these things and you're not really sure how to paint it, but there is no signal at all that email will not be just as relevant into the indefinite future as it is right now. I just don't think it's much of a danger to incorporate it if it happens to make sense based on all these factors that relate to you personally.

Blair: Yes, there's this line, I think you quote it, maybe it's Rand Fishkin. It's not his line, he quotes it from somebody else, the enshittification of the internet. It's not just the internet, but it's the various platforms. It's almost like it's this inevitable cycle of these new platforms come out and they're amazing, and look at the audience you can reach and look at the engagement. Then more and more it becomes harder to reach, it becomes more pay-to-play. Our friend, Philip Morgan, wrote a great post on this a couple years ago. We've cited it a couple of times. I think it's called When the King Gets Hungry. It's really about the platform owner sees everybody monetizing the platform and they start to take that money, and they start to monetize it more and more. These platforms that start out as amazing, at some point, you realize, "Oh, my audience on this platform isn't really my audience." That's not the case with email, right?

David: Right, it's not.

Blair: People have this urge, they think, "Okay, I should do some more thinking," and they decide to do some writing. They don't want to set up a blog or whatever, so they just go to Medium, which would be the logical choice, and they start writing. Then they decide to move it maybe to Substack or something and they realize, "Oh my goodness, those were not my subscribers. Those were Medium subscribers that were directed to me, but they own all the SEO juice," right? The thing about email is this is mine.

David: The other thing that we've talked about multiple times on here is Gini Dietrich's model, her PESO model, paid, earned, shared, owned. This is an owned category. That's really why it's so unique. This would be true of almost any other owned category like a podcast, for instance. There's still some aggregation and some discoverability issues, so let's say if you put your podcast on Spotify.

Blair: Yes, that's what I was thinking about. It's like podcast was basically RSS audio, and I guess technically it still is. It was this thing that you owned where you owned the platform. Now you're having this consolidation primarily on Spotify. You and I have never talked about this, but I do have this sense of losing control of the audience via podcasting. Maybe that's a topic for another day.

David: Yes, right.

Blair: Okay. Email leads all the other channels, all the other options. The first reason for it is that you own it and you can't be deplatformed. Your next point here is that there's an expected response path. What you mean by that is just hit reply?

David: Yes, exactly. You just hit reply. Now, of course, sometimes it's going to go to an unmanned address, right? Most of the time, you can just hit reply.

Blair: I get your weekly email.

David: I wish you read it. I know you get it. I wish you read it.

Blair: [laughs] If I reply to it, does that go to you?

David: It goes to me and Jonathan together, and then whoever needs to reply picks it up.

Blair: Got you.

David: When I sent this newsletter out as a weekly email, I said, "Hey, hit reply. Try me out." A lot of people did with comments or questions. That's beautiful. You're listening to a podcast and there isn't any response mechanism.

Blair: Just go ahead and hit reply, folks, and we'll get right back to you.

David: Right. Yes. I love this. If you actually want to have a conversation, a relationship with your list, this facilitates it. Very few other things do.

Blair: Yes, that's a really good point. As you're saying that, I realize there's some times where I think, "I don't want to read the replies to this." There are other times I'm really, really interested in. I should just take it all. It's part of the package. It is one of the benefits. It's like when we used to allow comments on blogs. Do you remember that?

David: Yes, I remember that, but it's a very painful memory. Let's not go down there. [chuckles]

Blair: Yes. I was actually thinking of enabling that again. I was on somebody's blog and they had comments, and I thought, "Maybe it's time to go back and revisit that idea," because of the response path idea that you talk about, the value of email here.

David: In some cases, yes. There's a lot of things I subscribe to where I'm just as interested in the conversation afterwards. I would say Freddie deBoer or Matty Yglesias, I read the comments as much as I do read the articles. What terrifies me is that I'm afraid that the comments to a blog post will not support the image I'm trying to convey. That's what scares me.

Blair: Yes, you don't want to give a platform to idiots. What else is on your list of reasons why email leads all the other options?

David: The other one is that email provides a pretty reliable feedback loop. It's not as if open rates are all that scientific, especially after the change that Apple made to their mail program, how they record, how do they classify and open. Still, it's comparative. Like on my list, I'm looking at a few things. I don't want any spam complaints ever. I want an unsubscribe rate of less than one-fourth of 1%. I want the net size to hold steady or rise, accounting for the people who unsubscribe and the new subscribers.

Whatever my open rate is or click-through rate, whatever, it may not be all that accurate, but at least it shows me a trend, and that's really good. You can do the same thing with your podcast. That's even audited, so it's just as reliable, maybe even more reliable than the email thing. How are you going to do that with the other forms of media? I just like the fact that there's a feedback loop. As you write an article on something and your stats dive, quit writing stuff like that. Write better stuff.

Blair: Yes. My stats say never put the S word in the subject line, sales.

David: My stats say never write about financial management issues, but I am determined to shovel vegetables on people's plates and not just feed them steak, so I don't really care. You're still going to get it.

Blair: Yes. That's interesting. Okay. Now, the benefit is everybody uses the medium.

David: Right, doesn't everybody have one?

Blair: Yes, and your point is there are no exceptions to this. Does anybody know anybody in business who is not on email?

David: If they are, would they ever buy from you?

Blair: Yes.

David: [chuckles] They're living somewhere in a jungle, right? They would kill you. They don't want your email. It just struck me as so odd. I wouldn't go to all this trouble for just a single unknown prospect, but I can find pretty much any adult's email anywhere. All you have to do is give me one email that they've used somewhere in their life, and I can find the rest of the emails they use.

The same is true for a phone number. Everybody has a phone number that you want to reach, but there's still something very different about calling somebody out of the blue, right? I hadn't even thought about this until I was writing this article. I was like, "Wow, every single person has an email address." Not everybody subscribes to cable TV,

Blair: Yes. I don't. Not everybody's active on LinkedIn. I'm on LinkedIn. I'm not on Instagram. I'm not on Facebook. I just deleted Twitter/X from my phone just because I'm not using it, and I thought, "This is a bit of a dud. I might come back to it someday if it becomes useful to me again. It's not a principal thing, it's just a usage thing." When you think of this, I think in the town we live in, Colette and I are seen as, "Oh, you're the people who aren't on Facebook." I just assume nobody's on Facebook because I'm not on Facebook, but that's not true. Clearly, I think there's five billion people on Facebook, but everybody's got email.

To your point about you can get an email address, listener, if you need to find anything on the deep or the dark web, David is your man. I'm often asking him to go get information for me. I don't know how he does it or where he gets it, but he gets it, anything you want.

David: [laughs]

Blair: Background checks on your babysitter. Whatever you need, man. It's also cost-effective. Do you remember the discussions where people were talking about, maybe we'll charge a cent in email-

David: Yes.

Blair: -and that would keep spam down? It's basically free, isn't it?

David: It really is. If you're subscribing to something like MailChimp, you're going to pay more for a bigger list, but that's just so meaningless. It's basically just a trivial cost it doesn't matter, especially in the scheme of things. Oh my goodness, we just did an analysis recently and we have a return on investment in our LinkedIn advertising. For every $30 we spend, we get about $100 worth of work from it. That's good. Then you think, "Wait a second, you mean your marketing budget is 30% of your income? That's bad." If you did the same analysis around email, it would blow you away. You'd never buy another digital ad in your life. From a cost-effective standpoint, it's amazing.

Blair: Yes, we're not talking about what's in the content of that email, but we'll get there. Another point, re-engagement, right? People go quiet, just park them for a little while, and then go back to them.

David: Yes, right. Whereas let's say you say to Facebook on your Facebook feed-- I don't know if you've never seen this because you're not on Facebook, but you can say, "Hey, I don't like this ad, don't show it to me again." Then they'll say, "Hey, do you want to tell us why?" I said, "No, just quit showing it to me." It's never going to show up again, right? It's gone.

Somebody unsubscribes from my list, I still have their name. I forget what the exact details are, but I think legally, you can try to re-engage them later. Anyways, however you feel about that ethically. The fact is that you can still try to reach them. You can re-engage them. Maybe they unsubscribed for some weird reason or whatever. You can't necessarily do that. If somebody quits listening to your podcast, you don't have any way of reaching them five years later.

Blair: Yes, great point.

David: Last one is scalability. I don't know if that's the right word here, but it's something that you could write something that resonates with your audience, and it takes no more effort to send it to 10,000 people than 2,000 people. That's what I mean by scalability there. It's powerful.

Blair: Continuing with our advocacy of spamming as a marketing approach.

[laughter]

David: Yes.

Blair: These benefits, some of these are the reasons why your inbox is just filled with garbage, so what's in the email is just as important. Let's talk about that, critical components of the strategy. Walk us through the key elements of how you should think about the content and other elements of your email strategy.

David: Yes. I think I've got five points here. The first one is there should not be any news in your newsletter. It's an unfortunate term. I don't know what else to call it. When you say newsletter, everybody knows what you mean, but there shouldn't be any news in there.

Blair: Yes, news about the firm, unless maybe it's a PS. Can you put a PS in there?

David: Yes. You can even have really relevant stuff, you won an Emmy or something. Yes, obviously, you want to tell people that, but the most recent hire or the award you got for doing something for some other client, that stuff doesn't change people's world. You ought to have a segmented list like grandma and your former classmates who thought you'd never amount to anything. You send stuff to them and brag about what's happening. First thing is no news. Second is really usable insight that is going to be tied closely to your positioning/. It shouldn't be the insight that just anybody could write. It should be the insight that's tied to your positioning.

Third, and this one I get a lot of questions on. Actually, this was the one reply in various forums that I got the most of after sending this out, and that's how does it make sense to give away all your stuff? Then they don't need to hire you, right? Which is a legitimate question, but what people do in response to that is they skate across the whole top. That doesn't really help your prospects to see. Instead, just peel off one little illustration of something and go really, really deep, and they'll assume that you can go very deep on all the other issues that you haven't addressed yet. Does that make sense before I go on?

Blair: Yes. By skating across the top, you mean people tend to write about content that is too broad.

David: Right.

Blair: They're nervous about going deep because they feel like, "I'm giving away everything on this topic." I love your language around this. I've heard you advocate this for years. You go an inch wide and a mile deep in your content, so very narrow slivers. Then you can write forever because there are an infinite number of slivers. You go deep into these topics. Now, just following up on the question of when you give something away for free and when do you charge for it, and your answer, which I love and I've quoted numerous times, is the minute somebody asks you to apply that guidance to their situation, that should be a paid engagement.

David: Yes.

Blair: I'm sure you've experienced this. You write a post. It's a post that is sent via email, drops into somebody's inbox. It stirs some profound thinking on the part of the reader. The reader reaches out to you asking for advice on how to apply that guidance to their situation. That's when they're coming up to the line and possibly even asking you to step over the line where you should start charging, correct?

David: Yes, exactly right. This happened to me actually two weeks ago. A fella, his name was Charlie, lives nearby. He's probably listening to this. He said, "Hey, can I buy you coffee and pick your brain?" He happened to live nearby, so it was an obvious thing that could have happened if he knew me. [laughs]

Blair: Hey, you're getting a coffee out of it. Sounds like a great deal. [laughs]

David: That's basically what I said. I said, "This is what I do for a living."

Blair: I just had a coffee. I'm good. Thanks.

David: I said it nicely, but firmly, "I have to put these boundaries up or I just can spend all my life doing that stuff." He said, "Oh, no. Actually, I want to talk about hiring you." I apologized to him." I said, "I'm really sorry. I made an assumption that you were just wanting to pick my brain." Then he acknowledged, "I probably could have said it differently." That would have been like, "I give this advice away for a living. If you want me to apply my thinking to you, then I have to charge you, right?" That's your point.

Blair: Yes, that's where the line is. Yes.

David: Anyway. That third one was dive really deep with a sliver. The other is to have a point of view that's so thoughtful that it will create some sort of a reaction to most of the people reading it. The way I think about this for myself is, even though I'm a fairly courageous person, I am frequently nervous right before I hit send. There was something in this that made me a little bit nervous too. I think that's the way it should be.

You could be so confident in what you're doing that there's just no nervousness at all, but you should be sending something that when people receive it, they just ignore it or unsubscribe, or they just sit there and think about it a minute and maybe forward it to a friend or a colleague or a competitor or something. That's what we're looking for. I find that most of the things that I get and then quickly unsubscribe for are just ignorable, and you can't be ignorable.

Blair: Yes, that's right. I think you should have this feeling of immense pride and looking forward to the response or fear. It's one of those two things. If it's just, "Oh, okay, done, get it out," maybe that's a piece that you shouldn't be putting forward into the world. I still remember the email that I was most nervous sending. I think it was around 2008, so it's going way back. It was called 12 Proclamations for the New Year. What made me nervous about it was not so much the content, but the tone of voice. I was experimenting with the tone of voice. Then I got all kinds of positive feedback, and that post ended up getting blown up into a book, The Win Without Pitching Manifesto.

David: Oh, really? I didn't know that. What was the tone? Was it angry, confident? What was the tone?

Blair: No. It's the grandiose language of we shall,-

David: Oh.

Blair: -like writing the 10 commandments.

David: Right.

Blair: The tone really resonated, so I went with it in a book format. We're talking about the critical components of an email strategy, so I'll just recap them here. There's one more. Don't include much news in your newsletter. Do include usable insights that pay off your positioning. Cut off a sliver and dive really deep, an inch wide and a mile deep. Aim for a point of view that's thoughtful, that's so thoughtful either make someone stop and think or unsubscribe. A bit of a polarization in your point of view.

If you're putting forward regular content without a point of view, that's probably content that AI could write. That's one of the things I like about a point of view or even an ideology these days. Then the fifth one to wrap up this section, I guess I was alluding to this with the question off the top, your relationship with your readers is the first thing that you'd grab if you had to flee your burning office or a burning building, right?

David: [chuckles] Yes.

Blair: The first thing you would grab is your list. I feel that way too. I feel like you could burn my business down, take everything from me, take away this podcast, take away the books. As long as I had my list, I could rebuild fairly quickly.

David: Yes.

Blair: That's exactly the way I feel. The point is not, how do you protect your list? The point is that you should invest in your list because it is the most important thing in your business. That's the point of this to me. It's like, "Wow." Whatever the cadence is, just do it. Let's wrap up. You've got some great advice from a blog post or two of Rand Fishkins. Rand is the founder of SparkToro, and he's an SEO guy. Moz before that, that big company, right?

David: Yes, Moz. Right.

Blair: He's got an interesting stat here, and then I'll throw it back to you to just pull on whatever thread you want to pull on. According to his research, he says, "Statistically, it's better to trade 1,000 new followers on any of these platforms for a single email subscriber."

David: Yes, I read that, and I thought, "It sounds like he's exaggerating, but he comes at this stuff as a scientist. Maybe he isn't."

Blair: Yes.

David: Then he goes on to say, "Social media engagement rates have plummeted in the last 15 years. Ad engagement to Google's CTRs have fallen massively the last decade, and now there's zero-click searches." Those are the ones where you actually just get the answer right there. You don't have to click through. The visibility of TV and print are dropping, and then you talked about enshittification and so on. This was very surprising to me, not just to hear it, but to hear it from him because this is one of the biggest scientific names in the SEO world. For him to talk about the value of email was even more striking to me.

Blair: Yes. We could pick the social platforms. TikTok is still on the rise, although threatened. It's probably going to be fine, but it's still on the ascendancy. Instagram is keeping pace. The rest of them, again, this term, the enshittification, what's a YouTube subscriber worth? I don't think it's a lot. Views are worth something. What's a subscriber worth? I'm not sure. My own personal disillusionment with the few remaining social platforms I'm on, I don't know if I've talked about this on this podcast before but I've spoken about it on others, is I'm just rapidly losing interest in social media, period.

Maybe that's just an old dude who's had enough and he's decided what he likes and what he doesn't like or what works and doesn't work. I'm not going to walk away from intelligent marketing. In terms of my own interest in these things, there's something about the platforms that feel like they're just not doing it for me anymore. Maybe it's because I'm not a teenage girl, although I still do like TikTok.

David: [laughs]

Blair: I'm not on it, but it's a great way to kill 20 minutes.

David: Contrast that with LinkedIn for me. I have, I don't know, 20,000-- I don't even know, but whatever, not that many enough followers on LinkedIn, a lot of connections. I keep watching these people that have somehow mastered the engagement game. I had a couple of calls with somebody last month about, how do I get better at LinkedIn? Every time I dive more into that, I'm thinking, "Oh, man, I just feel like I'm playing the system and then they're going to change the rules on me as soon as I figure it out." That's the difference between a platform that you might participate on that you must like LinkedIn, you must, and having your own email list. It's just different.

Blair: That's an interesting point, this idea of, okay, how do I play this game now because the rules have changed? You have a conversation with somebody who's figured it out. Now I have to change how I'm using this platform. I have to show up differently. It's a formatting thing. It's a commenting thing. It's these little things designed to game the system. That's part of my fatigue with it.

I hadn't thought about it until you mentioned it. It's somebody else's platform. The platform is in charge. The platform has decided we no longer value that, we now value this. They're just trying to get ahead of people who are trying to game the system, and all of us users are trying to game the system. It's a bit of a cat-and-mouse game that does get tired at some point. Whereas your point here is email is email is email. It doesn't change. You own it. You're in control. You have this freedom and it's free.

David: Yes, largely free. The big message I want to plaster across this episode is think carefully about what role email can play in your marketing strategy. It might very well should be included in some way.

Blair: Yes. That's a great way to finish. You're not saying everybody should be on email, it should be your primary channel. Think carefully about it. Maybe just underpinning that is the idea that it's been around for so long and it's seen as such an everyday use case tool that maybe there comes a point where we take for granted the marketing capability that this old friend still has.

David: Yes. The other thing we do too is that we react to the emails we get all the time and we say, "I don't want to be included in that batch." I get very few emails I really want. To me, I flip that around and say, "You know how easy it is to stand out in that crowd." Most everybody really isn't doing it very well, so it makes it easier for you if you know how to do it.

Blair: That's a great point to end on. Are Email Newsletters Even Viable Anymore? There is a blog post on punctuation.com if you want to read more about it. If you do not subscribe to David's email newsletter, it's punctuation.com or winwithoutpitching.com for mine. We both write fairly regularly, you more so than me. Thank you, David. Great episode.

David: Thank you, Blair.

David provides some clear examples of what is required for a firm to be successful at offering one service for many different verticals.

Links

“Strengthening a Weak Horizontal Positioning” by David C. Baker on punctuation.com

Transcript

Blair Enns: David, our topic today is strengthening an otherwise weak horizontal positioning. Is this about sleep? Is this about improving your sleep quality? Because if it is, it's perfect timing. I have not been sleeping well lately.

David: We just bought a bed that you can raise the top waist up part of it, and it really does help. Maybe just subconsciously, because I've been sleeping so much better, this topic came up. I didn't even think about that. No, it's not.

Blair: Did you buy one of those Hästens, the Swedish handmade grand whatever $800,000 beds that Drake has?

David: No. No.

Blair: Okay. So it's about positioning the offer of your firm. We'll get to the strengthening part if there's something weak there. But otherwise, can you explain what you mean by a horizontal positioning if we are not talking about sleep?

David: Yes. There are tens of thousands of potential horizontal positionings, but very few of them are actually articulated clearly. When we talk about vertical positioning, we're talking about an NAICS code, which is sort of the predecessor to SIC code. Then the three big broad ones that for the last 25 years have always been strong are healthcare, tech, and financial services. Those are very broad. We're talking about a very narrow vertical one.

But a horizontal positioning basically stretches across almost all of the vertical ones and does one smaller, more focused thing typically for clients across lots of verticals. A vertically positioned firm is typically doing more things for that very narrow vertical.

Blair: So vertical positioning means you're specializing in a vertical market and you can typically identify that market by the NAIC code, North American Industry Classification Code. The code would have a number associated with it and a horizontal positioning. I think about the crosshairs of positioning as what do you do and for whom do you do it. When the for whom you do it can be identified by verticals, that's what you would characterize as a vertical positioning, correct?

David: Right, exactly.

Blair: But horizontal, your definition of it is it's not just what you do, there's also some description of who is in it.

David: Yes. The way you described it just a second ago really rung true in the sense that you do something for somebody, and who you do it for is identified. Everybody agrees that's this NAICS code. But when you flip that around, it's the same sort of question. A horizontal positioning is really trying to answer the same question, discipline for market. But in this case, the market is not one single market. The market is a lot of things, but you're doing something for them.

I like the discipline for market way to think about positioning, but I would just capitalize one of those if we're talking about vertical and the other one for horizontal. So discipline for market. The emphasis is market, who you do it for if it's vertical, and then the discipline itself for many markets, the markets themselves are not as important. It's more what you do for them that you can carry across all of these verticals.

Blair: You have these two aspects or dimensions of your positioning, what do you do and for whom do you do it. When one tends to be narrower or more emphasized than the other, and when the market for whom you do it is more narrow or more emphasized, and we can all agree on what that is via the NAIC code, then that's when we think about it as a vertical positioning. When it's more about the what do you do and less about who you do it for, then that's when we think about it as a horizontal positioning. Is that right?

David: Yes, exactly. I'll give you some examples. If we're still leaving people confused, this might help. I just got off the phone with a client. It's actually a client you and I've shared. What they do within a particular division is they develop mobile apps for workers in the field. There are workers in the field from all kinds of verticals. There's telephone people, there's plumbers, there's people that maintain heavy equipment, there's surveyors. They're all over the place in terms of the verticals.

But the one thing they have in common is that they have service people out in the field and this client of ours develops mobile apps to serve that need. That's a horizontal focus. They do a very specific thing for lots of verticals. Bringing gamification to engage consumers. You could see how there's, I guess, a core strength that they understand how to build engagement with gamification, but that actually applies to lots of verticals, right? One thing I should mention here before we get too far is that really tightly positioned firms have not only a horizontal but a vertical too. I think of that as a bullseye where they can't miss, but here's some more examples. ABM for expert advisors. Expert advisors would typically be in the 54 classification for that coding. That's a broad vertical, but they're really leading with ABM, that's the core.

Blair: Account-based marketing.

David: Yes, and it applies to all these verticals. When what you do applies to all these verticals, it's typically a horizontal positioning. Now here, I'm going to yell at the moon for a second, but if you think about the classic struggle of a creative firm where it's not just an information, it's more of a courage problem or a business model problem, they're not very tightly positioned.

So the way they try to solve that is, "Okay, how can I preserve working across all of these verticals, but still bring a unique expertise to the table? So I'm going to have a horizontal positioning." But they land on one that just doesn't have an addressable component to it, nor does it tell you when that person's going to need it.

Blair: What do you mean by an addressable component?

David: Rebranding for Fortune 5000s. Okay, that would be a horizontal positioning. We do this very specific thing, and it can be applied across all of them. Okay, how are you going to find the decision maker for a rebranding, because that's at four or five different levels within a company, all high level, but different departments, and then how are you going to find it at the right time? That's the addressability problem. By the time you found out about it, your competitor already got the project.

Blair: The addressable components, the decision-makers, and then also with rebranding, there's a time in the life of an organization when they consider rebranding. Your timing has to be perfect. It's not an ever-present problem.

David: Right. Here's another example of a loose horizontal, and that's helping clients navigate change. I just want to gag when I hear that, because it's like, what? Every company's going through change. Whatever. But what if you said the same sort of thing, but the target was more for publicly traded clients at one of these four intersections, like change of CEO, there's a market regulation problem, you just got sued, there's an activist investor. Whatever it is, right?

Now all of a sudden, "Oh, okay, now I know where to find my clients, and probably I can figure out the clues." That's back to the title of this whole thing, which I thought was brilliant, by the way, and you said nothing about it.

[laughter]

It's like how to strengthen an otherwise weak horizontal positioning. Most of the people listening to this podcast would be drawn to a horizontal positioning because of the variety. But what they're lacking in their proposed positioning is the ability to reach that market very well. That's what I'm trying to do here, is to help people understand. And we haven't even gotten to the answers to that, but how do you take an otherwise weak positioning and buttress it so that it's as strong as a vertical one?

Blair: Are you claiming, or is it your hypothesis, that most agency owners should prioritize one horizontal over vertical, or vice versa? Is that your hypothesis?

David: No, I actually think there are fantastic reasons for either. It's just knowing what those are and making a considered decision. I wouldn't favor vertical over horizontal. The default should be vertical because it's so easy to find your clients, but if that bores you, then go think somewhere else.

Blair: That was my second question. Do agency owners defaulting to one or the other?

David: Oh, yes.

Blair: So it's a broadly positioned firm, you come along and say, "Hey, you've got to narrow your positioning so you're more deeply relevant to the smaller audience." The first thing they think of is, "Well, what vertical am I going to go after? We work across all verticals." You think that's the default, or that's at least the place they start.

David: Right, whether they like it or not. Yes, that is the place they start. I actually had an author send me a book about seven or eight months ago asking me to endorse it. It was a book written for this field by a good guy. The whole premise of the book was that if you're going to focus, you need to pick your vertical, like get with it. The only option for him in the book was to pick a vertical.

I just said, "I cannot endorse this. I think what you're saying about verticals is true, and it's going to be a good book in that regard, but I do not want people to come away from this thinking, 'Oh gosh, a horizontal positioning is so tough, I guess I can't choose it.' No, I think there's some really great ones."

Blair: You say here that there are two different ways to define a horizontal focus. Do you want to walk us through those?

David: Sure, and this is where it gets a little even more interesting to me. In vertical, there's one question, but there's only one possible answer, and that's where you target NAICS code. With horizontal, there's the same question, but there's two viable answers. One of them is that you're focusing on a particular demographic. Maybe it's Hispanic, or maybe it's old, or young, or rich, or poor, or whatever. Or it could be a very tight service offering. Either one of those would be fine. For instance, the one I mentioned as an example, mobile apps for field workers, that actually has both. We're talking about both because they're doing something very specific, but they're also doing it for very specific companies. Anyway, all that works pretty well. Those are the two ways you can define horizontal focus. Either a very tight service offering, often that not many people can do, or a very tight demographic.

Blair: All right, so give us an example of a very viable horizontal positioning.

David: So the ones I've mentioned are good. I'll give you some others here. Digital employee recruitment. Employee recruitment is needed by lots of verticals, but not as many of them have gotten into, and here I really meant to say, more social media sort of digital recruitment. There are certain industries where they have a couple things happening. It's hard to find people, and those people actually happen to read Facebook a lot. Anyway, another would be portals to build engaged communities.

You could see all kinds of communities, like you graduated from this school, you've enrolled in this cancer program, whatever it is, building engaged communities for lots of different verticals. CRO for e-commerce, employer branding. Employer branding is basically helping turn the message inward to recruit people well and to get them on board with whatever the mission of the company is and so on. Design systems for startups.

On the face of it, that sounds very much like a horizontal positioning, but most startups are in the tech space. This could very well be interpreted as a vertical as well. Rapid response SCM for multi-location retail. Making legacy brands relevant again. I don't know about that one, right? It's not quite narrow enough.

Blair: Are these real life examples from your clients and firms you've spoken to?

David: They are, yes.

Blair: I'm referencing your notes here, but you talked about the easily addressable components. In all of these examples, the buyers are easily found, number one, and number two, they generally need a service like this all the time. It's not like one brief moment in the history of the organization where they would have this need. There seems to be a somewhat present need for the services being described.

David: Yes, here's another example of a firm with a creative mentality and this initial assumption, let's come up with something horizontal, so that they feel like they don't have to say no quite as often, right? They land on something that all of that is true about, but it also sounds fun. How about if we work for challenger brands? I hear this one a lot.

Blair: Not as much as 20 years ago, it's still out there.

David: Because of the book?

Blair: Yes.

David: What was that book again?

Blair: Building a Challenger Brand, maybe?

David: I can't remember even who wrote it, but let's do challenger brands because that'll be exciting, right? And this really differentiates us from everybody else. But when you start looking deeper into it, it's like if they're not number one, then everybody else is two or lower. This includes everybody. Somebody told me that one time after a cross-country race that I didn't win. He said, "Just think of it this way, you came in second and he came in next to last," of the two of us running.

[laughter]

Blair: It's like every agency that doesn't win a pitch came in second.

David: Right. [laughs] Anyway, it's like there's a whole lot of challenger brands, but we decided we didn't, and this is a real client too, we really didn't want to leave this idea. What if we took a more scientific approach to it? What I suggested is, "Okay, make specific criteria and even make them public about what a challenger brand is, and then it'll start to sound a little bit more interesting to people, okay?" You're not the brand leader. Don't come to us if you're the brand leader.

We actually don't want to work with you because of very specific things. Second, you must be within the top four. You're anywhere, number two, number three, or four, and I'm just making this up, this is arbitrary. I don't want to give away all their secrets. Third, you're actually climbing in market share. You're not just stalled, you're actually already on a pretty upward trajectory, and you just want to maximize that.

Next, you're willing to spend a greater percentage of your revenue on marketing, and those numbers are readily published every year out of Chicago, it's a public thing. In the middle quartile or the middle two quartiles, they might say, "Okay, in this industry, they spend 2.2% on marketing." You calculate that for this potential client of yours, and if they spend more, then they are a challenger brand. Finally, do they show evidence or a willingness in the future to take more risks? Because market leaders aren't taking risks.

They don't want to do anything to lose market share. Everybody else is taking risks because they have less to lose and what they're doing right now is obviously not working, so something has to change. Anyway, that's how you could take something that sounds like a pretty weak horizontal positioning and be a lot more specific with the description of it. That's another idea.

Blair: Yes, I really like this. Challenger brand on its own. I've heard that a lot and what they really meant is like, "The market leaders don't hire us because we're not good enough for them, so we focus on Challenger brands." But your point is, well, you've put some meaningful criteria around it. In my last agency new business development job, I would go into meetings with this positioning statement that I wrote. I forget the second part of it was, but it was we work with companies at times of growth and transition to benefit.

I forget what the benefit was. It was a sentence and then I had six examples of what I meant by growth and transition. I had this written on a piece of paper and it was a face-to-face meeting and I would say the sentence, I would slide it across the table and very often the client would look at the list of six criteria and go, "Yes, we're all six," and hand it back. I thought I'd pulled off the perfect positioning because it looked narrow, but it was broad because the truth is most companies or most leaders within organizations felt as though they were at these inflection points at all times.

David: It was aspirational in a way for them, right?

Blair: Yes. Was it smoke and mirrors or was there something real there? Answer, it was smoke and mirrors.

David: Yes, and if you'd have given that to me and you were my client, I would have said no.

Blair: You would have fired my ass. "Yes, see you, there's the door."

David: But I do think there's criteria here that can help it, right? Then there's another huge one and that's what I was thinking we might get to at some point. Although, to me, it's like after I sent you these notes, I thought this is just one of many ways you could define your market tighter. What I was going to suggest we talk about a little bit is just research too. What if you had some research that somebody else didn't have?

Blair: Say, back to challenger brands, you had some research around challenger brands and you had a point of view, the research was reflective of a point of view or you uncovered something that other people hadn't understood about it. Is that what you mean?

David: Yes, exactly. It's just not that hard either. You don't even have to do original research. It's already out there. You just have to find it.

Blair: Chat GPT, ladies and gentlemen.

David: Yes.

Blair: Do you have a real world example you want to talk about this where somebody was trying to pull off a broad or weak horizontal positioning and then supported it through research?

David: Yes, my article this week came out too. So if you want to follow any of these links, you can find it at punctuation.com. This is a firm in Fort Wayne, Indiana. I know exactly what you thought when I said that.

Blair: I didn't think anything.

David: What the listeners thought was, "Okay, fashion's out, music is out, great food is out, architecture's out."

Blair: Taste. I'm sorry. Some of my best friends are from Fort Wayne, Indiana. I don't even know where that is.

David: So here they are running a pretty substantial agency in Fort Wayne, Indiana. You look at the options and it's not that there are no vertical options, there's just a lot of them without any great concentration in a particular area. They're thinking, "Okay, well, maybe we need to go horizontal. What is it that we are really unique about?" "Oh, well, we live in middle America. We understand middle America."

So the idea was we'll have a horizontal positioning that's about reaching consumers in middle America. That sounds okay on the surface, right? As long as you don't get angry when people talk about the flyover states. I live in one of these. What they discover with research, and that was the key for them, is that there are certain values that have a bigger role in the products and services they choose.

So they do regular research reports that only their clients get that help them effectively sell to middle America. There's a whole lot of people, a whole lot of money in middle America. That was a weak positioning, but once you buttress it with research, it can work. That was the example.

Blair: The value proposition is we help you reach middle America and your point is that on its own is meaningless, but as soon as you add some research and your point is it doesn't even have to be proprietary, in this firm's example, they understand some values that people in middle America would have higher up in their value stack. Therefore, they understand how to speak to people in middle America. And they can speak to that in a sales conversation with prospective clients by referencing the research and the key values.

David: Yes. I think actually this is, I guess, a side benefit is to them, their location is no longer a potential drag on their positioning. It's actually at the core of it. Which I think is also really smart too. Yes, I remember this engagement very clearly. There's only so much I can say because I don't want to take all their thunder, but the research they do is substantial. Yes, I'm just really proud of somebody who stuck to their guns with a horizontal positioning but then did the hard work to buttress it with either research or a tighter--

You can't get past the door without answering these questions right. There's some other ways to do this too. Process is a big one, like how you solve problems is also part of it. We haven't even talked about the particular service offering that you might do that could be maybe your experience is in IOT. That's a horizontal positioning with a very tight service design. It's fun stuff to think through.

Blair: If this episode was going to be a tweet, it would be strengthen an otherwise weak horizontal positioning with research. Is that right?

David: Yes, except that it's X, not Twitter, but yes. That is correct.

Blair: Oh, yes, yes, yes. You could've saved me 35 minutes.

[laughter]

David: I need a different co-host.

Blair: We get to the end and it's like, "Yes, this is worth spending 30 minutes on." It's too bad we're at the end of the show. That's actually really insightful. When I think of the clients that I've served over the years who are exploring a new positioning, and especially people who are resisting, it's like, "Well, I don't want to just do this for car dealers or whatever the vertical is."

Then you point out, "Well, verticals is only one way to do it. The other way to do it is horizontal." Very often they're in these broad horizontal positionings. You've pointed out some. Your key point here is they can stay somewhat broad as long as you make sure that you're hitting the addressable components, right? You're not time-restricted. There's a pervasive need for this.

It's easy enough for you to identify who the decision-makers are in your client organizations. Then you bring more meat to that positioning through some research, through better understanding what the market is. "We help you understand middle America," that's not a vertical at all, but it is referencing a market.

David: A demographic, that's the demographic. The one of two options when you define a horizontal. Yes, it's not a specific thing they do. We do lots of things for a demographic.

Blair: Oh yes, it's actually your client's market. I'm getting distracted, confused and distracted by that, yes. Okay, I get this. We could almost go deeper into this. Other ways in which you can build a better business and improve your positioning through research because I feel like if we haven't already talked about it, I know the conversations that you and I have had privately and some of the things that you've written, I think there's probably more meat here worth getting into.

You've said before, you see yourself as a data scientist posing as a consultant. You have a research-oriented brain. I think a lot of creative firms run by creative people in particular are not research-oriented. There's probably an episode on the different ways to use research to build a better business.

David: Oh, that's a good idea. Yes, I'm going to make a note of that.

Blair: All right, this was great. Thanks, David.

David: Thanks, Blair.

Given these uncertain economic times we are in right now, Blair is asking if some creative firms might need to rethink the market they serve, looking at whether their positioning might be too broad, too narrow, or just wrong.

Links

"The Target Is Not the Market" by Blair Enns on winwithoutpitching.com

Transcript

David C. Baker: All right, Blair. Today, the topic is, Are You Fishing in the Right Pond? I don't really care about the audience today just to make that clear. That's a good way to start an episode, isn't it?

Blair Enns: It's the same as usual.

David: Right.

[laughter]

David: No, I was going to call you today with a specific question like this about a book I'm writing. This saves me a call with you.

Blair: Is this the novel or is it the other book?

David: No, the other one. The book that I know people will buy, not the novel. I'm hoping to get my question answered. I'm really going to take this in a different direction. If it feels like we're losing the audience here and you wonder, that's it. I just don't care.

Blair: Is there even an audience? Do you ever look at the analytics? Is there anybody listening to this?

David: Marcus lies to us.

Blair: My wife still does not listen to this.

David: My wife doesn't either. I'm glad, actually, because I don't have to be careful with what I say. All right, so are you fishing in the right pond? The idea is that you're drawing a distinction between-- Well, the way I say it is the work you look for is not the same as the work you accept, but you phrase it a little bit differently. You're like a real big golf player, so you talk about--

Blair: Do I strike you as a real big golf player?

David: You don't.

Blair: I would play more golf, except the uniforms are horrible. Those shirts are horrible. Actually, I have a really cool golf shirt that no other golfer would wear, but anyway, go on.

David: You pictured it in golf terminology, so start with that.

Blair: The target is not the market. The target is that at which you aim and the market is that which you are happy to hit. I don't golf much anymore, but I assume golfers aim for the flag and are happy to land on the green. Maybe they aim for the green. I don't know, but that's how I think about it. You're on the tee-off box. It's a short Par 3. You reach for whatever iron. See, I'm faking my way through this sport. You're aiming for the flag, but you're happy if you just land on the green.

David: The worse you are at golf, the more this episode will appeal to you. Aim for something, but be happy if you just hit something bigger. Something's happened, though, in doing an episode like this on this topic 30 years ago. Probably wasn't the same as doing it now. The world around us is changing, so this is even more relevant than normal.

Blair: There's two reasons to talk about this. One is if it's just you and I talking here, it's a thinly disguised way for me to talk about something that we're doing differently at win without pitching. Also, it is funny times right now. It is funny economic times. You and I and a couple of other friends who also serve the creative firm market, we check in with each other every day on what are you seeing.

We're constantly putting feelers out, what's going on in the economy. How is our market? Creative firms, how are they doing these days? There are mixed economic messages. There are some firms that are doing well, but I think the way I would characterize it, and I probably have before, is there's a lot of economic uncertainty. It's uncertain times. Money is not flowing freely.

As a result, many of the conversations that you and I have, not just in this podcast but privately, often comes back to the subject of positioning. Are you fishing in the right pond? We're neglecting half of the positioning equation here and that is, "What is it that you do?" I simply wanted to look at the other half, which is the market you serve. Maybe it's time to rethink the pond that you're fishing in.

David: When you look back over your experience at when without pitching, who's a client that we would least expect to hear where you feel like you delivered value?

Blair: Oh, that's a good question. Our target market has always been expressed as the short version of a positioning statement would be sales training for creative professionals. The market being creative professionals, now, that has always been the target. That's been the flag or the pin at which we've aimed. The larger green that we're happy to hit is basically any professional or anybody who sees themselves as an expert first, a practitioner or an advisor, and a salesperson second. The target is creative professionals. The larger market is any kind of expert whose second job is selling. The most unusual? Well, a lot of consulting companies, a lot of financial planning firms.

David: Any doctors, lawyers?

Blair: A couple of doctors, a couple of lawyers, architects, interior designers, staffing companies. We've worked with a couple of SaaS companies. That's not a good fit for us.

David: They're selling their product. They're not selling expertise.

Blair: Right.

David: That has to be the common thread is that they're selling expertise.

Blair: Right.

David: Recently, you've worked with another firm in the professional services space and there was certainly enough overlap. They're selling different things, but it's still expertise. There's enough common threads there. When they hear you talk, they may not feel like you have a camera in their office the same way a creative does, but they hear you explain the principles behind how you think. Then they're nodding their heads and it's like, "Yes, that's us."

Blair: When I think of the books that I've written, I'm writing to a designer or a small or independent design firm. That's my surrogate for other creative businesses, so it could be an ad agency, a marketing agency, or some other kind. Historically, for 20 years anyways, when I wrote, I wrote to that audience. It's counterintuitive. When you aim for the pin, you aim for the smaller target.

The larger market, they're not idiots. They will see relevance in what you do for them. My intuition has always been to stay small and narrowly focused. If I look back over 24 years, it's one of the things that I'm most proud of is I've resisted the urge to broaden out. Because as you craft messages and services to a narrow, specific audience, you should hear from tangential markets.

Some of those people in those tangential markets, they look at what you have and think, "Well, that works for us too." They will try to persuade you to broaden out your message and your services through a broader audience. We'll get into this. There's a time when you should pay attention to that advice. Early in your business, that's advice you would be better off to ignore.

David: It's like there are two different segments in a restaurant next to each other, tables next to each other, and you're at the table with your exact fit audience. "This is the flag, people." You're having this great conversation and the people next to you are in a related field, but they're more on the green. They're not at the flag. They're overhearing the conversation and they're thinking, "We don't hear that sort of insight in our space."

Then they scoot over here and say, "Can we talk?" That's okay. I'm afraid people are going to run away with this in the wrong direction. The way you organize this feels good to me. You're talking about three main market problems. The first is too broad, too narrow, and just wrong. What you and I have been chatting about for the last few minutes is the too narrow thing, but we don't want to start with that because too broad is a really dangerous thing too, so let's start with that.

Blair: Three market mistakes. You could be going after too broad a market, too narrow a market, or just the wrong market. The most common one by far is too broad a market. You get distracted by the size of the market and you delude yourself into thinking that, "Oh, if I can just get a small piece of that big market, then I will be better off." I went looking for a quote from Peter Thiel in his book, Zero to One, on this. I ended up making all kinds of notes, all kinds of quotes. I'll quote him numerous times throughout this episode on the subject.

Here's what Thiel has to say on the topic of being too broad, "It's always a red flag when entrepreneurs talk about getting 1% of a $100 billion market. In practice, a large market will either lack a good starting point, or it will be open to competition, so it's hard to ever reach that 1%." It's counterintuitive, but what Thiel says is you should look to dominate a small market first. Once you have a dominant position in that small market or that small pond, then you should think about branching out.

David: Right. I think that probably is how people are thinking, "Surely I can get 1% of that market." I'd be interested in your feedback on this. I wonder if there's something else really that's a little bit more philosophical at work here. They're going after a really broad market. This is the mistake we're trying to correct with this first of three points, too broad. They're going after a broad market because they love the variety and because they don't have a marketing plan. They're like, "We've got to be open to everything. The last thing we need to do is to close our market down a little bit because we barely have enough work as it is." That plays into it too, would you say, or not?

Blair: Yes, it's a big part of it. Somebody looks at, "Oh, we're only getting a tiny, little business from this pretty big market. We need to go bigger. We need to go broader." The reality is you need to go smaller. There are two dimensions here when you're thinking of your positioning. One is relevance, your TAM, your total addressable market. Two, what size market are you relevant. The other is differentiation. In some ways, they're opposed to each other. The real question you want to answer is, what is the largest market to which we are meaningfully different?

David: Could you also ask, what is the biggest market that we could realistically dominate?

Blair: Yes.

David: If you come up with too big a target and you think, "Ah, I can't really see us dominating that," then you make it a little bit smaller. It's two questions asking the same thing.

Blair: We talk about, "Would you rather be a big fish in a small pond or a small fish in a big pond?" The answer is we all want to be big fishes in big ponds, but we all start out as small fishes. If you're going to start out as a small fish anyway, you might as well start out as a small fish in a small pond and do what you can to become the big fish in that small pond. In fact, I think a better way to think about it is not ponds but bays.

Think of a massive lake. I live on the shore of a 100-mile-long lake. Think of a massive lake and a small bay. You want to start out in that lake. You start out as little fish. You want to be in a nice, safe little bay. You want to grow to the size where you are the dominant fish in that bay, and then you want to start reaching out. This idea of the target as the market, think of the bay as the target. That's what you're aiming at. My metaphor starts to get mixed and break down a little bit here. Golfing and fishing. [laughs]

David: Pretty soon, there's going to be flags in the water.

Blair: Pretty soon, there's a fish playing golf.

[laughter].

Blair: Oh, my wife would love this episode. She's a mixed metaphor. You want to start out small. Aim at this small target, the target to whom you will be most meaningfully different. Then once you have some dominance there, once you have some size there, then you start to broaden out to the larger market.

David: Okay, so I'm going to be the principal asking this question. I've dominated this little bay here. I'm tired of these other people. I'm ready to get bigger. You're suggesting that I should look for some adjacent relevance. What about just expanding the things I do for these people?

Blair: I'm purposefully leaving off that side of the equation. Maybe it's just such a straw man argument because of that because that is the other thing you do have to consider hand in hand. Fast forward a few years and you quickly become dominant in this tiny, little bay, and you think, "Okay. Well, we've outgrown the bay. We've got to move." You look at adjacencies.

The adjacencies are in both market and discipline or you can think of it as discipline or problems that you solve or tools that you use to solve the problems that you solve. Let's keep it simple and think of, "There's your discipline, what you do, and there's your market for whom you do it." On both of those dimensions, you are pretty small at first. Then once you become the big fish in the small bay or the small pond, the way you look to expand is adjacencies on both of those two dimensions.

David: Right. Okay, so we'll keep it back to this topic of toying with your market versus your target and so on. This first of three points is we're trying to fix the too-broad problem. One of the ways that people fix this is faking narrowness. You're advocating against that as well.

Blair: Yes, so here's another Peter Thiel quote. He says, "The fatal temptation is to describe your market extremely narrowly so that you can dominate it by definition. I'll add the word "by definition" alone. You dominate it and market in theory. In reality, it's not a distinct market. He makes the use of the metaphor of a restaurant on Castro Street in Palo Alto. When he was in a startup mode with PayPal, he said he could walk down the street.

There are all these South Indian restaurants, North Indian restaurants, Korean restaurants. He says like a fake distinction, a fake narrowness would be saying, "We're going to open up a British food restaurant," if there is such a thing. I guess it's fish and chips. "We're going to totally own that market. We're going to dominate that market." He said, "The reality is I and these other people in the startup, we're walking down the street looking for food."

David: Your market is hungry people, not people looking for British food.

Blair: Yes, so it's a false distinction. We are going to dominate. We're going to completely own this market. I see this among creative firms, agencies all the time. These ridiculously narrow distinctions, definitions of the marketplace. We've probably talked about this before, but you narrow one dimension. You have to go back and look at the other dimension. If you narrow your market to health care, but you're still a branding agency, branding for health care, that's a meaningless distinction in my mind.

David: Well, if I can add something to that, meaningless even just in terms of words. If it doesn't come with real expertise, it's also empty. I should be able to hear some things from you. How is branding different for health care? You ought to, without hesitation, be able to talk for hours and hours. I'm nodding my head, learning all kinds of things. You don't have to have that right away. Boy, it better be true. It better not just be a stated focus. It better be really substantive too.

Blair: What is it about branding for health care that does not apply to branding for aerospace or retail or automotive or anything else?

David: Yes, exactly. The first mistake we're trying to avoid is being too broad. The second one is being too narrow. This was where it gets really interesting. I think people expected to hear what they heard in this first section, but this second one's going to be newer.

Blair: There's two reasons your market is too narrow. One, the rare one is it's a mistake. You've just mistakenly decided to focus on too small of a market. As I've already said and we've discussed, you're better off starting with a small target, small market, trying to dominate, and then growing up from there. The second reason your market is too narrow is you have become that big fish.

You've grown. You've taken whatever share of that market you're going to reasonably take. Now, it's time to expand. It begs the question, here's the million-dollar question if your market is too narrow. How do you know? How do you know when it's time to leave the bay and move into an adjacent market? The obvious answer is your market will tell you. Your market will tell you that it's time. When without pitching, we open a public workshop by saying, we talk about, "Well, the target isn't the market."

The target is that at which you aim, the markets that which you're happy to hit. We do, as an example, sales training for creative professionals. That's the language we take to the marketplace, but we actually do more than sales training. Some of you aren't creative professionals. Now, as the years go by, some of you became most of you. At some point, we had to open our eyes and say, "It's time to broaden the language. It's time to move into a broader market."

David: That was the marketplace telling you that. How do you know when you're too narrow? You just said your market will tell you, right? Now, that market, that's the adjacent relevance that you have. They're telling you that your market could be bigger, but you don't want to listen to them about your target changing or am I wrong?

Blair: That's not how I think about it. In our business, the target was creative professionals. The larger market is anybody who sees themselves as an expert first and a salesperson second. When we woke up recently and realized, "Okay, this is now the majority of the people who are buying training from us," we now describe the target as any practitioner or advisor who sees themselves as an expert first and a salesperson second. What was the larger, broader market is now the target.

David: Oh okay, so you would disagree with the way I said that. You would listen to your market when they say you should change your target?

Blair: Yes, the way I think about it is the broader market becomes the new target, which implies that there is an even broader market still. Now, the way I'm thinking about it and the way I'm asking the listener to think about it is not the only way to think about this, but that's how I think about it. You can pursue adjacencies without actually doing much in the way of changing your language or even your marketing for a period of time. The assumption is that if you keep delivering value and you keep growing, you're probably going to have to keep expanding.

David: See, I've thought of it as the opposite over the years that, okay, you're a broadly positioned firm right now. What I'm asking you to do requires a lot of courage. I recognize that. Let's just get it narrower. There are two reasons why we wouldn't go really, really narrow right out of the gate. One is we have the courage. We just don't have the information. We just need more time to figure that out, or we're just not sure if the market is big enough. There's not enough opportunity in something.

I want to ask something just to make sure I understand. When you're saying that we should listen to adjacent markets and maybe change our target, are you saying to actually enlarge the target so that somebody is more likely to see themselves on their website when they come? How do you balance that with a marketing plan? Because now, you have a more complicated marketing plan.

Blair: Well, you could have a more complicated marketing plan. You almost certainly do, but you don't necessarily have to. You can think about these as distinct adjacent markets or you can think of a broader market. The way I've just described our new target, that's a pretty broad market, in fact. Now, you've got financial advisors, designers, marketers, or software engineers all in the same target market. The language that these people would resonate with them if you want language that's going to resonate with everybody, you're going to have to water it down a little bit or, to your point, you're going to have to create distinct marketing plans for each of these sub-markets.

David: People are so good at one marketing plan. I'm sure they can kill three of them, right? [laughs]

Blair: Well, they both come with trade-offs and dangers, right? You just alluded to one is you're already horrible at one marketing plan. Now, you're going to do three or four. I've heard you say that numerous times and I've used that line myself many times citing you. Then the other danger, the one that I just cited, is when you broaden out too broad, same message, broader audience, you start to water down the language so that you're not speaking exactly the same language to everybody.

David: So many interesting trade-offs in all of this. We can't just come up with a policy without adjusting it every couple of years because the world is changing in ways that we just have not predicted.

Blair: Thiel has got this great quote. He talks a lot about monopolies. In that book, Zero to One, he really is talking about how to build a monopoly, not a government-protected monopoly but, basically, where you create a category. He has this famous line, "Competition is for losers." Within that framework, if you said to him, "Hey, I'm going to launch an ad agency or a design firm or any other firm where we would recognize by the language exactly what it is that you do and we can imagine what you would sell and how much you would charge, et cetera," he would say-- Again, coming from the startup world, he'd say, "Why waste your time? There's already 100 or 1,000 or 10,000 people doing that. Go do something that doesn't exist yet."

That's what he means by a monopoly. That's one of the reasons why I think owners of creative firms should really read this book because it will force smarter thinking from you. It will cause you to build less of a me-too business. It'll get you thinking about building something that doesn't already exist. Again, he's referencing startups. He's starting this new entity. He's holding in his mind this idea of a monopoly, creating something that doesn't exist.

Here's the quote, "Every startup is small at the start," so that's the small fish. "Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market. Always err on the side of starting too small. The reason is simple. It's easier to dominate a small market than a large one. If you think your initial market might be too big, it almost certainly is."

David: First problem, too broad. We talked about that. You need to have some positioning in this equation to slightly vary from. Second market problem is too narrow, which is what we've just been talking about. The third is the wrong market entirely. Things change. The world that you're addressing like the NAICS code, well, it didn't even exist 20 years ago. Like the SIC code today doesn't look like it did then because entirely new industries have come along and others have dropped out.

Blair: Yes, that's right. Some of the listeners are in the early stages of their business. Maybe they're struggling and they're wondering. Maybe they haven't even stopped to wonder like, "Am I just going after the wrong market?" Then some of our listeners have been doing this for 10, 20, maybe 30 years. Maybe things have changed in the market they served recently or maybe things changed years ago. They just never bothered to think about fishing in a different pond.

An example, I'm not the originator of this idea, but we are in a software recession. I think AI is making it worse. I can't prove this. Anecdotally, I'm pretty convinced that most of the creative firm world is in one of a few different ways overly dependent on the software market. SaaS is getting eviscerated for all kinds of reasons we can talk about or not. I'll skip over them here, but SaaS is getting eviscerated.

There's no real sign that the margins and the money are going to be in SaaS moving forward that they have been historically in the zero interest rate, scale-up environment. AI is making it worse. Many firms are overly dependent on SaaS. If you are explicitly focused on a SaaS market of some kind or you look at your market and you realize you've got a lot of exposure to SaaS, you might decide it is time to look for a different pond. I guess fish aren't fishing. Fish are just growing in the pond. Back to the metaphor. It might be time to look for a different pond.

That's where you ask yourself about adjacencies. Well, what are the adjacent markets that aren't SaaS but are like SaaS? What are the markets that may be, on the surface, aren't anywhere near close to SaaS but actually share a lot of the same characteristics? I'm just using SaaS as an example. It might be property development and real estate is hit hard in a lot of segments. You've got skills as a real estate marketing firm. What might those skills translate to?

David: Just four years ago, travel and tourism was hit pretty hard. 15 years ago, Fortune 5000s were still paying $250 or $500,000 to do beautiful annual reports. If that was your focus, that's changed currently, where would you say, "Oh, I'm not sure I would start a firm right there now because that's something that's under unusual pressure or changing"? For me, it would be the content space. SEO, I would say earth-friendly communications materials makes me nervous nowadays with the backlash against that. What would you say? Anything else you'd add or disagree with there?

Blair: I think the AI trend, it's the new disruptor. It's like mobile. It's like the internet before that. Maybe it's not as big as the internet, but it's as big as mobile. It's bigger. We don't even know what we're dealing with yet. That's got me excited and nervous about so many things. I came to the realization that I'm glad I'm not in a business where I am building new technology because I think anybody who's building new technology right now is so vulnerable to disruption from AI, but I don't know beyond that.

David: Coding is going to change for sure. It's not like that need will go away, but some of the basic coding stuff, humans will just be looking at the work. That's going to be disrupted for sure.

Blair: I have a kid who just graduated from a software development program. Basically, he's going, "Oh, great. Perfect timing."

David: Buggy whips no more.

[laughter]

Blair: You and I have a mutual friend who basically said, "The era of US dev shops is over." They cannot compete. It's all moving overseas. That's a strong opinion. I think he's largely right. I don't know how right it remains to be seen, but that space makes me nervous too. The reality is all marketplaces make me nervous right now.

David: You know what I was doing 35 years ago? I was managing a bookstore in Warsaw, Indiana when Amazon first entered the scene. As you note here, Amazon started as a bookstore, right? They wanted to dominate a market and they expanded. I remember telling my boss. His name was Jim and I said, "You got nothing to worry about, Jim. This is not a thing, right?" Every single thing I said about Amazon changed.

Now, that particular bookshop is still flourishing because they're very tightly focused. Wow, not only do things change, they change so much faster than they did. You could set up positioning and you could put it on autopilot for 15, 20 years, then that came down to about five years. Nowadays, I'm thinking, "Three is the outside area where you need to--" Don't write it in ink. Write it in pencil.

Blair: You and I have another mutual friend who's humming along beautifully 12, 18 months ago as business like the envy of everybody who knows him. Then it's completely disrupted almost overnight. Back to your Amazon reference, I remember when Amazon came out. I remember hearing when they were getting into CDs, moving from books into CDs thinking, "Well, that's stupid. Stay in your lane." I hate that line, but I remember thinking that. It turns out I've become quite a student of Amazon as a lot of people have in the last 20-some years.

Jeff Bezos' vision was always to be the everything store. That was always the vision. They simply started in books. That's an example of pick a small niche. Then once you dominate, move on from there. Thiel says, "The most successful companies will make the core progression, to first dominate a specific niche and then scale to adjacent markets, a core part of their founding narrative." Just like Bezos said, "I want to be the everything store on the internet, but I can't do everything at once. I'm going to start with books."

You should think about your targets and markets similarly. I don't think this is widely understood. Marc Benioff at Salesforce did the same thing. Early on, I believe right from the beginning, he saw way past CRM. He saw Salesforce as being enterprise-wide software. People who don't use Salesforce don't realize how broadly it stretches into an organization. There was a time when we ran all e-commerce and all kinds of other functionality on Salesforce.

It was the dominant platform in our business. That's no longer the case. I know people. I have a friend who's built a massive business using Salesforce, installing Salesforce into large Fortune 500 companies to do far, far more than CRM. CRM was simply the first market that Benioff wanted to dominate. You should think about that similarly when you're thinking about playing in a small pond or, as I prefer, a small bay in a large lake. Think about where are you going next once you gain some sort of the dominance in the small bay.

David: That kind of decision, I think, is fun actually because it doesn't take nearly the same sort of courage that it takes to go narrow first. Thinking back over these three segments, the first mistake was too broad. That's the one that trips people up because it takes so much courage. You're suggesting that they be a big fish in a small pond at that point so they can dominate it. Second problem is too narrow and then the third is just getting the wrong one. This is going to prompt a lot of people to not sleep well tonight. Should I just repeat your email address for them? You've done that to me before.

Blair: Well, I think we've done our job if we're giving people things to think about. I don't know how often we're wrong. It's pretty often.

David: Who's we?

Blair: [laughs] More often, it's not a matter of right or wrong. It's a matter of being provocative and choosing to think about things different ways. I hope there's enough meat to think about. Really, what I want the listener to take away is I think we get a little bit comfortable in our business. Even when we're running into trouble in certain domains, I think very often, we don't rethink our choice of the market we serve enough.

David: All right. Thank you, Blair.

Blair: Thanks, David.