Robert Kyosocki once said, "If you do the thing that you fear the most, you will have conquered your fear." As an entrepreneur, fear is a constant companion. You are fearful that you won't sell any of your product, or run out of money, or be sued by a deadbeat, or....
You will never be able to avoid risk, however, if you can manage risk intelligently, you can minimize the risk and make it acceptable.
What are some of the ways that an entrepreneur can manage risks?
1) Incorporate: If you own a sole proprietorship, all that you now own, or will own in the future, can be taken away in a lawsuit. Unfortunately, there are a lot of people that are professional victims that are just looking to sue someone, and because we do not have a "loser pays" legal system, they do so at no risk. How do you manage those risks? Incorporate. If someone sues, and wins, all that they can do is to take the corporate assets, not your personal assets.
2) Insurance: Do you have a "key man" or woman that your business depends on to be profitable? What would happen if they died? What would happen if they got an offer at a different job? (Can you say, "Lebron James"?) Key man insurance is expensive, but it gives you a buffer to survive and move on if a key employee is no longer there. At the same time, if you have a key employee, and you are not paying them well, do not be amazed if they leave at the first opportunity. One of the ways to manage this is to give them a piece of the company. You do not do this out of altruism, but because it makes good business sense.
3) Investment (Research and Development): A lot of companies work like crazy to develop new technologies and have the latest and greatest product...and then stop innovating. In our technologically advanced culture, a new technology will be cutting edge for weeks. It will be innovative for months, and it will have a life span of 18 months...if you are lucky. If you are developing new technologies, you must be constantly adapting, revising, and coming up with new products/services that are "cool". If you don't you risk being a "buggy whip" manufacturer with a great product...but no demand.
4) Instant results marketing: One of the ways to lower your risks in marketing is to only pay for results. For instance, If your advertising budget is 10% of gross sales, and you want to increase sales, offer a 10% discount off purchases, if they buy using a coupon. You only pay for results WHEN the sale is made. OR, you use consultants, and you ONLY pay when they make a sale. By using production results (or commissions) you are only paying when you receive money. If you are using dinosaur marketing techniques, you pay for the possibility that someone will notice the ad, remember, contact you, and purchase. If you use Instant results marketing, you pay the commission AS you are paid, and not before. This lowers risk.
5) Bundling services/products: Instead of offering to sell your services piecemeal, offer to bundle services so that your customers pay for a larger purchase, increasing your revenue, by giving them a discount over buying the separate pieces individually. (Buy a case of Mountain Dew, for $150, rather than purchasing one Mountain Dew for $1.50. The per unit cost is lower individually, but by selling a greater volume, you increase your revenue. Assuming that they will continue to purchase your product.)
In short, if you are able to reduce your risk of failure, you will increase your chances of success, with all other variables being constant. Manage your fear, and you will manage your success.
Friday, April 22, 2011
Establishing rapport quickly
One of the secrets to negotiating is effective communicating. However, if someone feels that they are being interrogated, they will not reveal anything about what they want. The easiest way to begin a negotiation is to start with sharing a little bit about yourself, and then revealing a little more, and a little more, and then let the other person talk. I use open and closed ended questions to precisely find their objections and motivations.
What are open ended and closed ended questions? An open ended question is one with no easy answer.
"Can you tell me a little bit about your situation?"
"How do you feel about that?"
"What are you looking to accomplish with this sale?"
"What would make you happy with this sale?"
As you start asking these questions, and you must listen sincerely, the other person will be amazed that you want to listen, and they will start telling you everything you wanted to know...and more. The open ended question gathers a LOT of information. It will be free ranging, and go off in unexpected tangents. Your job here is to herd cats...by asking the closed ended question to clarify their response.
Here are some closed ended questions:
Open: "Tell me about your situation?" Response: "I lost my job, and can't make the mortgage payments, I am wanting to sell so that I don't hurt my credit in a foreclosure."
Closed: "So you're worried about a foreclosure hurting your credit?" (We have moved away from the price, and are focusing on the foreclosure hazards, and the deleterious effects on their credit. The closed ended question can be answered in a single word or sentence.
If the seller starts going in the wrong direction, use the closed ended questions to get them back on track. You can interrupt...IF you are doing it to understand them better.
"Pardon me, I just want to make sure I understand, So you are saying that you are most concerned with avoiding a foreclosure?" This question gets them back on track, and steers them in the direction that you want them to go.
Although it seems rude to interrupt, you are actually engaging in intense listening, and if you also use mirroring techniques the seller will be amazed that you understand them so well, and will want to open up.
Practice this with friends and family, and you will be amazed at the results. You will find that people want to tell you everything, and that is ok...if you can control the direction of the conversation.
These intense listening skills are powerful, and must be used with caution. If they are used without integrity, they can really take advantage of other people, so make sure that you let people know up front exactly what you want to do; help them solve their problem, in a mutually advantageous manner.
Open and closed ended questions work with almost any person, but you must be aware that there are cultural differences around the world, and if you can modify your listening skills to cultural norms, it will work with anyone.
What are open ended and closed ended questions? An open ended question is one with no easy answer.
"Can you tell me a little bit about your situation?"
"How do you feel about that?"
"What are you looking to accomplish with this sale?"
"What would make you happy with this sale?"
As you start asking these questions, and you must listen sincerely, the other person will be amazed that you want to listen, and they will start telling you everything you wanted to know...and more. The open ended question gathers a LOT of information. It will be free ranging, and go off in unexpected tangents. Your job here is to herd cats...by asking the closed ended question to clarify their response.
Here are some closed ended questions:
Open: "Tell me about your situation?" Response: "I lost my job, and can't make the mortgage payments, I am wanting to sell so that I don't hurt my credit in a foreclosure."
Closed: "So you're worried about a foreclosure hurting your credit?" (We have moved away from the price, and are focusing on the foreclosure hazards, and the deleterious effects on their credit. The closed ended question can be answered in a single word or sentence.
If the seller starts going in the wrong direction, use the closed ended questions to get them back on track. You can interrupt...IF you are doing it to understand them better.
"Pardon me, I just want to make sure I understand, So you are saying that you are most concerned with avoiding a foreclosure?" This question gets them back on track, and steers them in the direction that you want them to go.
Although it seems rude to interrupt, you are actually engaging in intense listening, and if you also use mirroring techniques the seller will be amazed that you understand them so well, and will want to open up.
Practice this with friends and family, and you will be amazed at the results. You will find that people want to tell you everything, and that is ok...if you can control the direction of the conversation.
These intense listening skills are powerful, and must be used with caution. If they are used without integrity, they can really take advantage of other people, so make sure that you let people know up front exactly what you want to do; help them solve their problem, in a mutually advantageous manner.
Open and closed ended questions work with almost any person, but you must be aware that there are cultural differences around the world, and if you can modify your listening skills to cultural norms, it will work with anyone.
Negotiating with the Dreadful alternative
When you are seeking to buy, or sell, anything, use the power of the "Dreadful Alternative" as your partner.
What is the "Dreadful Alternative"? Imagine that you are looking to buy a house. As you are starting to talk, ask a few questions:
1) If I don't buy it, what are you going to do? (If they have been trying to sell it for a long time, they are already afraid of not being able to sell it.)
2) If you have to move to another house, and make double payments, how long could you afford to make them before it SEVERELY affected your life style.
3) If you can't make the double payments, would you lose the house in foreclosure and have your credit destroyed?
By asking questions, you are having the seller tell you the answer. If I tell them, it might be a lie, if they tell me, it's always the truth (at least according to them.)
By using the dreadful alternative as your partner in negotiating, you are replacing the price (hope of gain) with the fear of loss. The fear of loss always wins. Because they are the ones stating the fear, it is always the truth. Our next blog will go into detail on some of the techniques to use to maximize the power of the dreadful alternative.
What is the "Dreadful Alternative"? Imagine that you are looking to buy a house. As you are starting to talk, ask a few questions:
1) If I don't buy it, what are you going to do? (If they have been trying to sell it for a long time, they are already afraid of not being able to sell it.)
2) If you have to move to another house, and make double payments, how long could you afford to make them before it SEVERELY affected your life style.
3) If you can't make the double payments, would you lose the house in foreclosure and have your credit destroyed?
By asking questions, you are having the seller tell you the answer. If I tell them, it might be a lie, if they tell me, it's always the truth (at least according to them.)
By using the dreadful alternative as your partner in negotiating, you are replacing the price (hope of gain) with the fear of loss. The fear of loss always wins. Because they are the ones stating the fear, it is always the truth. Our next blog will go into detail on some of the techniques to use to maximize the power of the dreadful alternative.
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