Expanding Capabilities and Reducing Operating Costs in a Tough Market

It is impossible for all companies to be all things for all clients all the time. Many companies try, but these are usually businesses whose leadership tends to be a little controlling or fearful of the competition. In the end, this can result in resources being stretched too thin or costs being carried that are simply not necessary. In a tough economy this kind of business stance can be a death knell for a small business.

One way to maintain or expand your company’s capabilities while controlling costs is to outsource certain non-core functions. Another effective means is to identify “delivery partners” who have business lines or service offerings that are complimentary to your own.

When the number of companies out there spending money starts to get thin the companies with the most capabilities will often win the most contracts, so long as their price structure is under control. Adding a delivery partner will help your consulting or IT shop by giving it broader reach and set it up to penetrate deeper into your existing client base. In addition, you might find that it can have a significant impact on your overall “deal flow.”

In my company we look for delivery partners whose businesses not only provide complimentary services but whose target market looks a lot like our own. Everyone knows it is easier to approach a warm lead than a cold one. If you and your delivery partner can share client lists or at least collaborate on how to approach each other’s clients then you can increase your respective deal flows while shortening your respective sales cycles. This is a big deal in any market, but it can be crucial to survival during tough economic times.

One thing to be wary of is partnering with firms that feel they must have a piece of the profits from any deal that you do with their clients. My rule of thumb is that although I might be willing to pay a finder’s fee in some cases, the fact is that unless my partner is adding specific value to the deal they should step aside, as should I in the opposite case. Not stepping aside runs the risk of pricing the deal too aggressively and losing an opportunity for both you and your partner (not to mention leaving a bad taste in the mouth of an otherwise good client). The best approach is to bring your partner to your clients with the idea of helping your clients, not making additional money for you. A good partner will try to reciprocate if possible. It’s simply good corporate karma.

If you can’t find a delivery partner that you can trust, you should seriously consider outsourcing certain non-core functions. At the very least this will cost you less than having an FTE perform certain non-core functions. But it also might result in an improvement in your overall employee and customer services. For example, even if you have the utmost respect for your office manager and she is a wiz at QuickBooks, chances are she is just not as current on employment laws and practices or possess the same skills as an HR professional or CPA.

In addition, you might be able to outsource non-core client facing functions as well. There are ample opportunities to do this in the technology arena (from software development and hosting to SEO and email archival).Depending on the nature of your business you might find that you can employ a call center (onshore or offshore) to perform some of your basis phone based services. This way you can ramp up and down with the ebb and flow of your business without carrying extra headcount.

In the end, we all need to be more creative in a down market. Finding a way to outsource non-core functions or developing relationships that will help you grow or preserve your market share is simply good corporate practice. Why try to do everything yourself?

Don’t Worry About the State of the Stock Markets; Just Be ready For the New Economy When it Emerges

Consultants and other professional services firms are wholly dependent on their clients’ ability to spend money for their own growth. With the market behaving like a bad dream this can be quite disconcerting. So what should we do to survive, never mind grow? That is the real question.

Unfortunately, most people are “looking down” right now. This is a problem. I’m not suggesting that consulting firms and other professionals shouldn’t be doing their best to cut costs and manage risk. Any business owner should take responsibility for managing his/her business intelligently. What I am suggesting is that the market gyrations that we are currently experiencing right now (including the credit crunch) should not be what companies focus on.

At some point in the not so distant future, maybe six months maybe two years, things will loosen up. The thing is that when the dust settles the economy may not be something we recognize easily. The rules may have changed a bit (literally in the case of highly regulated markets like banks). So consulting firms should spend a little time getting their houses in order so they may prepare for the inevitable downturn, but then they should aggressively remake their businesses to be well positioned for the “new” economy. So what does the new economy look like?
Here are a few trends that we are focusing on:

• Workforce Mobility – We believe that when the economy emerges from the current malaise most traditional companies, even those that were reluctant to outsource in the past, will begin to view outsourcing as a required means of doing business. This will reflect both the maturity of today’s technology and a general reluctance to operate with a significant cost base (see my posting from October 8th titled “Creating Collaborative Products for a Troubled Market”). A much larger percentage of the pool of eligible workers will be contractors not FTE’s going forward.


• Workplace Automation – Although this trend has been ongoing for years, we believe that the trend will continue and will reach into markets that have traditionally been reluctant to pursue technology solutions in the past. A few notable markets that we are looking at are the legal and recruiting markets. More on that later.


• Information Aggregation – In the 1990’s the financial services industry in particular enjoyed centralized data resources provided by data and content aggregators. In the new economy even companies whose information has existed in a silo will begin to demand integration between internal content and outside sources. This might include the medical profession, for example. As more and more patient data becomes available in medical systems there is a market opportunity for those firms that find a way to blend patient metadata with outside data (keeping HIPAA compliance requirements in mind, of course). This will not only help the medical and insurance industries reduce costs and risk but could result in the development of improved therapeutic methods for the population at large as well.


• Outsourcing – Yes, outsourcing. At some point protectionists are going to realize that the power is where the growth is. That is going to be Asia in the next decade. Europe has simply regulated itself into a stagnate state We can look inward as a society and hold off the inevitable for a while, but in the end western companies need to be more global in order to be well positioned for the next boom-time. That means that even small companies need to begin to develop relationships with offshore partners or else they risk being left behind. All the old arguments for not outsourcing simply do not hold water anymore and if managed properly, a blended solution that uses onshore and offshore resources can actually create high paying jobs at home (see http://www.jlroy.com/Documents/jr_Outsourcing_IBJ07_rev.pdf for more information on this subject).
  

Despite the state of the economy I am optimistic that there is still plenty of opportunity, if not in the short-term then certainly in the medium to long-term. The trick is to make decent predictions and try to position yourself for the inevitable changes.

Practical Business Continuity: What Does it Mean for Your Business?

What is “business continuity” and what does it mean to your business? A quick search on Wikipedia says that business continuity “is an interdisciplinary concept used to create and validate a practiced logistical plan for how an organization will recover and restore partially or completely interrupted critical (urgent) function(s) within a predetermined time after a disaster or extended disruption”. That’s a good technical definition but it is not particularly helpful in telling the average business owner what to do to protect his or her business.

Most large businesses have some sort of plan in place for hurricanes, earthquakes, catastrophic power failures, cyber attacks, viruses, etc. In the end they tend to lose more data from disgruntled employees anyway. For small businesses, planning is much less complex but is often ignored. Chances are your hard drive will simply fail and you will lose data. No hurricane, no virus, no disgruntled employees. But in the end the effect is the same. You have lost mission critical data and now you have to scramble to maintain momentum in your business and serve your clients.

All businesses, even the small ones, need some way to safeguard their companies in case things go south. Business owners should think about continuity planning as a “self-insurance” policy. We buy business insurance to protect our firms from things that are beyond our control. Why not write your own policy for things that are within your control?

If you own a software or records management company then you probably already have pretty sophisticated disaster recovery plans in place. But what if you own a small consulting practice or work in a professional field such as the accounting or legal profession? These individuals are extremely susceptible to data and document loss but rarely do more than back up files from time to time on a flash drive or central server. These companies also have data and documents spread out over a widely distributed workforce on laptops and tend to outsource many basic functions. Outsourcing alone means that a business’ command and control over critical business information is further compromised. This can also be a risk for any company with a geographically based sales force. So how do you protect your business?

First, decide what is important to your business. In most cases the business information on your hard drive is all you need to rebuild your business and maintain momentum. Your financials, sales data, customer lists, client documents, etc. tend to be resident on a single PC for each employee.

Once you’ve identified the “gotta have” data a documents make sure that you organize it. Put all your key data into a single directly on your hard drive. In my business, each venture I own with my business partner has its own directory. In this way I can have an extremely complex sub-directory structure that logically organizes my information, but from a continuity perspective all I have to do is make sure that just one directory is backed up to protect the whole venture.

Find a solution that works for you. The problem with burning CD’s or backing things up on external hard drives or flash drives is that external drives fail and you can lose a flash drive. Additionally, we can be our own worst enemy. By depending on ourselves, we have to remember to save data and documents not just periodically, but each time we create a new document or make a significant change to our data. I don’t know about you, but when I am in the middle of my busy day I am not thinking about business continuity – I am thinking about serving my clients.

What does this mean? It means that once you have organized your data you need to find a solution that solves the problem in the following ways:

1. Copies critical data to a remote location.
2. Ensures that data is backed up without your proactive intervention but without preventing you from being proactive.
3. The solution must account for the hierarchy in your business. Each employee, contractor, vendor and even clients can have data automatically backed up into a centralized location.
4. Make sure that you can easily recover and access backed up data. Simply zipping data files up and shipping them offsite does protect the data, but leaves you dead in the water for a time as you try to recover. Make sure you can rebuild your data structure with a few clicks.
5. Ensure that you can find what you need quickly. A solution that bundles all your data into one bucket without offering a sophisticated search function may leave you in a lurch as you try to respond to clients during your recovery process.

There are a variety of tools that could work for your business. My firm (http://www.ifconnect.com/) and its parent company have determined that although there a many good solutions out there, most fall short in some way. So in November 2008 we are introducing Praura (see http://www.praura.com/). The first iteration of Praura will blend some basic collaboration and document management functionality with simple to use fully automated disaster recovery features. This fully integrates your business continuity solution with you core business operations, resulting in cost savings and superior protection for your business.

Whatever works for your business, it is important that you find a way to protect against the unforseeen. A little self insurance never hurt anyone and the responsibility for protecting your data is yours, after all.

Consulting Sales: The Expertise Conundrum

One of the most daunting challenges facing any service provider, especially consultants, is sales. In order to build a successful consulting practice you must have credibility and experience, in short you must be a domain expert in the areas where you are consulting. So how come it is so difficult for domain experts to sell their expertise? They are proven experts after all.

It is difficult because “expertise” is an inherently intangible item. And the more expertise you have, the more difficult it can be to sell, as backwards as that may sound.

Selling the intangible is difficult because it is not readily apparent where the value is. Even if you clearly articulate your value proposition, not everyone will understand exactly how your expertise will benefit their business even if they recognize you as a subject matter expert. But that is only part of the problem. Even if you are successful at adequately explaining the value of your services, the act of selling your expertise can actually turn off many potential clients regardless of whether or not you could in fact help them.

For example, an expert in systems integration hears that the Universal Widget Company was just acquired by Widgets International. Everyone knows there is considerable overlap between these two companies and integration challenges abound. Since this is such a hot prospect, the integration expert contacts the CEO of Widgets International and offers her services, explaining how much experience and expertise she has with just this kind of project. The CEO politely listens to the pitch because he does in fact need help. However, our expert is surprised when she reads an announcement that Widgets International has just engaged a competitor with less experience to help with the integration.

Why did our expert lose the opportunity? The reason is that like many consultants her pitch was exclusively focused on her expertise and experience. The consultant was explaining why her background and experience would benefit Widgets International. At best, this approach did not focus enough on the value that could be reaped by Widgets International through an engagement and at worst turned the CEO off by indirectly implying that he and his team were not skilled or experienced enough to handle the integration on their own. Even if it is true, nobody likes to be made to feel inadequate.

Selling expertise is a delicate process. The best way to sell expertise is to not sell it at all. Instead of discussing past successes and track records the consultant should sell bundled service offerings that deliver specific values to clients. In short the consultant should sell a “product.”

If that product makes sense to the client and seems like it will deliver enough value, they will investigate the experience of the consultant and be pleasantly surprised to learn that he or she does in fact have a great track record and solid client list. If you cannot generate interest for your product at the beginning of the sales process then your background does not matter and you’ve quickly ruled out a prospect with minimal expenditure of time and effort.

One of the most important lessons to be learned here is that the process of productizing your services will ultimately convert an intangible offering (i.e. “expertise”) into a tangible product (i.e. “bundled integration services”).

Another advantage of productization is that is creates opportunities to up-sell other packaged services once you’ve established a relationship. The same consultant that is an expert in integration in the previous example probably has other skills, such as process improvement, change management and organizational development. Once a client has purchased one product from you they will be more likely to purchase others as their needs change because you already have established credibility.

For more information on productizing services please visit http://www.jlroy.com/JLROY_LearningCenter.htm.

Selling Expertise to a Suspicious Market

Starting a business carries risk. During the early stages of developing any business concept an entrepreneur is essentially a business person operating without the safety net provided by an employer. Even after their product or service concept has been defined and has matured somewhat, the entrepreneur must still work to overcome considerable business challenges unique to start ups while also shouldering the burden of running a business. For those entrepreneurs who are starting a professional services firm there are also some special challenges.

One of your first challenges as a new consultant or service provider is creating a market for your services. In order to do this, you must make your expertise clearly understood by the marketplace. Traditionally, all new consultants make the same mistake at this point.

Consultants tend to believe that their past history and track record is what sells their services. So the first thing they do is build a website. This is a requirement, of course, for any new business today. But the content that you include on your website matters. The typical consultant’s website reads like a resume that was simply divided up into separate web pages. Fact of the matter is that prospective clients care very little about what you have done for others. They want to know what you can do for them specifically.

My experience has been that very few prospects even ask for references. They know you will load your reference list with only people who like you. The prospects that we are able to convert to clients we convert simply because we were able to present them with a viable solution to their specific business challenge at the right time. More importantly, we go out of our way to show them that we understand their business and take time to explain the benefits of our proposal to their company. I am fond of telling our sales director (and anyone who will listen) that clients never buy expertise from a consultant despite consultants’ often lofty opinions of themselves. Clients are buying a benefit to their business. So if you cannot explain exactly how your service will save money, make money or mitigate risk for your clients then you will not close a sale.

So what can you do to successfully sell your services to a suspicious market? The steps below may help you get started:

1. Productize your expertise and experience. Everything you have ever done professionally can be boiled down to areas of expertise, each with a specific benefit to your past employer. Instead of listing past accomplishments, look hard for what expertise you leveraged to accomplish corporate objectives in the past and link that directly to a realized benefit. Describe this in general terms linking the benefit to one of the three purchasing drivers mentioned above. A road map on how to do this can be found at http://www.jlroy.com/Documents/Creating%20A%20Framework%20For%20Growth.pdf.

2. Put something useful on your website. One of the best ways to demonstrate expertise is by providing something for free. This thing should be useable and provide a specific benefit to the user. It might be educational “how to” kind of information. It could be templates or case studies that teach a lesson. It could be links to other useful sites or online resources. The point is that at some point during your sales process you will direct someone to your website (or they will go out and find it independently). The site should not only be informative but should be useful too. If you can build a useful online destination then you have successfully demonstrated that you understand how to help your clients.

3. Sell efficiently. Many consultants will go out and try to sell their service to everyone and anyone by casting a wide net. They spend an inordinate amount of time selling. Although sales are important to any consulting firm, the hours spent on sales are not billable. Another way to think about this is that you have roughly 2,000 billable hours per year. Your income is directly affected by how efficiently you sell. Locate companies that you understand. Make sure that you completely grasp how you can specifically help each company. Make company specific proposals. This will dramatically improve your success rate and as a result will require you to spend fewer hours on sales. We will generally target entire industries. If we can help one company in an industry then we can pattern most participants. This will make your research easier too.

There are lots of ways to sell your services. My belief is that you must spend a little time up front learning how you can impact clients. Make sure you completely understand the benefits of your services and remember that if you can’t describe your benefits in one sentence then prospects will likely miss the point as well.

The Future of Social Networking for Business

The social networking phenomenon has clearly changed the way people meet, interact and exchange ideas. I don’t think anyone will argue that this is not true. Even the most old fashioned of people now seem to have a presence on FaceBook, LinkedIn, Ryze or some similar site (if not all of the above).

More recently, special interest groups have benefitted from dedicated networks and communities such as BlackPlanet for African Americans, Geni.com for those interested in genealogy, CafeMom for mothers and many more. There are now also a myriad of social networks based on your country of origin; for example, Cyworld for South Koreans, Biip for Norwegians and Grono from Poland to name but a few. Your options for joining a social network are now officially endless.

What does this tell you? It tells me that people want to link with each other to share ideas and information and to just generally communicate. It tells me that people constantly seek like-minded individuals with similar backgrounds, interests, experiences or origins. If this were not true then there would not be so many options available.

So what about social networking for the business community? Interestingly, the business community is way behind. First of all, most social networks that are frequented by business people are so because the business community believes that they can sell their product or service, find a job, hire a good employee, etc. In other words, the business community uses social networking to supplement the same functions that it was doing before. This means that most people do not get to realize the greatest value from the networks that they have joined. It may also mean that the traditional social network simply does not add that much value to the business community.

Businesses today should view the social networking phenomenon as an opportunity to create networks within their own client or employee communities. This will ensure that their products’ evolution is in line with their clients’ expectations. It would also mean that employees in large conglomerates could learn best practices from peers in far flung offices around the world. This exchange of ideas and information within a corporate environment may increase morale, productivity and efficiency. It will also ensure that limited spending dollars are focused on only the highest value initiatives for the business. In the end, even if these communities simply created a more transparent operating environment it would be good for the business.

Some business leaders may worry that this will empower their employees causing them to lose control of their message to staff. Simply put, that type of thought process is the digital equivalent of sticking your head in the sand. Employees only value employers that also value them and their opinion. Creating an environment where ideas, thoughts and complaints can be freely shared openly exposes management to the scary reality of what their business is and how it is perceived. It will also empower employees to think creatively and find new ways to solve old problems. In the end we all need to know what is good and what is bad in order to make the best decisions.

Social networks that include real targeted functionality could also be used to create new market opportunities for businesses. A great example of this is Parlerai (http://www.parlerai.com/). Parlerai is a client of my project outsourcing firm IFConnect (http://www.ifconnect.com/). Parlerai uses social networking technology to enable families to establish secure (i.e. closed) networks of family, friends, caregivers and educators around children with special needs. This is a great example of targeted social networking. What Parlerai calls “augmentative collaboration.”

Up to this point, the expansion of social networking sites has been limited to people with common interests or backgrounds. The new world order in social networking will be leveraging this same technology to build functional networks that simplify a person’s life. This goes way beyond the simple sharing of ideas and information and represents the future of online communities.

Increasing the Value of Your Knowledge and Experience

If you are a consultant then you already know that one of your biggest challenges is letting the market know what you know. There is no quicker way to generate sales than being perceived by the marketplace as an expert. There are many ways to do this, a good number of which are outlined by my good friend Ken Lizotte in his book “The Expert’s Edge” (McGraw Hill, 2008).

In his book, Ken describes how to become a thought leader through speaking engagements, public appearances and various traditional publishing vehicles. Ken and I have had numerous conversations about the best way to do this in the new technical age. Ken has a solid reputation for getting people published (in addition to himself) and this clearly works wonders for the reputation of many consultants. Our conversations however, have centered more on what happens after you’ve already been published.

My belief is that although nobody can dispute the value of being published in print media or via online publications there are better ways to generate value from your knowledge in the long term. The problem with magazine articles and books is twofold: first, they have an extremely limited shelf life (pun intended); and second, no matter how well placed or how well written an article or book is the fact remains that the information in the book or magazine is not useable.

Information increases in value exponentially as it becomes more useable to its audience.

So how do you make your knowledge more useable? The answer lies in leveraging technology. When you read a book you increase your knowledge. This is clearly a good thing. But this rarely helps you during your business day, even if you are blessed with complete recall. Executives (a.k.a. “your clients”) have little time to read all the books that they should in order to stay current and move themselves and their companies forward. This is why information aggregators have been so successful in the past decade. They simply blend a variety of news sources (for example) into one digestible packet by putting everything into one online location. Subscribers need only go to one site to find out what is going on. From there they can peruse headlines or run specific searches. Newer versions of this type of product include “push” features that allow subscribers to receive SMS or email alerts based on their own filtering criteria.

Information becomes useable when subscribers can find what they are looking for quickly and easily. This means that your product should be well organized and needs to include some basic knowledge management functionality. Topical and full text searches, data visualization, sentiment calculations and links to similar content can help subscribers not only find what they need at a specific point in time but can help them locate knowledge they didn’t even know they needed. If your product can deliver value in quick easy to find doses your audience will learn to not make a move without checking in. That is valuable for them and good for your consulting practice.

If you have written a book (or two), have a long running newsletter, a blog, a library of magazine articles, whitepapers or other content generated over the years then chances are that much of this content still holds some residual value. But I would wager that almost none of it is generating value for you today.

By developing an information product you can resurrect your expertise and deliver value to the marketplace on an ongoing basis. By continually updating this knowledge base and supplementing it with content from others or with filtered news, etc. you can quickly and inexpensively create an online destination for your constituents. In additional to generating subscription or ad revenue this can do wonders for your consulting sales process and will help you net new clients.

There are a variety of tools available to support this model that can be implemented with limited or even no costs. There are a few steps that you should follow before considering what technology to employ however. They are:

1. Compile your content into logical categories that will support topical searches. Ultimately, any school child knows that a good library is organized somehow. One of your first challenges is to determine the best way to segment your knowledge base to make it easier for readers to quickly find what they are looking for.

2. Determine what information needs updating. Without a doubt some percentage of what you’ve written in the past will be hopelessly out of date. Some of this can be brought current and some might simply need to be discarded. Figure that out early. Be ruthless. All your content should deliver specific value.

3. Find the holes in your library and fill them. Even the most thoughtful subject matter experts will not cover every angle. The fact is that we tend to specialize where the majority of our expertise lies. If there are gaping holes in your content set then you should find a way to fill them. This can be done through new independent research or by seeking contributions from other professionals that you might know.

4. Outline your value proposition. As a consultant you already know how you deliver value to your clients. But this needs to be tailored for a new audience – namely subscribers. Subscribers purchase their subscriptions for decidedly different reasons than people who might buy your services. Always remember that someone will subscribe not because they like you or feel that you are particularly interesting, but because they feel that their subscription will help them make money, mitigate risk or reduce their operating costs somehow. Make sure you have a sound strategy before you go to market with your new information product.

5. Find the right technology. If you have only limited content a simple blog might be enough if you don’t have one already. This is a good way to push information out to alert your clients to new trends and may also help you get found by prospective new clients. This kind of passive sales is always welcome. For people with large volumes of content to publish (or re-publish as the case may be) a broader search may be required. If you are not technically savvy, you may want to seek assistance from an outside expert.

A good example of an information product built by a larger company is Fortent’s Inform product (full disclosure, my project outsourcing firm IFConnect built this product for Fortent). This is a good model for consultants because it blends information from many sources and leverages relatively basic technology. Fortent Inform includes regulatory data, original content, filtered news, calendars and more to assemble an online destination for bank compliance officers. On a smaller scale, this model could work for almost any thought leader or experienced consultant.

Hopefully, after you think about your business a little bit and determine that you do in fact have adequate content to support an information product (no matter how basic) you will begin to realize how much value you have that has gone untapped. This can be the very first step in converting your expertise into a tangible product.

Maintaining Cash Flow to Survive the Downturn

Let’s face it; money is tight right now. All sectors of the economy are looking for ways to reduce spending. In many cases, this includes cutting costs in their core operations and not just on the “nice to haves”. If you are a professional services firm you’ve probably noticed that this trend is exacerbated by a new behavior; companies stretching out their payment of invoices.

Professional services firms have become accustomed to operating on a net-30 day basis. Most conscientious businesses pay their bills on time, or not more than a week or so late. This reflects a general discomfort with having invoices stack up. That has all started to change.

In my own business and those of people I know, I have started to see a trend where otherwise good companies are starting to delay payments to the point of being troublesome. With the tight credit market it is difficult if not downright stupid to hit your line of credit to float your customers’ projects, something we might have been willing to do even as late as this spring. So like everyone else, we have to find a way to strike a balance between dropping clients that are not paying and trying to preserve these valuable relationships for the future. We recognize that as vendors we are the first to get cut and it is rarely a smooth and equitable process. So how do you protect yourself?

We have two kinds of clients: large clients that have been good customers for years and everyone else. Here’s what we are doing to mitigate our risk during this period:

1. For large clients with a good solid history of paying their bills, we are trying to be as flexible as is reasonable. So long as they are making some payments each month we are staying in close contact with company leadership and trying to work within their means. We’ve made it very clear that we rely on them for cash flow and that we will continue to move their projects forward so long as we feel we are being treated fairly. My philosophy is that we will get through this downturn just fine so long as we are willing to compromise with our customers and they are with us.
2. For clients that are more than a quarter in arrears, we are calling the CEO or decision maker and having one more frank conversation. If they do not put a check in the mail then we will be dropping them as clients. At the end of the day, it is not reasonable for us to continue to prop up any business whose leadership can’t bring themselves to open a dialogue with us about their cash flow problems. These are companies that will most likely default on payments, but are selfish enough to get as much as they can from us until that becomes obvious. I don’t need clients like that. We will cut our losses early so we can reduce our operating costs related to their projects.
3. For companies that are somewhere in between, they’ve paid their bills in the past but are behind now, we will work with these customers for one more month. If no payment comes in then we will start to hold back source code and other deliverables. While this will not stop them from operating, it does increase their business risk and prevents them from totally ignoring our pleas for payment. The longer this goes forward the stronger our negotiating position becomes.
4. For chronic deadbeats and companies that simply will not even answer my calls anymore, we just write off the revenues and send them to a collection agency. Ultimately we do not like to do this as the collection agencies’ relentless approach virtually guarantees that you will not maintain a good relationship with that client in the future. But you have to ask yourself, if they are not paying their bills then do you really want them as a client anyway? So we cut our losses.

In the end, all businesses are different. Smaller vendors must be aware that they cannot mortgage their future for companies that will most likely not pay their bills anyway. They need to be honest with themselves about their cash flow and begin discounting receivables. It does not matter how much revenue you have accrued, until your customers pay you these assets are worth little. We all have to be careful about allowing our expenses to remain high or even grow when our cash flow is taking a hit.

Larger vendors will have to be just as careful as their clients about reducing costs, but they can be more creative. In this market , a large vendor may quickly find that they are suddenly bigger than some of their clients. They can use unpaid receivables to buy into their clients’ businesses and position themselves well for the economic upturn (whenever that happens).

The only way to manage your risk is to open an honest dialogue with customers and unwind from those that will just not pay their bills. This might mean working with your good clients to help keep them in business, something which is good for your business too. If you want to survive this downturn, you must manage your own business tightly and start to think defensively.

Creating Collaborative Products for a Troubled Market

The current selling environment stinks. There really is no other way to put it. That being said, I still find it difficult to be pessimistic. Fact of the matter is that both up and down markets can breed opportunity. The challenge is determining what that opportunity is and how to capitalize on it.

At my company, I’ll admit that we are having a difficult time finding that one bright spot in the market. So we have changed gears. Instead of looking for market segments that are bucking the downward trend we are now seeking future trends in workplace development. The companies that can remain at the forefront of how businesses work will ultimately be successful regardless of the short term market conditions.

Currently, there is at least one trend that presents a number of opportunities. This is in the area of "workforce mobility". The past ten years have seen huge gains in productivity through the use of technology. This includes software offered in different ways (the SaaS trend comes to mind) and new workflow solutions that help automate specific task-oriented business functions. These past trends when combined with the current dismal economic outlook means that companies that intend to survive will have to change the way that they operate. This will include finding ways to reduce operating costs and keep those knowledge workers that they can’t afford to shed.

Workforce mobility can be defined as a blended offering of functionality and enabling technologies that support a widely distributed workforce while controlling output in a transparent environment.

Companies that find a way to maintain a truly mobile workforce will find that their people’s individual productivity improves significantly. The average worker is at least 50% inactive while in the corporate environment. Without getting into the specifics of how workers waste time while at work, if you remove the corporate environment you will find a significant positive bump in productivity for many workers.

The beautiful thing about where we are as a technological society is that technology has finally matured on a wholesale basis. Fiber optic networks, cheaper laptops and other hardware, inexpensive collaboration tools, portable wireless devices, etc. mean that it is relatively easy for even small businesses to assemble market specific solutions that can reduce costs, improve productivity and actually increase controls for a workforce that go to work each day in their home offices. Any company that found a way to combine collaborative solutions with basic corporate needs such as document management, data acquisition, disaster recovery, etc. would find an eager market even when dollars are tight.

So how should companies capitalize on this trend? Simply focus on what you already know. My project outsourcing firm understands intimately how consulting firms operate. We know where we as providers fall down and where we shine. We also understand what kind of solutions could make us operate more efficiently. Now, full disclosure: my company already manages a global workforce under a virtual business model. So we are already accustomed to a widely distributed workforce. We have several offices in India and several in the U.S. (Boston and Washington D.C.) that must work closely in order to be successful. Even our employees in a single market, such as Boston, only rarely come together; and even then, it is often at a client site in a different city.

We are currently working on a product that really represents subscription based infrastructure for professional services firms. So, by developing a solution that will help us operate in this dynamic market, we are also creating new revenue opportunities by offering our homegrown solution to other participants in the marketplace. This strengthens our competitive position, ensures that we remain thought leaders in our market and helps us diversify our revenue base.

So what should you be doing for your firm? Ask yourself what you do well and what you don’t. Try to visualize an environment where you simplify your world by intelligently leveraging technology. There is no blanket solution that will work everywhere. But there are enough tools available that you should be able to at least lower your own costs right now. And if you can do that for your own firm, then you can do it for others. That is how new products are born.