Greetings from the Cumberland Gap. The RV is parked at the tri-state intersection of Kentucky, Tennessee, and Virginia where we will be exploring the passage blazed by Daniel Boone back in 1775.
I hope you found our last conversation about creating Authority-building videos to be useful and that it inspires you to start using video to market your expertise. Remember the stats from a previous newsletter: the average person spends 6 hours per day watching video of some kind vs. 19 minutes per day reading text of all kinds.
On to this week. I am frequently asked about how to compete against low-cost BV providers. And, parenthetically, low-cost BV providers are not just the online services of our world. They are also found amongst traditional practices that, lacking differentiation, compete on the basis of price.
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The BV industry is becoming more competitive every day … more professionals doing the work and better informed prospects getting fee quotes. There’s tremendous pressure to lower prices and conform to the demands of “the market” as online firms like BizEquity gain traction. And this pressure is not limited to my coaching niche of 1-3 person BV practices because I hear even some big valuation shops are feeling the burn.
If you’re trying to build a profitable, sustainable practice, pricing can be daunting. But here’s the good news: you can compete if you are willing to do some things differently. I am not saying these things are easy … if they were, everyone would be doing them.
#1 – Narrow your focus and become the expert
You’ve tried the generalist route, and it isn’t working. The key to differentiating your practice from the low-cost options is to narrow your focus and build a brand as a leading expert in a standalone practice area or industry niche or a group of related areas or niches.
Then – like the Beatons, Dietrichs, Fannons, Grabowskis, Hitchners, Mercers, and other titans in our profession – work to build your reputation as the go-to expert for that specific area or niche. Write a newsletter. Publish articles. Launch a podcast. Speak at conferences. Write a book. Pick something, get started, and the rest will fall into place.
#2 – Build and maintain your referral network
For many of us, our referral sources are our clients. So you must build a network of referral sources who know, like, and trust you, believe in your expertise, and understand the value you provide. They’ll send you prospects who are a good fit and have already been prepped to pay your fees.
Thus, a major focus of your marketing should be maintaining relationships with your referral network and frequently reminding them of what you do, why they can trust you with their clients, and what makes a good referral. This activity is a large component of my 2019 BVFLS Practice Development Marketing Plan.
#3 – Demonstrate the cost of low-cost alternatives
It’s important to alert prospects of the hidden costs that may accompany a low-cost service as it relates to that prospect’s reason for wanting/needing a valuation. Hey, there are some reasons for which a low-cost valuation may be “good enough.” But it’s easy to point out why business owners who built companies over their lifetime and are now ready to exit shouldn’t rely on a $500 valuation to tell them what the selling price is.
And I think it’s important to have a script ready so that when you need to explain the hidden costs to a prospect it comes off as a thoughtful rejoinder and not a disparaging rant against all low-cost providers.
#4 – Eliminate the competition
Not by tilting at their windmills but by transforming your practice. If there’s too much competition in your market, create a new segment for yourself. If you can accomplish this, you’ll be selling in a vacuum and there will be nobody your prospects can price-shop you against. How can you enhance, combine, or structure your services to create something that nobody else offers? Read Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant for some ideas and examples.
What can you do to place yourself in the Blue Ocean category of one? What resources do you have … what relationships can you leverage … what unique value can you create … how can you mix, match, or restructure your current services? It requires innovation and a willingness to pivot. And if you haven’t thought about this before, it’s worth blocking off some time to consider the possibilities.
Competing successfully in these conditions requires us to accept that many prospects will choose the low-cost provider every time … no matter how much it offends our sensibilities. So don’t chase those clients.
Instead, focus your business development efforts on a practice area or industry niche where you can stand out for an audience who will pay premium fees because they recognize the superior value you provide.
In real life
In many industries, there are insanely profitable businesses that charge premium fees and still win business despite the availability of free alternatives. Look at water.
Even though experts say we have high-quality potable tap water, millions of people buy bottled water every day … and bottlers position themselves to charge premium prices within this category (think Fiji).
If an entire industry can thrive by selling water – readily available for free – at high prices, there’s no reason for you to panic when you hear about low-cost competitors. But you must have a strategy to attract the right prospects who have the means to pay your fees and see the value in doing so. Because that is what you do when you hire a professional service provider.
Big Data Valuations: What we BV experts are up against
Big Data Valuations: What you said about them
Our fees are determined by the market. Which market?
Has anyone noticed that we are being disrupted? (a must-read)
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– If you think we share common interests, connect with me on LinkedIn.
– If you want a sense of how well your practice is working for you, take this Practice Self Assessment.