Bloke goes into pub. Says to barstaff, “Mine’s a pint!” “No problem,” says the guy and starts pulling. “That’ll be £2.25 please.” Bloke says, “I’ll drink it first, then you can invoice me, and I’ll pay it in about a month’s time, more or less, honest I will.” Barman says, “That sounds reasonable. I have the same arrangement with all our punters. It means that I have no money right now to pay the rent and the wages and other expenses.
So we’re closing down tomorrow. Plus we’ve run out of beer and I don’t have any cash to buy more. A pint of tap water will have to do.” “Figures,” says bloke.
Figures indeed. Cash-flow figures, to be precise. The reality of business finances. How do you keep the flow on the go?
We’ve had many discussions with other SME owners lately about this problem. The most commonly used example is that of a loaf of bread from Asda. You wouldn’t go into a supermarket, take a loaf and then expect Asda to send you an invoice to be paid on a month’s time (at best)? So why is it any different when someone tries to buy one of your services?
One solution is to demand cash-before-work. Refuse to put pencil to paper or brain to problem unless there is some payment. This works with services in which the customer can see the product being developed or designed at stages in front of their eyes. It is more difficult in our field of training in which most of the prep work is hidden prior to the event or totally unacknowledged at all. Hence customers almost universally underestimate the true cost of training in time, effort and expertise.
One lesson my stint in business has taught me so far is that it is more difficult to sell the value of a service than it is to sell goods. People can see goods. They know what exactly they are getting with a car, a tee-shirt, a burger, some hardware, and a pint. But what do you ‘see’ in a training service? Someone standing up in front of a group and talking for a day. All the important bits – the design, the learning, the increase in workplace effectiveness – are invisible even on the day.
Among other things, productisation is a way of making your services visible to the customer so they know what they’re getting. This reassures them and makes them more willing to exchange their cash for your product. After all, no-one would dream of taking away a thing and not paying for it.
Productisation has been rather vaguely defined as, “The act of modifying something, such as a concept or a tool internal to an organization, to make it suitable as a commercial product.”
For those who want to know more I suggest these articles for starters.
10 practices for service productization
Turning Your Services into a Product
Beyond the obvious of selling training resources and materials, I’m trying to work out how to apply this to idea to my own service. How do you do it to yours?
Image credit: JasonRogersFotographie.
