1. My market is different:   In the late 1990s professionals selling services to the telecommunications industry argued that with the rate of increase in data communications, demand for their services would keep increasing for the foreseeable future.   They failed to realize that short term imbalances in supply and demand can create a short-term bust in a generally upward market.  Firms selling heavily to the healthcare industry, which had come through earlier recessions unscathed, took a beating in this one, when many hospitals cut their spending.
2. My client is really many clients:   All markets go up and down.  The classic way to reduce the impact of such swings is through diversification.  But we must be wary of false diversification.  Over the years I have heard professionals who were dependent on one client for most of their revenue claim that the client was so big and they were working in so many parts of it that it was the same as having many clients.  When several big financial institutions failed over the past two years, some professionals learned how untrue this was.
3. My firm already has a diverse client base:  Sometimes professionals believe they serve diverse markets, when they don’t.  A dot com consulting firm, whose three biggest clients were an airline, a credit card company and a hotel chain, went belly up after September 11, 2001, when travel nosedived, and all three clients canceled projects.  Management of another firm convinced themselves that their top three clients; a credit card company, an insurance company and a bank; were so different that the firm was effectively diversified.  In this downturn, they learned that a credit crunch crunches all lenders.

Always be skeptical of it-can’t-happen-to-us statements.

I hear many professionals say they do not know what to do with social networks. They neither have the time for them nor see the value in them.  They feel that social networks invade one’s privacy, and that there are enough communications vehicles what with cell phones, email, and a seemingly endless list of old and new media.  And they find the array of social networking options overwhelming with LinkedIn, Facebook, Twitter, My Space, You Tube, and specialized networks for specific professions and industries.

A recent Business Week article points out that new modes of communication have always attracted this kind of reaction.  Among the examples it cites are:

• Socrates’ objection to writing, in part because this “invention” eliminated the need to exercise the memory.
• Henry David Thoreau’s objection to the telegraph, the instant transcontinental communications in the 1840s about which he said, “Maine and Texas … have nothing important to communicate.”
• Western Union’s refusal of an offer to buy the patent rights for the telephone in 1880, asking “whether any sensible man would transact his affairs by such a means of communication.”
• The New York Times editorial against the typewriter because it usurped the art of “writing with one’s own hand.” (What would Socrates think of this).

To these we can add more recent examples:

• Some people disdained cell phones in 1990 with voicemail messages, saying that they would hinder person-to-person telephone communication.
• By  the middle of the decade others complained that email and the internet would lead us away from real time communication.
• And now … social networks.

Instead of being superfluous, social networks are here to stay.   During the first years of the internet, people could only guess at its future uses and impact.  Now, we are just beginning to explore their potential of social networks.  They are a piece of the rain-making process. Those who stand aloof from them lower their probabilities of success and will  lose out on their the increasing power and value in the years ahead.

Examples of channel failure include:

• The loss of a rainmaker who provides a disproportional share of a firm’s or practice’s new business.  This is the simplest and most common source of channel failure.
• The loss of a referral source who provides a disproportional share of the firm’s or practice’s new business.  A cost reduction consultant received all of his work from a turnaround manager.  When that person was forced into retirement, his sole source of business disappeared.
• The failure of education programs as a channel for new business.  Several consulting firms ran seminars on specific methods for dealing with corporate problems.  After the seminars some attendees would hire them for large engagements.  At first these seminars attracted high-level participants, but after time, more and more junior people entered the mix.  When senior people stopped coming to the seminars, lead flow declined and when even the junior people stopped coming to the seminars, there were no more leads.
• The failure of an internal referral channel.  There are many examples of this. The engineering studio of an architectural and engineering firm got all of its business from projects that originated with the firm’s architectural studios.  When architectural projects dried up, so did the engineering studios lead flow.  In later years the management of the studio developed personal relationships with client facilities managers, which gave them a second, less cyclical, direct-to-market channel.  Also, at the large accounting firms, the passage of the Sarbanes-Oxley Act reduced leads from audit partners to forensic accountant practices specializing in litigation support to zero overnight.  The litigation support consultants, who had relied entirely on audit partners for a steady flow of new cases, had to scramble to develop new channels.

Channel failure is surprisingly common and can be devastating, all the more so, because the single channel usually looks as if it will never cease to provide new business.  It almost all cases, its failure comes as a big surprise.

The best way to avoid the problem is to have multiple channels to market.   Any professional who relies on a single channel and who doesn’t know how to go out and generate business through multiple sources exposes himself to grave career risk.  But, I don’t really expect many people to recognize and act on this knowledge.  History shows that it is all too easy to become complacent and to ignore channel risk.  You do so at your peril.

I’ve known Mooch (name changed) for many years.  He has implied that he helped meget work at two clients.  In both cases I have strong evidence that others helped me get in, but no direct evidence of Mooch’s help.  Because he is not clearly stated that he helped, I tend to discount the possibility.

I like this man.  He is smart and cheerful.  He also has unusual family obligations which must create great pressure for him.

As a networker, I have stayed in touch with him over the years, checking up on how he is doing, without any sales motive in mind.  Several times he has been out of work and called me for help.  Those are the only times I remember him ever calling me.  He is good at what he does, and I have recommended him to several people who interviewed him.  When I have not been in a position to help, he wheedles, asking me for more introductions repeatedly, if indirectly.

I once said to him that I, too, would like some introductions to potential clients from among the many people he knows.  Nothing was forthcoming, until the last time he came to me for help, when he offered to give me an introduction to a client that I did not think was likely to hire my firm, it was so small.  Then he asked for help finding a job.  I explained to him there was no quid pro quo for my help, just to keep in mind when he was talking with people might benefit from my services.  I then tried to introduce him to someone, who declined for reasons unrelated to Mooch.  He didn’t seem to understand my explanation.

I did not hear back from Mooch for several months.  He left me a message yesterday.  I know he is still looking for work and I know what he wants.  What should I do?

(This is another of a series of Rainmaking Problems.  If you have one that you would like other readers to comment, please send it to me at fharding@HardingCo.com.)

We do a better job, because this is the only thing that we do: A big competitor may be better known than you and have a stronger brand, but their brand is usually more diffused than yours, because it must encompass more services.  All big firms also have practices that don’t fit neatly within the brand they promote, and others that are clearly secondary in importance to the firms’ businesses.  This gives you the opportunity to differentiate your firm on the basis of your specialty.  This argument will only succeed, if specialization really makes a difference in your area of work.  You argue that because you don’t do anything else, you recruit, train, promote, reward and organize around just this kind of work.  This results in a more effective organization and better work producing better results for the client.  If you can back this argument up with specialized data bases, research, publications or other demonstrable differentiators, so much the better.

We do a better job, because we have fewer conflicts of interest.  The more services a firm has and the bigger it gets, the more likely it is to have potential conflicts of interest when serving a client.  Sometimes they are so severe that they are subject to regulation.  That happened to the big accounting firms which are now proscribed from serving as outsourced providers of an audit client’s internal accounting and bookkeeping functions, as a result of the Sarbanes Oxley Act.   Sometimes these potential conflicts draw sufficient heat that clients avoid them, even when not prohibited from doing so.  In recent times this has kept many companies from buying executive compensation services from the firms which do their pension and benefits work.  This provides opportunities for small, focused firms to replace them.  As another example, if a law firm that works for insurance companies also does insurance recovery work, it raises a fair question about potential conflicts of interest.  A firm specializing in insurance recovery and which doesn’t work for insurance companies can win business on that basis.

You will get better service because your business will be more important to us than it will be to a big firm.  A company that is a middling or small client to a big firm is likely to be a major account for yours.  This means it will get more of attention from your firm.  Your A Team will work the account, where a large competitor might assign a B or even a C team.  The client can get easy access to the head of the firm, if it wants to for any reason.  I know one small MEP (Mechanical, Electrical, Plumbing) consulting engineering firm, which specializes in small repair and renovation projects for large clients with big processing operations.  They are set up to complete these projects efficiently and profitably, whereas, for large competitors, the projects are often seen as a nuisance.  That they gladly take on small projects that others will do only begrudgingly wins work.

You will get a richer mix of talent from us, because we are less leveraged than big firms are, meaning fewer rookies working on your important assignment.  You aren’t expecting the client to pay for the education and development of junior team members, because the firm tends to hire experienced people.

We cost less, because we have less overhead.  Many small firms don’t compete on price.  But many others do and there is nothing shameful about doing so.  This works best if you are avoid giving the perception that you pay less, and so may attract less qualified people.  One consulting firm has grown rapidly by focusing on selling work within an easy commute from its offices.  Because travel costs for its consulting teams end up being much lower than for big firms which move huge teams from across the country to do an assignment, the total cost of their services is lower.

Winning against a big firm is challenging, but it sure feels good when you do

A big firm has many advantages, when competing against a small one.  It spends more on marketing and does so many more engagements with so many more clients that it usually has a stronger brand.  The marketing team can help put together stunning proposals and presentations.  Big firms can devote more hours to a pursuit.  They have greater depth and breadth in their professional teams.  Offering multiple services, the big firm is more likely to have an established relationship with someone at the targeted account.  Professionals at big firms can point out that one-stop-shopping for an array of services lessens project management cost and complexity for the client, and that there are less likely to be gaps between services, a common frustration for clients who parcel out a project in pieces to multiple firms.  The list goes on.

Yet small firms do win against big ones and do it frequently.  Sometimes they win on access to key people in the client company.  I will review some of the special forms of access that they can benefit from in this post, and describe other ways they compete with big firms in the next.

If you can learn about a client’s need early, and get in front of the buyers quickly, before competitors do, at the very least you have the advantage of more time to learn about what the client wants and the potential to make your case more frequently.  At best, you can shut out competitors before they even realize the client has a need.  Here are some tips for gaining early access:

Tip #1: Seek to develop a referral relationship with people who sell to the same people you do.  Focus especially on those who compete with big firms in one area, but don’t compete with you.  If a client has a need for your services, such people are unlikely to refer a mutual competitor.  If they know and trust you, they will be happy to recommend you—and, of course, you should do the same for them.  I belong to a formal networking group made up of representatives mostly of small firms, will sell to professional service firms.  There are many such formal and informal networks.

You can also develop a relationship with competitors and their colleagues at large firms which may be conflicted out of the opportunity to work for a client, who would rather see the work go to a small firm, like yours, rather than to a firm which competes with them on many fronts.  Working with such people provides you with extra eyes and ears in the marketplace, identifying opportunities for you.

Tip #2: Figure out who wants you to win and see if they might have opportunities to introduce you to decision makers.  You can also get special access through former employers, colleagues, employees, because they want you to win.  Many small firms get started when the founder leaves a job at a company, but continues to work for it as an independent advisor.

Tip #3: Figure out what can you do that will give you special access.  It had best be something you like to do, because it will absorb large amounts of your time and energies.  Sometimes you can do something difficult for a large competitor to imitate that gets you access.  The founder of a small consulting firm I know is getting many meetings with senior executives.  They meet with him because his recently published book which captures their interest and because his professional meeting-getter knows how to use that interest to obtain meetings.  I have seen others gain access through organizations they found and promote, from a golf tournament to a full-fledged professional association.  These channels take a lot of work, but can deliver huge payoffs.   Most small firms that have grown to midsize have done so by investing heavily in some such vehicle.

This all may sound Pollyanna-ish, but it’s not.  When interviewing people who have observed rainmakers, they often note the rainmakers’ optimism, sometimes mentioning in a tone of mild surprise that the rainmakers’ optimism often proved to be well-founded.  The rainmakers’ positive outlook is shaped and reinforced through experience.  They know not to take an unreturned phone call too seriously, because they’ve had to deal with so many of them.

When rainmakers apply their optimism foolishly, they are as likely to get hurt as anyone else.  Our data base of rainmakers includes several who went bankrupt through misplaced optimism, often in the form of a real estate deal.  Confident that they would sell boatloads of new work, they signed leases for space to accommodate all of the employees they would have to hire to do it.  When the work didn’t appear, they were stuck with the real estate costs.

I make this point for two reasons.  First, it is a caution to rainmakers and those who work with them to question the rainmakers’ optimism, if they seem to be applying it to areas beyond their expertise or to be brushing off the risk of catastrophic consequences, if they prove to be wrong.

My second reason for making this point is to deter anyone inclined to use a colleague’s negative thinking as a brickbat to beat them with.  I’ve had this done to me earlier in my career and seen it done to others.  Branding someone has a negative thinker and berating them for it is a loathsome and ineffective form of bullying.  There is a place for negative thinking in an organization, and when appropriately applied, should be encouraged and rewarded.  When misapplied, the reaction should be education, not derision.  For those interested in this subject, I recommend Martin Seligman’s excellent book, Learned Optimism.  (I have no financial interest in the sale of this book.  I do have a financial interest in the sale of my book, Creating Rainmakers, which also addresses the subject, but decline to recommend it out of modesty and fear of being hauled into court by the blog police.)

“At any given time there are three to five things that a company is working on that are driven by the board and CEO on down, and everyone owns a piece of them.  They’re not always the obvious things.  If you are talking to people about  one of those things, you’re helping.  If you are talking about anything else,  you’re on the outside and you’re selling.”

I think this is true wisdom.

Many people feel awkward about calling former clients and other business contacts.  They imagine getting a negative response, and this imaginary image becomes so strong that they accept it as if we were real.  These people say things, like “ he’ll think I am just calling to sell them something” or “ she’ll be annoyed with me.”  These people fall into the trap of believing that they can read other people’s minds.

If you find that you say such things to yourself and that it deters you are making calls, remember the following:

1. People generally accept without question your stated reason for calling them.  Even if they suspect that you may be calling to sell them something in your first call, they will quickly learn that that is not your primary motivation, if you focus on providing value to them in each conversation.  This value can include recognizing them as people and friends, providing some information that might help them, offering an introduction, and the like.  The more you call people and provide such help, the less they are likely to ascribe to you a mercenary motivation.
2. Even if they do suspect that a hope for new business is one motivation for your call, few will be offended.  After all, most are in business, themselves, and in business everyone must live by selling something.