At least. Which is a pretty good piece of pocket money. I suspect even Warren Buffet would slow down to pick that up.

I attribute this to SEO because even thought it was a change in business process coupled with good SEO that made it happen it could not have happened without SEO.

Fair warning to people looking for "advanced" techniques - they ain't here. But what I'm going to talk about is a LOT more valuable than a trick that may or may not work with Google next week or next year.

Best Ever YouMoz Article

Let's look at the real money quote that J Kelly Garrett put in his amazingly excellent SEO article at YouMoz. This piece of advice will serve you while you climb up the value chain from a specialist to a trusted business advisor:

I took the pile [of papers, documentation, etc], pushed it aside, and asked him [the business owner] to tell me about himself. This is a common technique of mine, whether it is a small business owner, or the Chairman of the Board for Burlington Northern Railroad.

He wasn't asking to hear about the guy's soccer team, he wanted to get the gestalt around the company. What is important about the environment, goals, challenges, employees, culture, customers, etc, etc, etc.

It's Not About the Technology

Really, it's not. Not even in SEO. I wasn't about the technology in OO programming. It wasn't about the technology in robotics. It wasn't about the technology during the dang moon shots either.

It's about how the technology serves the business and makes it more successful. Sometimes 'success' means one or more of:

• Improved profit
• Increased revenue
• Decreased risk
• Stronger resilience
• Faster new product introduction
• and on and on...

But if the technology isn't in service to the goals of the business then it will eventually fail.

The $2M Piece of Advice

I know exactly when I finally understood this. No kidding.

I left one job as a consultant making $55/hour doing NeXTStep programming (hey, that was LOT of money back then) and got another one making $75/hour. The had two slots to fill - lead programmer ($50/hour) and technology business advocate ($75/hour).

For some reason, don't know why, during the interview I was homing in on the business objectives of the billing audit system they were building. I kept asking about change management (people, not source!), about deployment, about disruption, etc, etc.

Next thing I knew I was walking about into the freezing flipping cold in Chicago holding onto a 50% raise. Bubba, you don't get too many of those.

If you work that out - 48 weeks a year, 40 hours a week, 40 work years in a lifetime - you find out that that change in focus gets you a $1,920,000 raise.

Actually, it's even more than that because you keep the advantage while you march up the food chain.

Back to The SEO Example

What really struck me about Garrett's example was that the business took the fairly traditional and predictable approach of getting some SEO guys to graft web and SEO onto a traditional "ring and pitch" business.

The SEO guys put together a campaign that generates 2,500 leads and it kills the guy because:

• ROI goes from "signup" to 2 years.
  
• "He is looking at ROIs that should apply to heavy machinery and commercial aircraft."
• Growth rate drops from 19% to 3% because of process issues:
• "growth rate has plummeted from 19% per year to 3% per year because he is in the office answering the phone all the time with close rates of 12% [down from 97%]"
  

Actually, there were a lot of issues, but those are the two killers. Look at what happened - his profits got pushed out a year from acquisition AND instead of looking at an yearly "takehome" increase of $67,032 he was seeing an increase of $10,584. That is an opportunity cost of over $55K!

You can go broke quickly making money that way.

Do the math

I'm just going to quote Garrett's point in toto because it sums up the whole problem so neatly:

SEO Firm Declares “Success.” The PPC campaign is bringing in over 2500 hits per month. Closing the sales is not really their job. They just need to work with the business owner to further tweak everything to bring in more hits. “Obviously” the copywriting needs work to further capture the ones that do get there, or there is something wrong with the business, or whatever...but we are getting people to the site. Just wait till the site starts to rank higher with the search engines!

Remember, the owner is now going broke pretty quickly, has sunk a fair bit of capital into the new venture AND is probably pretty much apoplectic. In fact, if he's like any dial-and-smile salesguy I know, physical and financial threats are probably in the offing.

What's the Solution?

I won't repeat the meat of the article but basically Garrett becomes and advisor and helps the owner re-engineer his business so that he goes back to ROI on close. But most importantly the business growth goes back up to the previous 19% and then all the way up to 28%.

So, back to the math - previous to the first campaign the owner was looking at a yearly "raise" of $67K based on growth. The slap-on-SEO campaign took him down to a $10K raise. The SEO+BPR campaign took him to a $98K yearly raise. Thus the title of this post because the SEO catalyzed a $31,752 additional raise.

I'd like to read a lot more articles like this, and I hope he keeps writing.

Seth Godin had an interesting article, Managing Urgencies. Here's one of many money quotes:

The problem, of course, is that most organizations are on fire, most of the time....Add up enough urgencies and you don't get a fire, you get a career. A career putting out fires never leads to the goal you had in mind all along.

Several years ago one of my employees imparted this nugget: "You are always living in the long term." Even though all of the pressures in a normal job tend to be focussed on the immediate, to quote BSG Razor "You make your choices and you live with them. In the end, you are your choices."

The fires you face today are usually the result of decisions you made months or even years ago. Here's an example. I did a consulting project for a software company that found itself mired by failing projects. Years ago, they had made some fairly poor choices, such as hiring people that weren't quite up to the job and not instituting standard practices such as source control, release management, and code reviews. They had 30 different customers with 30 completely different sets of source code, and were fixing the same bugs (with different people) at every project. The CEO asked me to come in and do a "health check" on their processes. I was to present my findings at a board of directors meeting.

I did my presentation to the board. I explained what the problems were and basically suggested that since they had 30 projects that were going to miss their delivery dates by an order of magnitude, the best thing they could do was 1) Clean house and get rid of some poor managers, 2) Start using best practices, and 3) Stop all work and concentrate on building a single branch of their source code that would be relatively bug free that they could then branch out to their projects. All pretty standard recommendations for software projects in trouble.

This approach didn't seem revolutionary to me, but it wasn't at all what the CEO had in mind. I had totally misread the situation. He was looking for outside validation that everything was ok. Or maybe he just wanted some improved firefighting equipment or techniques. Perhaps he should have spoken to me before I went in front of the board, but he was busy putting out fires. In fact, the entire company was built on a culture of fire fighting. Employees that went to extraordinary lengths to fix situations that simply should not have existed were lauded as heros, and the few technical people that were pushing for change were just "negative." Years later, the company was sold at a "fire sale" (how fitting) and almost no one from those days is now with the new company.

It's very easy to get trapped into just looking at the current fire that needs to be put out. After all, when the house is on fire it's pretty tough to be thinking about installing the smoke detectors.

But merely moving from fire to fire is not leadership. A leader is someone that can guide change even while dealing with the day-to-day. If you find yourself unable to deal with anything more than the minutiae of your business, then where will you be in 5 years? I'll give you a hint: Even if you manage to stomp out these fires, unless you're proactive you'll just be fighting another set of fires.

So you're rocking along, doing some pretty good dollar consulting, and you build a small product, internal use only, to help you get your fixed price projects done more quickly.  And now you're really pulling in some bucks.

Disaster Strikes

A junior consultant you just hired from Compsci-U gets drunk at TGIF with the client and spills the beans about your groovy-o tool.  The client, who is billing $100K/month with you, demands a demo.  Upon seeing the (very rough) demo he wants to drop down to $10K/month in consulting and $25k/month in tool charges.

You want to fire Mr. Junior Consultant-man but you do the math:

$100K/month @ 25% (gross) margin = $25K/month (gross) profit

versus:

$10K/month @ 25% gross margin = $2.5K/month (gross) profit

$25K/month tool use at 100% (gross) margin = $25K/month

Total (gross) profit: $27.5K.

Total (gross) upside: $2.5K

Hmmm, up $2.5K plus you have fewer heads on sticks to worry about getting drunk and telling the client what is really going on.

Brief break for the hula dance of victory.  With some Walk Like An Egyptian dancing thrown in.

Money Left on the Table

Hey, wait, all those RFP's and client requests you couldn't fill?  Now you have people.  Time to start dialing!

Revenues go up, bench time stays low.

What is a Tool?

I am using it in a generic sense. It might be an actual tool that takes input and produces output, like WordFinder.  It might be data, like D&B records.  It might be a newsletter, like ValueLine.  Heck, the Yellow Pages is a product.  There are different kinds of products: Shrink Wrap, Custom Off The Shelf (COTS), Consumables (newsletters), etc.....  You'll know which category you're in, and they have different sales characteristics, but at the end of the day, they all fall in the tool bucket and the discussion below applies.

Defensible Business

Consulting is a human resource constrained business so growth is hard.  Suddenly you see how you can sell maybe a quarter of your customers this tool and double your top and bottom lines with the same resource base.  You're rich.  Well, you do have to start investing in resources to improve, grow, and bullet-proof your tool.  So maybe you're just doing better and not well. Still, it's easier money in many ways.

Plus you are suddenly holding a defensible business with a 99% margine.  Before a competitor could come in, offer to do the same job at 80% your rate, and boot you out.  How would the client know the difference?  But now there is this cool tool where the client can pay 35% what they were paying before and get the same benefit.  It's a win-win because they won't be able to get the service cheaper and you can't come under much (if any) price pressure.

Business Fundamentals: Cost / Payment Cycle

When you first start a consulting business you can finance it by floating your expenses on your credit card while you wait for clients to actually, you know, pay.  After a while you learn to build up a bank account so that you don't have to use your home equity line or pay big Amex penalties while you wait for your client's AP department to cut and mail a check.

If you're pretty smart you prepare a bigger reserve before you hire your first non 10-99 employee so that you can pay their salary and expenses too.  If you're like me, well, you're just glad that you put 20% down on your house 15 years ago.  Eventually, though, you learn to keep a tempting pile of cash around (business reserves) relative to

• Employee headcount
• New employees costs and ramp time
• Bench time - expected (occasional) and sudden (client driven)

Costs Start to Rise

If you're really really smart you got ahead of the cost cycle, otherwise you eventually figure it out in time.  (Else you're reading this post from a post-Dilbert cubicle slapping your head!)  But what is probably surprising you is the rising costs of maintaining your cool new tool.

See, the tool got built by the guys on the bench because they need to do something wihle they're not working.  And you figured, hey, if my guys are only spending 10% as much time at client sites then....

But it doesn't work that way over time. Consultants are the king of the one-off – each client gets a customized solution.  It’s very hard to step back from that and introduce release cycles, source control, Q/A,  and a one size fits all mentality.  In fact, your consultants probably can’t do that and you’ll need to hire dedicated product staff and not just guys on the bench.

Regardless, the product gets more complex so you need dedicated resources.  But you have better margin, revenue, and gross dollars to pay for them, so on you plunge. 

And then you need bigger office space.  And you need support staff.  And so on and so forth.  Suddenly you're spending a LOT of money building in features that will be required for future sales.  And now you have a product manager - how did that happen?

The Sales Revolution

Suddenly you have a sales guy.  Or you realize  you need one.  Maybe at first your senior consultants were making the sales for you, but as costs of building and maintaining the tool rise you realize that you need to convert more and more of your customer base to tool users.  And you need to poach, er, convert your competitors customers, which is a much more sophisticated and complex sales cycle.

So now you have a salesguy absolutely eating money as he travels around and does the needful making sales.

Industry Conferences

Got a spare $50K to $100K lying around?  Because now you feel you need to go to the industry conferences.  If not for leads, then certainly for branding (whatever that means for you).  Good luck keeping it down to one or two conferences!

Revolution In The Ranks

Back when your consultants ruled the roost they were busy and happy and well bonused. Now they're carrying water for the product guys, there is some strife, and you're having higher turnover.  Oh, and consultants are paid bonuses based on utilization.  With shorter engagements and because you're spreading them across customers suddenly you have to bonus people for bringing in less money.

Remember your Reserve?

Before, with a staff of a dozen people, you were keeping $75K to $125K in the bank to cover salaries, float, bench, and expenses.  Now you have thirty or forty people and only a dozen of them are pulling in steady and predictable monthly revenue.  So what's your reserve now?  Maybe $350K?  Oh, wait, you've signed up for two conferences so you need another $50K set aside for that.

Hmmm, by now you're at the beginning of the turnover cycle for install base customers, but since new customers are signing up it's all gravy.  Except that now revenues are growing at a slower rate.

Inflection

Andy Grove, the most paranoid and brilliant man in the semiconductor business, describes an inflection point as where a business fundamentally changes from catepillar to moth.  You're just noticing that your consulting model is necessary to your product sales model, but that your company is built around a product model.  You've reached an inflection point.  He also noted that capital is the grease that rides you over the bump.

A Little Planning Meeting Discovery

Usually on a Saturday, usually right after a tight payroll, usually after the cash reserves go down two months in a row, usually this is the discovery:

We need capital to get past this inflection point

You briefly consider using your reserve but then remember that many of your staff own guns.   So you think that maybe the partners can go lite on salary, but they're already only pulling down $40K/year, or less than half the company average, so not much blood left in that rock.

But you've run the numbers, and while you can keep going like this for at least a year, you're going to have to either go back to being primarily consulting or somehow find $1M to just push through the wall.

Enter the VC

To Be Continued....

You would think that with 120+ years of experience we'd do a better job at the inflection point - where you start moving test into restricted production.

Or, based on personal experience, you wouldn't.

Well, I did.

Let me count the problems:

1. Blog disaster - posts lost, URL's not found, etc
2. Template dysfunction - widget A breaks, but widget B breaks on A fix
3. DNS error - that one was my fault and I don't want to talk about it
4. Check-in-Dilbertiasim - like it was supposed to all render in IE?

I was once involved in a $200M+ system implementation.  After almost 2 years of prep time my department's deliverables were totally complete.  And they weren't used.

I am actually a bit more frustrated today.  And our least favorite client called so I am gritting my teeth and working through issues of left column spacing.

Kill me now?