Firestone’s
Three Laws of Power Selling
Introduction
Before I get to the Three Laws of Power Selling, I thought I
should restate for you the three most important things that every new startup
and freshly minted entrepreneur has to worry about first. The three most important things you need to focus on above
all others are: Sales, Sales and Sales.
It turns out that most
entrepreneurs are blessed with cleverness, ambition, flexibility, initiative,
the ability to work in teams, curiosity, creativity, fear of failure, willing
to take responsibility, leadership, energy and willingness to work hard; they
have lots of ideas, some good and some bad.
But if you can’t sell,
you’re toast. I have often heard CEOs of large, successful corporations and
Presidents of fast growing SMEEs (Small and Medium Sized Enterprises) say: “Ah,
now that things are going so well (i.e., sales are rolling in rather nicely), I
can stand back and work on the
business instead of in the business.”
This is completely wrong; as soon as a CEO delegates wholly the responsibility
to his or her Vice President of Sales, the business starts to go down hill.
When Lou Gerstner stepped in
to the CEO role at IBM in the early 1990s (a time of great crisis for IBM), he
took a very active role in sales. Within a few days of taking the reins, he
wanted to see a list of IBM’s top 300 customers. Why? Because he wanted to visit each and every one of them.
Sure you want to spend some
time working on the business but you have to working in the business too and
you have to be involved in sales—you have to be in the sales loop otherwise you
have abrogated your basic responsibilities to your company’s stakeholders
including your customers. I mean there are times when your customers don’t want
to talk to another sales engineer; they need to talk directly to you, Ms. CEO
or Mr. CEO. And this way you disintermediate all the layers of bureaucracy; you
get the real story and you then are in a position to create new sales channels
and new sales opportunities that only the CEO or President can champion at the
end of the day.
I thought it was weird circa
1995 to 2001 that all of a sudden entrepreneurs and their financiers started
thinking that they needed financing first and sales second (or third or
sometimes not at all). I have always taught that if you have revenues, you will
get financing and not the other way around. Have you ever heard of a business
folding where their sales are booming? Don’t think so.
They might change CEOs for
one reason or another but if you have great sales, your company is going to be
around for a long time.
So, quick, what is the
entrepreneur’s first and foremost challenge? Sales, Sales and Sales.
Getting sales is not easy.
There is always competition and it’s
hard to find customers.
Some of my students tell me
that their ‘pixie dust’ in their business model is that
there isn’t’ any competition for their (great!) new idea. This is actually
quite funny—there are two reasons why there might not be any competition. One
is that it is a bad idea. Two is that
it is a good idea that no one else
has thought about before (unlikely but possible). However, in the second case,
if it is a good idea, you absolutely will have competition. Check out how long
it took for competitors for Viagra to appear. (I am not saying Viagra is a good
idea, never having tried it myself, but it sure is a money maker.)
If your idea is a good one,
you will create your own competition.
So it’s a tough old world out there—your competitors don’t want you to succeed
but, guess what, your customers and your future customers do.
They want you to be
successful because they need your
product or service. They don’t want you to go out of business. They are your
greatest allies.
So making a connection with
them (this is called marketing) is really crucial—and you have to be able to
make these connections cheaply and effectively (this is called Guerrilla Marketing—substituting
advertising and promotion brains for money).
But Guerrilla Marketing is
something I deal with elsewhere; here let’s assume that you have made the
connection with a potential client. How do you make your selling proposition
irresistible? Well, you do it by first applying Firestone’s Three Laws of Power
Selling.
The Three Laws of Power Selling
Here below are Firestone’s Three Laws of Power Selling.
First, I’ll iterate them and, second, I’ll give some examples that will seek to
illustrate how the Three Laws of Power Selling actually work. Most people read
these types of things and they nod wisely but really have no idea how to apply
these ‘how-to-guides’ to their situation. I have found that people learn best
from RL (Real Life) examples.
Firestone’s Three Laws of
Power Selling are—
Thou shalt get on the same side of the table as thine customer or
client.
Thou
art selling a solution to a client problem or opportunity.
Thou shalt demonstrate that thy solution is a negative cost for thine
customer—that thy customer’s or client’s costs decreaseth or thy customer’s or client’s
revenues increaseth or both.
Thou
shalt find persons who be willing to pay thou to
market thine wares or services
Law 1—Some Examples of ‘SITTING ON THE SAME SIDE OF
THE TABLE’
When I was doing some
consulting work with GradeAStudent.com (started by four, really smart, former
students of mine), I told them that if they adopted Law No. 1, they could
greatly increase the amount of hardware and software they sell.
Their main business is
at-home computer service—fixing your PC on-site: installing software, getting
rid of viruses, making your network to run, etc., etc. But clients naturally
trust them to help them buy hardware and software too.
I told them that instead of
trying to sell their customers stuff; they should put their suppliers on the
other side of the table. So basically a GradeAStudent.com techie would say to a
customer: “I can get you XYZ virus scan software from Acme Corp. for 200 bucks
and it does everything, including
block spy ware and ad ware and pop ups, as well. Or I can get you something
cheaper from Pirate Software Co. for $99—it scans for viruses but doesn’t block
pop ups, etc.”
Now the GradeAStudent.com
techie is taking on the role of trusted advisor, a consultant to his customer,
if you will—he is on the same side of the table as the client. The suppliers are on the other side. If the
client doesn’t like any of the options, the techie can then say: “Look, maybe I
can get you a better price from Acme or Pirate or maybe I can find something
that will suit you better from someone else.”
In either event, the client
isn’t saying ‘no’ to GradeAStudent.com and they aren’t ‘buying’ from
GradeAStudent.com—they are buying ‘through’ GradeAStudent.com and from
GradeAStudent.com’s suppliers. The question of GradeAStudent.com’s margin and
markup on the sale isn’t likely to come up at all—it will be the suppliers who
will most likely take heat if the pricing is too high or the offer doesn’t have
all the features (or has too many of them) that the client wants.
GradeAStudent.com can back away from any solution with no loss of face. This
kind of ‘non-selling’, selling is extremely powerful.
Another client of mine, a
web developer at EnvisionOnline.ca, was asking how he might apply Law 1 to his
business. I thought about it a bit and came up with this example for him. He
has already designed a web site for a Home Heating and Air Conditioning Company
(HHAC, not their real name). I told EnvisionOnline.ca: “Why not turn HHAC into
a quote machine instead of a seller of AC units or furnaces?” The idea would be
for HHAC to consult with their clients, get on the ‘same side of the table’ and
spec two or three different solutions for them. Again, HHAC clients would
(hopefully) tend to see HHAC’s suppliers as the entities they are negotiating
with, not HHAC.
Maybe EnvisionOnline.ca
could create an opportunity for itself to get some recurring revenues by
optimizing HHAC’s web site for maximum search engine traffic and perfecting an
online quote system for HHAC. EnvisionOnline.ca could operate the site for
HHAC. Today, what once were product companies like IBM want to be more like
service companies and get more of their revenues from consulting for clients or
operating things for their clients. It makes sense—these types of revenues can
be more predictable and they obviously can lead to more product sales too. IBM
has been very successful at this: operating huge data centers and other back
office operations for major global companies. They now get a huge portion of
their revenues from services. And when these back office operations need new
equipment, you can be sure that IBM supplies a lot of that as well.
But service companies also
want to be more like product companies. Selling products has its own appeal—you
make a thing once and you resell it over and over again.
EnvisionOnline.ca develops
products (web sites) with many, many of the components being repeatedly reused.
By ‘operating’ client web sites (consistent with the Three Laws of Power
Selling, of course), EnvisionOnline.ca can be more of a service company with
more predictable revenues perhaps.
Now another important
feature of the Three Laws of Power Selling is to make sure that you are applying
the Three Laws to not only your sales
to your clients and customers but also thinking through how they might or
should be applying the Three Laws to their efforts to sell to their clients.
Huh?
Now one could carry this on
down the food chain indefinitely but I think applying the Three Laws to two
generations of the business-land ecology is enough to think about at any one
time.
So let’s go back to Law 1
and see if we can find an example where we can apply this type of thinking. How
about the case of Brymark.com, a seller of promotional items. One of their
sales people, Dale (not his real name) is a keen golfer and he wants to sell
promo items to Golf Pros but everywhere he goes, he hears the same story—they
don’t have the budget for it.
Now Golf Pros do a lot of
teaching (their bread and butter) and Dale notices that a lot of those keen
students are lawyers. Dale realizes that lawyers (at least in Canada) are
usually in tough trying to find ways to market and sell to new clients—Canadian
lawyers tend to do less of those late night television ads than their US
counterparts who don’t’ seem to mind a direct pitch like say: “Have you
recently been injured in an accident? Do you need someone to represent you and
take your side?”
So maybe Dale can solve the
problem this way: he will sell the promo items to the Golf Pro but he will get
one of Golf Pro’s legal clients to pay. This is how it works: he chooses a
promo item that appeals to both of them—the Golf pro and the Law Firm, say,
mouse pads. He brands the mouse pads with both the Golf Pro’s information and
the Law Firm’s pitch too.
Now the Law Firm gives out
free mouse pads to its clients, many of whom are probable golfers, and the Golf
Pro gives out the mouse pads to his clients, many of whom are probably in the
market for legal services. By thinking about how the Golf Pro’s clients sell
(or market) to their clients, Dale has made a sale and created a new marketing
channel for both the Golf Pro (who gets the Law Firm to distribute his
marketing info to their clients) and the Law Firm (who gets the Golf Pro to
distribute their marketing info to his clients).
This is called co-branding
and can work with more than two parties as well. For example, promo items for a
high end men’s shoe store might work well with an upscale jeweler and a high
performance auto dealership.
This kind of selling is more
difficult to do because it involves a minimum of three parties—you, the sales
person, and at least two co-branders. Anytime, you need three approvals to get a
project off the ground, well, that’s tougher to get than a two party agreement.
Obviously, the degree of difficulty goes up as you bring in more co-branders.
Having said this, by making it more difficult for himself, Dale is also making
it harder for his competition to duplicate too. And in the promo business,
which is absolutely cutthroat at the best of times, that’s not a bad thing.
I really like how the Ottawa
04 International Animation Festival sold to one of their key sponsors
(Electronic Arts, EA). Usually, these sponsorships are pretty boring—put up a
banner, hand out some brochures, demonstrate the products or service. Most
sponsors get involved with good works out of guilt and don’t leverage their
sponsorship dollars very well, if at all.
But the Festival had clearly
thought about some of EA’s challenges, like the fact that one of EA’s biggest
problems (circa 2004) is how to recruit top notch talent. By getting on the
same side of the table as EA, the Festival thought about who EA is selling to; they
need to sell to (i.e., recruit): software engineers, animators and computer
graphics artists. And those just happen to be the kind of people who might
come/be attracted to an International Animation Festival.
So EA brought their
recruiting machine to town.
So the Festival was not only
thinking about how they could sell to their customer (EA) but how their
customer (EA) could sell to their customers (software engineers, et al). You can only see solutions like this when you
are sitting on the same side of the table as your client and looking at their
problems the same way they do. This leads us to Law No. 2.
Law 2—Some Examples of ‘SOLUTION SELLING’
Law No. 2 involves ‘solution
selling’. I am always amazed at how many sales people make a sales call on a
prospective client knowing next to nothing (or sometimes absolutely nothing)
about the potential client’s organization and its problems and challenges. It’s
hard to sell a solution when you don’t know the problem.
Solution selling is all
about knowing a client’s business and business model in incredible detail so
that your product or service addresses, in a very direct way, at least one of
their key issues.
Solution selling often
involves self-financing offerings, where the money the client needs to have in
order to pay you for your services or products doesn’t actually come from them
but from their clients; i.e., your client’s clients.
I worked with one NPO (Not
for Profit) outfit and we devised and entire program for them that cost them
$100,000+/- to implement but generated more than $600,000 in net funds from
event participation and sponsorship. They never had to reach into their (short)
pockets for a dime.
Furniture sellers and auto
dealers do this all the time—they provide attractive financing deals (OAC, On
Approved Credit) like those ‘don’t pay a cent events’ until some point in the
future or by providing you with 100% financing at super low interest rates.
I have been involved in
mergers and acquisitions where the acquiring company ends up with more cash after buying the other business than
they had before. These are called ‘accretive’ financing deals—they can be cash
accretive or earnings accretive or both. This is another, more complex form of
solution selling.
Another way to look at it is, if I am asked to help sell a company, one of the first
things I might do is to try to find a way to provide the acquiring company with
the financing to do it so they don’t have to reach into their jeans for any
money at all.
In one transaction I am familiar
with, the acquiring company bought a franchise for $30m, half down in cash and
half paid at $5m per year for three years. (The numbers have been changed to
protect the identity of the acquiring company).
They then entered into a long
term lease for a facility and received a leasing inducement in the amount of
$20m in cash from their Landlord. They also put in place a credit facility with
their Bank for 50% of the value of their new franchise.
If you do the numbers, they
put up $15m in cash to get into this business but received back (from the
leasing inducement and the credit facility) a total of $35m so they had $20m
more in cash after buying the
franchise than before. Nice work if you can get it.
Accretive deals like this
are much easier to do when you are a large company with a top credit rating and
explains to some degree why the rich get richer and the rest of us, don’t’.
Real Estate transactions can
often be like this too. It’s a form of Bootstrap Capital.
How can you acquire real estate with no money down? I get asked
this all the time. In reality, you usually can’t do this; it’s more like
acquire real estate with little money down. But it can be done. For those of
you who are curious about this, you can read an example of how Betty and Phil (not their real names)
acquired residential rentals with very little money down.
One of my former students
started his residential construction business with no money down by finding a
willing landowner to play along with him. He optioned a piece of land for
almost nothing ($500), put his sign up, put a trailer
on site and he pre-sold 10 units from plans. With the deposits he received from
Purchasers, terms he got from his suppliers and with the co-operation of the
landowner, he was able to profitably build more than ten single family homes in
his first year.
The landowner and his
suppliers got paid out of the closings. He had zero bank financing and
practically zero cash when he started out but he did have one
thing—credibility. And that can take you a long way.
There are other ways people
acquire real estate with no money down. For example, they might be speculators
who intend to flip the land for a profit before they actually acquire it. Or
they could buy land or buildings that are undervalued.
The latter was especially
popular in the real estate go-go years of the 1980s. Another way of looking at
it—is they are ‘over-leveraging’ the acquisition.
Basically, it works like
this: buy an undervalued property; add some value by doing a ‘lipstick’ (i.e.,
superficial) renovation or raising rents; get it reappraised at a higher
valuation; mortgage the property for more than you paid for it.
Law 3—Some Examples of ‘NEGATIVE COST
SELLING/NEGATIVE COST MAREKTING’
Negative cost marketing is really
two things—one is being able to show a client (and really show it using a
spreadsheet) that by hiring you or by buying your product, their costs will go
down or their revenues will go up or both. We are going to call this negative
cost selling here.
Two is to find people who
will pay you to market your products
or services. We’ll call this negative cost marketing and, somewhat
surprisingly, it can be quite common and would be more commonplace if people
(read marketing professionals) were willing to think more in these terms to
begin with.
The obvious example of this
is what pro sports teams do. It seems incredible to
me that people will gladly buy overpriced merchandise and walk around as unpaid
billboards for their favorite sports teams. I mean in the Great Depression of
the 1930s, some poor suckers got paid (wretchedly) to become walking billboard
and shills for local businesses. Now we do it for free; in fact, we pay sports teams
to do it for them.
Of course, it isn’t just
sports teams that are in this space; Calvin Klein Jeans, Roots and other
assorted brand name manufacturers long ago figured that people would pay to buy
your stuff with your name and brand on the outside
of their clothes. What’s with that anyway?
There are many other ways to
induce people to market your stuff for you. One of my former students owns a
beautiful, hand crafted wooden gondola that he charters out all summer.
Then he pays to put it in storage for the winter. I suggested to him that he
contact some of the large commercial office or commercial retail landlords in
his area and see if they want to put his boat on display in one of their atria.
After all, his boat is an
artifact—a unique (in
Now let’s turn to negative
cost selling. To do this, you have to know how your customer’s business (model)
actually works. Study your client—it pays off, big time.
I go through one example of
re-engineering a business model for a friend of mine (Bill Farley, not his real
name), who is in the media training business. We tweaked his business model to
help his business out of a slump and we made it consistent with the Firestone’s
Three Laws of Power Selling, of course. In my view, the latter is the cause of
the former. You can read more about Bill’s Media Training Business Model Revamp
and I won’t repeat it here.
Another friend of mine,
Anthony (sorry but not his real name either) owns his own mail order house and
part of his business model is to create his own customers through negative cost
selling. I think he does it more because he is bored with the normal course of
business than because he needs more clients. He finds that sometimes he can
create more interesting solutions for potential clients than they can for
themselves and, happily, more interesting work for himself. He sees it as a
kind of challenge.
Anthony has recently gotten
into the ‘lumpy mail’ business—today Canada Post and the USPS allow people to
send all kinds of weirdly shaped objects through the mail. They had to adjust
their business models too or face near oblivion.
So Anthony came up with the
idea of helping a summer camp for distressed children raise money by using his
bulk mail service. But he just didn’t go to them with a proposal of give me
$15,000 and I’ll mail out thousands of solicitation letters. I mean how many of
these does everyone see in a year anyway? And where do most of them end up?
File 13.
No, he pitched them on
sending a select group of CEOs and senior Managers (from a good quality mailing
list he had) a lumpy mail piece containing a skipping stone and an invitation
to a CEO stone skipping challenge event. Over 90% of these lumpy mail packages
got opened and the response rates were in the stratosphere.
Everyone can skip a stone
and everyone has childhood memories of time spent by the water on a perfect
summer’s day.
He even got a
I like even better the
example of Peter Patafie, owner of Patafies Inc., who started his packing and
moving supplies business and in five years, built a $15m a year business from
nothing with nothing.
Peter noticed how all the
sales persons for moving companies in the Ottawa area were supplying their
customers with packing supplies by first taking delivery of cardboard boxes,
wardrobe boxes, bubble wrap, tape, tape dispensers, wrapping paper, what have
you, in their warehouses and then the sale person would hump the stuff over to
their clients’ homes in their vehicles. Peter saw
He thought that a better use
of the sales person’s time was selling more moves (better for them since they
are mostly on commission and better for the moving company obviously) rather
than delivering boxes to people packing up for their moves. So Peter pitched
every moving company this way: he would sell them packing supplies but his
people would deliver them to their customers.
It was a simple idea but
brilliant. Today, 98% of the movers in
In essence, the moving
company gets money for nothing—they mark up Peter’s packing and moving
supplies, sell them to their clients, Peter delivers the stuff, they never see it,
they get the money (less Peter’s share) but haven’t done any more work and, in
fact, have unleashed their sales people to sell more moves….
A few years later, Peter
noticed something else by visiting his clients. (What a novel concept, wouldn’t
email have done as well? Don’t think so.) They each had a zillion used boxes
lying around. Boxes that Peter had sold his clients’ clients; after their
moves, somehow they ended up back in the movers’ warehouses.
So Peter asked them what
they did with the used boxes. They paid
to have a recycler take them away. So Peter offered to buy the old boxes from them (another negative cost!) They might
have thought Peter a bit foolish but they indulged him. ‘Sure, you can buy our
discarded cardboard,’ they said.
But Peter had noticed that
plenty of people were scrounging old boxes from grocery stores, hardware
stores, liquor stores, wherever. People who didn’t want to buy new boxes. So
Peter started selling used boxes and
he turned that into a thriving million dollar plus retail business in less than
two years. Think about it—Peter sells new boxes, later he buys them back at a
fraction of the price and then resells them again at a substantial markup.
Peter has created his own
clients—seeded the fields and reaped the harvest, if you will. He created a new
revenue stream and a recurring revenue stream for himself, both critical
components to having a great business. And he made the connection with new
customers efficiently and effectively—by first visiting all the moving companies
in the area, which is feasible for one person to do since there aren’t that
many of them. And later, he created a mass market for recycled boxes by niche
radio advertising.
At the beginning of this
paper, I made the point that if you have to knock yourself out to make a
connection with potential customers at huge cost in terms of time or money or
both, your business won’t be sustainable and it will fail. So remember:
finding, getting and keeping customers have to be (relatively) cheap and easy to
do in order for your business to have a chance at success.
Conclusion
Really, Firestone’s Three
Laws of Power Selling are woefully inadequate to by themselves create a truly
powerful sales organization; there’s a lot more to it than my Three Laws, for
sure. At its very essence, power selling is about becoming more creative,
thinking a lot about your customer (and your customer’s customers’) needs. It’s
about hard work. It’s about lateral thinking. It’s about seeing opportunities.
It’s about knowing how the world works. It’s about training your whole team—and
I mean everyone including your
receptionist and your accounting staff too—to be power sellers.
Your accounting team is a
great source of leads; why not reverse sell to people you buy from (aka, your suppliers).
When I was with the Ottawa Senators, I didn’t like to buy from anyone who
wasn’t already a season ticket holder or prepared to become one; I think we
should expect people to buy from us if we are buying from them, provided it
makes sense.
And nothing is worse (and
this has happened to me a lot) than calling a tech company or calling a real
estate company or any type of business and getting a receptionist who knows nothing about the company she or he
works for. How is it possible for a receptionist not to know what real estate
projects a company has on the go or what new products the firm just released
with great fanfare at a tech trade show? And don’t blame the receptionist—it’s
management’s and ownership’s fault if they have untrained and uniformed
employees running around.
In pro sports, they know how
important it is to be prepared. They say that if you develop good habits in
practices, it will carry over to games when the results really mean something,
like whether you get to keep your job or get cut. In any competent military,
they are fanatical about training and preparation because it saves their lives.
You want to be a power seller? Then you and your entire organization need to be
trained and prepared—you need to do your homework and you need to learn how to
be a power seller and then you need to practice it again and again because you
will get better at it. You can train yourself to be more creative if you are
alive to that possibility.
At the end of the day,
people like to buy from people they like so you can’t neglect the human factor.
My late father, Professor O.J. Firestone, told me if I wanted to get a deal
done then it had to be face to face. I thought he was being a bit old fashioned
but in this time of widespread email abuse and voicemail hell, I think his
advice is even truer today than it was when he said it to me, in 1982.
Copyright,
Dr. Bruce M. Firestone,
Postscript:
Recently, I took a course in real estate given by a fine teacher, Mr. Wayne
Hancock of
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