This is the transcript from EntreArchitect Podcast Episode 219, Pricing Creativity with Author Blair Enns. Listen to this podcast episode or download the audio file here.The post Pricing Creativity with Author
***Start Transcript***Promo: 00:00 Do you know how to calculate the exact amount you need to charge your clients in order to earn 20 percent profit on that project? It’s simple to do., if you know how. Learn how by downloading our free course Profit for Small Firm Architects today at entrearchitect.com/freecourse. Mark: 00:21 You are listening to EntreArchitect Podcast and this is episode 219. Mark: 00:38 Welcome back to EntreArchitect Podcast. My name is Mark R. LePage and this is the podcast dedicated to a successful life as a small firm entrepreneur architect. Whether you have plans to someday start your own firm, you’re in the process of launching a startup or you may be experienced small firm architect, just me, just trying to make a difference, this podcast is for you. My goal is to inspire you to build a better business, so that you may pursue your purpose with passion and live the life of your dreams. Mark: 01:14 What is it that we sell as small firm architects? Is it a… is it a pile of paper, or a bunch of technical services, or a legal process required to obtain a building permit? No. What we sell is a desired future state… a desired future state, and whether we’re working with commercial or institutional or residential clients, our clients have an idea, a visual narrative, a story inside their head of how they want their life to be in the future. We’ve all experienced the moment when our clients finally get it and they understand the value of what we provide, right? We all have experienced that, but it comes at the end of the project, but at that moment, the understanding of the value of what we do at that late moment, it’s too late. We need them to understand the value of what we do before we do it, before we propose it, before we price it. There is a process to properly pricing our creative services. There are principles and rules, and today we’re going to talk about them with someone who works with creative professionals every day, helping them to understand how to Win Without Pitching. This week at EntreArchitect Podcast Pricing Creativity with author Blair Enns. Sponsor: 02:57 This episode of EntreArchitect Podcast is supported by our Platform Sponsors, ARCAT, the online resource, delivering quality material information, CAD details, BIM specifications, and much more at ARCAT.com and FreshBooks, the cloud based accounting software that makes running your small firm easy, fast and secure. Spend less time on accounting and more time doing the work that you love. Mark: 02:57 Blair Enns, welcome to EntreArchitect Podcast. Blair Enns: 03:28 Thank you, Mark. It’s my pleasure to be here. Mark: 03:29 It’s great having you here. Your book Pricing Creativity is trending here at EntreArchitect and in the community. I keep hearing your name. I keep hearing the titles of your books and so this is really going to be an interesting conversation. Not only to me, but to our listeners for sure. Blair Enns: 03:29 Great. Mark: 03:54 Let me introduce you to our audience here. Blair Enns is the sand in the free pitching machine. Through his sales training program for creative professionals, Win Without Pitching, he’s on a mission to change the way creative services, much like our architectural services, are bought and sold the world over. He is the author of the Win Without Pitching Manifesto, and his latest book Pricing Creativity, a Guide to Profit Beyond the Billable Hour. He is also a cohost with David C. Baker on a fantastic podcast called 2Bobs where Blair and David have a weekly conversation about the business of creative services and with sort of a specific focus on sales and marketing, that’s usually what they, they focus on, which is something that we ought to learn more about. So I highly recommend you go check that out. And Blair lives way up north in a small… Well, I don’t know if it’s small, but it’s a remote mountain village of Kaslo, British Columbia up in Canada and he’s also an expert on the question, “How do I win new business without giving away my work for free?” That sounds familiar, right? So this is going to be a very interesting conversation. I’m looking forward to this. But before we do that, Blair, I want to get into your origin story. I want to, I want to know where you sort of discovered your purpose and your passion and give us your journey to where you are right now. Blair Enns: 05:09 Yeah. I was raised by wolves. Mark: 05:13 Awesome. I’ve never met anybody like that. Blair Enns: 05:14 Yeah, no, I do live in a remote as small remote mountain village in Kaslo, British Columbia, Canada population is about 900. It’s on the shore of a 90 mile long lake, home to the largest strain of rainbow trout in the world. Set between two mountain ranges. So it is a very idyllic setting. I didn’t grow up here. I’ve been here for about 18 years. I kind of grew up professionally. I grew up in the center of the country, um, Canada. Uh, but I grew up professionally in the advertising and design professions on the business side of both of those businesses. So I started as an account manager and then very quickly moved into new business roles as I found I had a bit of a strength for it. And new businesses is the term that uh, most of the creative professions, and when I say that, use that term, I’m talking primarily, I think of it primarily as designed based and advertising based professions, but that’s the code phrase we use for selling or sales, because we don’t like to use the S word and I suspect architects don’t like to use the S word either. Mark: 06:23 Exactly. Blair Enns: 06:24 So my, even though I grew up there, at some point I discovered this little mountain village in the middle of nowhere and I just had to live here and I convinced my wife and I think we had two or three… We have four kids. They’re all grown now, but I convinced my wife to move here. And so I started Win Without Pitching initially as a consulting practice, as a way to earn a living, so that I could drop out of the advertising business and live in this little town in the middle of nowhere. And the consulting practice ran from 2002 to 2012. And then in November of 2012 I was I’m flat on my back in bed with pneumonia. That was the fourth time I got sick that year on three different continents. And I had this thought that I needed to change my business. My business model was trying to kill me, so I had to kill it before it succeeded and I decided to transition the consulting practice. I felt like I had pushed it as solo consulting practice as far as I could. In hindsight, the truth is I didn’t. I just, I ran into limitations. I now see what those limitations were, but I decided to kind of switch the model over to a training company. So I began to scale up. My kids were grown and didn’t need me so much. I could focus more on the business. I started hiring people and building a training organization. So since early 2013 Win Without Pitching has been a training, primarily sales training. We don’t use that S word a lot because it scares people, but we’re really a sales training organization for creative professionals. Mark: 08:00 Yeah. Which is, which is us. I think that, you know I have a similar timeline… 2000, late 2012, early 2013, similar timeline to EntreArchitect, we sort of were birthed around the same time. And so, uh, it’s exciting to see how you doing what you’re doing and, and to see how it parallels with what we’re doing and what you’re talking about with sales and pricing and all of the things that creative professionals… that are not architects are having, that you’re sort of focused on. When I started reading your books and, and talking to some of the members inside the Academy who are, who are following you in doing sort of following some of the, your prescriptions and your books. It’s very clear that what you’re talking about are, are many of the same issues that architects are talking about. Blair Enns: 08:51 Yeah. From what I know about the architecture business, again, not at kind of the center of our market, but it is… we do get a lot of inquiries. We have some architects, uh, various types in our program. So what I, from what I know about architects and I’ve had lots of conversations with them, I think there are so many similarities, um, on the, on the business challenges, whether it’s sales, marketing, pricing, or even the other issues that I’m, that I’m sure you get into in your training program. Mark: 09:19 Yeah, I think that architects for sure, and I’m sure that many of the creative professionals that you’re dealing with see themselves as… as artists. You know, that the creativity comes first and that the, that the money sort of just follows, you know, you do your thing and you’re happy because you’re doing your thing and you know, if I get paid enough to pay my bills, I’m happy. Right. So you see that a lot in your community as well. Blair Enns: 09:44 Yeah, I’m fond of saying in the beginning it’s like you go to work for two reasons. It’s a generalization, but it works. Those two reasons are fun and money. And in the beginning when you start your own small practice, you kind of tell yourself, well, it’s mostly about the fun, right? So, and if you see yourself as this pure artists, then it’s, the topic of money is a tricky one. It’s a tricky conversation that we have with ourselves and it makes for tricky conversations with others. So I think sometimes we, um, um, delude ourselves and we say things like, well, money’s not important, or we think, well, the money will come eventually. I’m doing what I love. Um, so you’re, you’re doing it for the fun and then one day you wake up after a few years in the business and you look in the mirror and you have this honest conversation with yourself and you say, I’m tired of having fun. Now I would like to make some money. And I say to all of the young designers out there, you, I promise you, you will get there. You will get there and you will have to reconcile your own ideas around money and capitalism and entrepreneurship and charging people lots of money. And, um, and you’ll maybe kind of tell these little lies to yourself for a little while, for a few years. But at some point there’s this, there’s this conversation with yourself that you’re just putting off and it’s going to happen. Mark: 11:01 Yeah, I can, I can hear a lot of heads nodding right now. Without a doubt. Without a doubt. I think that they’re, uh, that they’re definitely resonating. So, so what do we do about that? I mean if, if, if we do find ourselves in the position of being a, uh, an architect, a creative professional, um, who started this because we love the idea of design, love, the idea of being an architect, never trained in architecture, in business. We’ve never been trained in sales or marketing. It’s all things that we have to learn from ourselves, which is why I launched EntreArchitect in the first place to sort of embrace the idea that we need to learn these things and give, give our community a place to learn it. Um, how do we, how do we, what do we do next? What do we do? Once we realized that we have to embrace it. Blair Enns: 11:49 Yeah. If I, if I were in a room full of young designers or young architects who are just starting out or just finishing school, I would probably say to them, listen, if you’re, if you’re going into or people who are just going into business for themselves, the business part of it is probably even more important than the art and it just so I have a bias and people might kind of just roll their eyes at that. Mark: 12:23 They’ve heard it. If they’re listening here, they’ve heard it. Blair Enns: 12:23 Let’s, let’s say those two parts are equally important. I would say, um, you know, you do, you do need to get a business education. You can’t in. I’m sure this happens in school for architects as it does with designers. There’s this, there’s this kind of loop that happens. An idealistic designer goes out into the world and an architect and reads Fountainhead or something, you know, reads is inspired by a really kind of inspirational, idealistic, idealistic, ideal, inspired by these ideals. And they’re kind of indoctrinated in school by these professors and they take these ideals out into the world and they clash with the reality of the business world. And this person who sees herself as an artist first and kind of eschews the business skills that really should be built to help to help her succeed, holds onto this notion, this conflicting notion of it’s about the art. Let’s just put the business aside or let’s treat the business as part of it as secondary, including pricing and selling, etc. And then they go as far as they can burning themselves out and they’re not really able to capture the rewards of any kind, let alone financial to make it all worthwhile. And in the end, towards the end of their career, these people go back to the schools from whence they were born and they teach the same ideals. And that’s a loop that I see. And maybe it’s just something that I imagine, but that’s just a vicious loop that I see happening all the time. So I’ve heard from so many different designers that, you know, these kind of older professors who’ve been out there in the world are saying it’s not… It’s about the art. It’s about the art. Well, not… The moment you put up your shingle and say, I’m in business for myself. Um, it’s no longer just about the art. You have to reconcile these two things as the art and the business and it’s not your… It’s really about value creation for your client and when you get good clients and you learn how to kind of select and and shape good clients and shape good engagements, then those best engagements will allow you to bring your, your artistic skills to the fore, but always to the ultimate goal of delivering value to the client. And we have to recognize, and we’ll get into this when we were talking about pricing, it’s the first principle of pricing really is that value is subjective. So you might have some ideas of what you want to do with every project that you design, but it’s not just the. As soon as you decided to go into business, it’s not just about you. It’s not just about art. If you want to do art, you go do art for yourself. You design your own projects. You’re in business. Your focus is the client and your focus is in creating value for their client and you must recognize that every client values different things to different degrees at different times. Mark: 15:32 Yeah, and they’ve heard me say, Profit, then art. If you focus on the profit first, then you have plenty of time and resources and money to go practice the art. Blair Enns: 15:44 The profit gives you the room, right? It gives you the room and when you’re under bidding on projects, et cetera, you have no room to move. You have no room to make mistakes. You don’t have enough time to think.. required to do the art. So yeah, profit creates the white canvas that allows you to do art. It’s not the other way around. Mark: 16:03 Yeah, exactly. Exactly. And, and, and you’ve written two books on, on, um, on the process of sales. Win Without Pitching Manifesto, which I’m halfway through. Excellent book. I’m looking forward to finishing that up. That sort of focuses around 12 proclamations, sort of how to, how to reprogram and rethink about how we sell as creatives. Excellent book. And your, your more recent book that just came out, Pricing Creativity, which is all about pricing specifically about pricing, how do we price what we do and uh, and there are six rules inside that, inside that book that, that sort of gives you the prescription for figuring out what your, how your, you should price your services for, um, you want to go through some of these ideas of, of what’s in the book and how it, how this book, the book is not a typical book either. It’s sort of like a sort of like a guide to how to price sort of step by step program that you kind of walk through. Blair Enns: 17:03 Yeah. I don’t know. I’ve heard people say this isn’t a book, why do you call it a book? And we’ll get into that a little bit. Maybe I’ll back up to the first book. The Win Without Pitching manifesto was published in 2010. So that’s a 24,000 word manifesto. It’s a, it’s a, it’s designed to kind of put forward an ideology and to inspire people. I think of it as the Yes You Can book. Um, I want people to read, I even that the, the actual shape of it, the thickness of it, the word count, I came up with all of that. I decided what size this book should be and then I wrote the word count to the actual shape of the book because I wanted it to fit on the back of a toilet tank. I imagined it in the bathrooms of have a artists, designers, architects. Mark: 17:53 And it’s shaped and looks like a sketchbook. Blair Enns: 17:55 Yeah. And uh, and I, um, I wanted it, I wanted you to look at and think, okay, I could read this on my next flight. If you’re getting on an airplane, you can read it in about two hours. I hired, you know, when your audience is creative professionals. I hired a designer whose hobby was designing type faces for bibles, either decided it’s going to have to be very well illustrated or about about the words. And I chose to go just about the words. So it’s got a very timeless look to it. And um, yeah, again, it’s the, Yes You Can book. I wanted people to be inspired by it and Pricing Creativity, which came out in January of 2018, this year, is, I think of it as the Here’s How To book and you know, I’ve mentioned and you kind of alluded to the fact that it’s a bit more than a book. It’s really a pricing system and it’s available in multiple formats. There’s the ebook, there’s the manual, which is the ebook, printed in a binder with tabs and it has an additional. The manual has an additional tools section. I’ll come back to that. And then there’s the video version. It’s basically I’ve taken the whole book and they’re broken down into five videos. So if you’re not, a lot of, a lot of my audience would prefer to listen to a book or watch me while listening to it or they put it on in the background and they’re really just listening to these videos while they do other things. So I guess you could think of it as it’s really a system. And when I was writing it, I imagined the manual. I wanted to write, um, uh, if, if my audience was going to just read one book on pricing, I wanted it to be this book and I wanted them to read the first three sections, the principles, the rules and the tips and then put it the physical thing on a shelf and then the next time they had to price and engagement or write a proposal, I imagined them reaching to the shelf, pulling open this manual, re familiarizing themselves with the rules and then flipping to the tools section and using the tools, the templates, the checklist, et cetera to help them craft the next proposal. So I wanted it to be kind of readable enough that enjoyable enough to read once through and then for it to be a reference manual that lived on people’s shelves. So it’s quite different from the manifesto. They’re serving two different purposes. Mark: 20:25 Yeah, the Pricing Creativity. It’s sort of like a plug and play business system with sales system sort of follow the step by steps, use the tools to make it happen and watch it happen. Blair Enns: 20:35 Yeah. The first section, principals, I say I call, I say this section is called principals understand these and there’s four chapters in it and what I did is I took all of the pricing theory and behavioral economics. That’s all wrapped up in the subject of pricing and there’s so much more than I ever imagined there would be like underpinning pricing theory when I first began on this journey years ago, I thought I’ll read a few books on it, become an expert. I mean I’ve read dozens of books now, so I thought, well, my creative professional audience, they’re not going to read all the material that I’ve read. I want to get the principles down into as few as possible. So I, I say, here are the four key principles you need to understand it. Then the next section I thought, okay, what are the rules? I’m going to get them to his small, smaller number as possible. The rules are things that you must do every time you are pricing and engagement. So I’ve got that down to six and then every other piece of advice, I put it in the broader section, the biggest section of the book, which is called tips. So tips Are really, you know, it’s advice for specific situation guidance and the tip section is broken up into constructing your proposals, alternative pricing models, a negotiating, and then what I call the next level, taking your pricing to the next level. Mark: 21:56 Right. So the tips is sorta like a how to leverage and execute what you’ve learned in the principles and the rules. Blair Enns: 21:56 Yeah. Mark: 22:01 Yeah, yeah. It’s really, really well done. This six rules, I just want to read the six rules because it’s, it’s it, it will sort of, uh, I think it’ll trigger some light bulbs in our audience. Price the client, not the job. Which, I think is not typical for architects. I like to talk about that a little bit. I’ll offer options. Anchor high, uh, Say a price before you show the price. Master the value conversation. And limit unpaid proposals to one page, a unpaid proposals to one page. Now, the first one, price the client, not the job. You’re essentially saying you don’t have one price, right, that you’re right, that you don’t just say, okay, I charge x dollars per hour or x percent. It depends on the context of your client. Correct? Blair Enns: 22:52 Yeah. So if you’re at a party somewhere and somebody says, oh, you’re an architect, what do you charge for x? And x might be, you know, kitchen renovations. Well it depends on the size of the kitchen. Well, I’m like, square footage is this? Well, I would charge about that much money. You shouldn’t have an answer to that question. And I don’t know if that’s the appropriate example for your target audience. I’m in my world, you know, if it’s a simple solo graphic designer, what do you charge for a logo? You… A designer should not have an answer to that question because as I pointed out in the book, logos, price or cost, somewhere between $200 and a million dollars, it’s actually, the range is much bigger than that. They’re anywhere from free to, you know, I’m familiar with companies paying $7,000,000 for a logo. So, um, and, and the difference is not… so you want to leave yourself room to charge differently because the first principle of selling creativity or value based pricing is the, the principle that all value is subjective, that different people value things differently. Value is like beauty. It’s in the eye of the beholder. So you in your pricing, you want to leverage this principle that’s known as price discrimination and it sounds like a horrible thing. It’s actually a wonderful thing and you can, it’s also referred to as wIllingness to pay and the underlying idea is, different people are willing to pay different things for essentially different amounts for essentially the same thing. And your job is to let them. And the reason they’re willing to pay different amounts is the value to them is significantly different. So wrapped up in the idea of price discrimination is a. So you might think, you know, it’s licensed to try to charge as much as possible. Absolutely it is. But also wrapped up in that idea is the notion that, well, what you think something is worth x, but this client you’re talking to, they really only value it at point five x, so you have to make the decision, is it worth your while to deliver it at point five x or should you find another solution at point five x or should you walk away from this client? Mark: 25:05 Yeah. Does that, does that lead into the second one where you offer options? Because I think that happens often with architects, um, that, that our clients undervalue what we, what our services are that they don’t ever expect that we’re going to charge as high as we really need the charge for our services. And so, um, so if it is point five x, what do you do? I mean, do you, how do you, how do you handle that? Blair Enns: 25:31 Yeah. And there’s um, uh, there are a lot of different components to the answer, but yet absolutely a part of the answer, absolutely. As the second rule of Pricing Creativity, which is offer options. So you, you think your, your typical client scenario, a client comes to you and says, here’s the project, it’s a new build or renovation and um, give me a proposal. So you go back and work some sort of math and your math is either based on the inputs of time and materials or it’s on the outputs, it’s a percentage of the bill budget. Um, in your markets example, uh, and then you come back and say, here’s my proposal. Well, your, um, when you put forward any proposal, whether it’s based on the inputs of time and materials, the outputs of percentage of the budget or based on the value to the client, that’s another conversation. We’ll get to that. It doesn’t matter how you price it. If you put forward a proposal with only one option, you’re essentially putting the client in this, take it or leave It position and for you to ever be doing that, you really should be. First of all, you should never do that. You should never put your client in that take it or leave it position. Um, but if you do it, it implies that you have learned everything you need to learn about the client to put for the only solution that is appropriate for the client. The reality is your client has a choice to make their not even their brain is not wired to look at your proposal for $50,000 in fees and say, oh, that’s worth $50,000 or that’s not worth $50,000. Their brain is not wIred to make that decision. Their brain is wired to make these contextual comparisons. So if the reason you providing options is your wanting to enable comparisons, you want to facilitate comparisons and you want to, it’s known as choice architecture. You want to the by the way you frame the comparisons, you want to be able to have some impact on the decision that gets made. So the client’s brain is really wired to answer the question which of these options is the best value? And if you don’t put forward options in your proposal, then what does the client do? The client goes away and gets something else against which to compare your proposal. So they think back in their mind about other things that they paid $50,000 or they go get two other bids, right? And there’s lots of reasons they do it, but really they’re not. They can’t subjectively perceive this. Like the value of your proposal. They can only make comparisons and say this one is the best value. So your job as the salesperson in this situation, when you’re putting forward the proposal is to enable and facilitate the comparisons that the client is going to make any way. Mark: 28:39 Yeah, I. And I think that’s exactly what happens is that we typically prepare a proposal and it’s one price, take it or leave it and then they go and they get two or three other prices from other architects and they make that comparison and very often it’s based on price. Who’s got the lowest price? And so what you’re saying is if, if we provided a proposal with multiple options, it’s less likely that they’re going to need that other comparison that you’re providing some sort of context within your proposal to be able to make a comparison and pick the one for them that works best for what they want to. Sponsor: 29:19 Let’s take a quick break to say thank you to our platform sponsors here at EntreArchitect, ARCAT and FreshBooks. Sponsor: 29:30 For years when I needed information on manufacturer’s products, I headed straight to the internet, straight to google.com, and then I sifted through the hundreds of results, maybe thousands of results to find the one or two that might be the link that I’m looking for, and more often than not it wasn’t. It wasn’t what I was looking for or it was outdated or it didn’t meet my requirements. So what do I do? 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EntreArchitect.com/ARCAT Sponsor: 31:03 FreshBooks makes it simple to send invoices, posts your expenses automatically. Track your time for your whole team by project and get organized with reports, communication and notifications, and getting started with fresh books. This is so ridiculously easy. Most people send their first invoice seconds after starting their free trial. It’s a click of a button. The same goes for tracking time, managing expenses, collaborating with contractors and viewing financial reports. It’s simple, fast, easy, life changing, and if you need help at any time, free award winning customer service as a phone call or an email away, I’ve used it. It works, and if you ever have second thoughts, don’t worry on top of their free trial for EntreArchitect listeners, you get a free 30 day money back guarantee so you don’t ever have to worry about choosing FreshBooks. So give it a try. It’s free for 30 days. Just vIsit EntreArchitect.com/FreshBooks and then let them know that we sent you by sharing EntreArchitect in the, How did you hear about us? section. That’s EntreArchitect.com/FreshBooks to access your free unlimited 30 day trial. Sponsor: 32:22 So ARCAT and FreshBooks. Please visit our platform sponsors today and thank them for supporting you, The EntreArchitect Community. Blair Enns: 32:34 Even if we’re not talking about pricing based on value and we haven’t really got there yet, even if you’re, even if you charge a percentage of the, of the project budget, right? so you might actually, you might, um, um, let’s say, and I don’t know what the standard is, but let’s say it’s 15 percent is kind of the standard in your geographic area for architectural fees for… 15 percent of the project. Mark: 32:34 Yup. Blair Enns: 32:57 And so you’re worried because somebody who’s underbidding at 13 or you’d really like to be able to charge 17. Well, you might think of it this way. You might think of having a proposal with three options that says, the middle option for 15 percent of the, of the total build. We will provide these services. The lower option… you want to save money, we can do it at 12 and a half percent, but here’s what you get and here’s what you give up. And you show what the client’s giving up by making them available in the higher priced options. And then the, uh, highest price option and you would lead with the highest price option because that’s rule number three, anchor high, and we can talk about that in a minute, but in the highest price option, you would just imagine, well, what would look if this, if this client where if money meant nothing to them, If they like what’s the most that we could do for them, what, what is our concierge level service? And in, in asking that question of yourself, you should start to come up with answers that may be even transcend the lines of typical architectural services, right? And think bigger and what else you might do. And you might say for 20 percent of the project, um, we’ll do these other things. And so if you, if we’re pricing based on value, then we’re working really hard to determine, you know, what is it that the client values? What is it that they might be willing to pay a premium for? Because one client might value some service of yours or a deliverable of yours, far higher than another client. So you wouldn’t. I’m not advocating to anybody that you have you take this principle of offering options and always offer the same three options to the same three different clients or, or sort of to all of your clients or perspective clients. I mean you could do that. That would take you further forward than where you are now if you’re just offering these, take it or leave it proposals, but back to the first rule of price, the client, not the job, what you put in each of those options and what the price or their percentage is changes from client to client. Mark: 35:09 And it’s all… what you’re talking about all comes back to value pricing, right? The value conversation. Explain what that is because I don’t think architects understand what that is. Blair Enns: 35:18 Yeah. So master the value conversation. That’s the rule number five and it’s where I find um, it’s the longest chapter in the book. It’s where I hope to bring a lot of value to the topic of pricing because I know a lot of professionals who are familiar with the principles of value based pricing but aren’t able to do it and the reason they’re not able to do it, it’s not because they don’t understand the theory. It’s that they haven’t mastered the skills and this is really a sales skill like in a one on one conversation with people where you’re facilitating this conversation and and, and kind of gleaning information from people. So if you want to price based on value, you really need to have a proper value conversation and a value conversation starts with what is that the client wants from this project. I refer to it as the desired future state. Uncovering or committing the client to their desired future state. So uncovering it, getting them to describe everything that they want and then getting them to commit to it, which is just as simple as saying, if I understand you correctly, if I’ve heard you correctly, you want all these things to be true at the end. Is that right? That’s right. So you start with that and then you add the next step is to identify the metrics. How will we know when these things are true, what are the things that we will measure, and then you move to the subject of value. What’s this worth? If we did all of this, what’s this worth to you? And again, it’s things are worth different amounts to different people at different times and then from there, once you get a sense of the value, and this might, you know, it’s depending on what business you’re in. That part of putting an economic value on things, some of, some of which are really kind of emotional. That’s tricky. That’s the part probably the hardest part of the conversation where you need to have a bunch of value conversations to get better at kind of navigating that and pulling out of the client and you’re not reading a script and you’re really focused on the client trying to really determine like what is. What would this be worth to you to create an environment like this where every morning you have like you’re having breakfast, and your kids, and it’s this beautiful. Well, what is that worth? Um, and then once you uncover kind of the value of this idealistic, like with the, the ideal, the client’s desired future state, then he start offering some pricing guidance and pricing guidance really means, okay, I’m going to come back to you with a proposal and it’s going to be in the y to x range and we start with y, the high number, not the low number because Pricing Creativity, rule number three is the anchor high. And there’s all kinds of, there’s Nobel Prize winning science behind this. The idea that the first piece of information on a subject really skews our decision making. So we start wIth the high number and the client might choke on it. So I might say I’ll come back to you quite quickly with a proposal on how we can help with some options in the hundred thousand dollar to $20,000 range. How does that sound? And so we’re following another rule here, which is say a price before you show a price, before you go away and craft a proposal, you want some feedback you want to give, you want to foreshadow or give the client some sense of what the project is going to come in at. You want to start with a really big number and that really big numbers is there. It’s actually bigger than what you probably think. Certainly what you think the client is going to buy. It’s there to make the other numbers within that range look more affordable. And again, there’s all kinds of science behind it. Mark: 38:59 And that’s the anchoring that you’re talking about. So… Blair Enns: 38:59 Yeah, that’s the anchoring. Mark: 39:03 You anchor the price that you’re really targeting with a high price that makes your target price seemed much more reasonable. Blair Enns: 39:09 Yeah. And then you go away and you craft your options and you say, all right, here my three options. Here’s, we don’t have $100,000 option, but for $90,000, here’s what we would do. And, and again, the number might be a function of a percentage of the bill. That’s your prerogative. I would suggest that it’s in the interest of architects to start moving away from that. I would suggest that you could use that as a rough math as a starting point where as sort of a stress test, um, but it’s probably in your interest to start moving away from that and just say, for this price, here’s how much and you don’t want included in your options. One option could be, well, we’ll charge you a percentage, we think it’s going to be at this, but if it’s the project is higher, than obviously our fee is higher. If it’s lower, it’s lower, but clients also value and are willing to pay a premium for price certainty. So if they’re overruns on the project, well then the architect’s fees go up as well too. And to mitigate against that, they might actually pay a small premium and maybe even a significant premium just to know that at the end of the project your fee is x, no matter what happens on the build side. Mark: 40:21 Yeah. The idea of the value conversation, what you’re talking about with the desired future state. I think that’s a really important piece of what you’re talking about here for architects because… Blair Enns: 40:21 Oh yeah. Mark: 40:34 Very often architects are being valued on drawings, on the deliverable, you know, on this package of paper that we’re going to hand off. Blair Enns: 40:34 Yeah. Mark: 40:41 The truth is we’re not. That’s not our, that’s not what we’re providing our service is that desired future state that we’re going to create a new life for this client. Blair Enns: 40:52 Yeah. I just think of the impact that architects have, especially in doing residential work, um, but also commercial too, but the impact of that architects have on people’s lives is profound and the idea that it gets reduced to drawings is a little bit absurd. Mark: 41:10 Yeah. and without having that conversation and going through that process and honing that and really fine tuning that and mastering that conversation, the client will never realize that. They’ll think they’re buying paper. So it’s your job to, to have this conversation with them, not realize, not having them realize that this is what you’re doing, but you’re actually educating them on what you actually do as an architect, that you’re actually going to create these, this design. You’re going to create, provide these services, and the value is the future state is, is your life when this is all done, that’s what you’re valuing. And now the value goes way up because that’s worth a lot more than a pile of paper. Blair Enns: 41:52 Yeah, you got it. It doesn’t matter what you’re selling. You’re always selling to the client a better version of themselves off in the future, their desired future state. So it’s your job to really. And we give you a framework for doing it in the book, to really get in there and uncover what it is that the client really wants. What is there it’s not, you know, and I think architects understand this quite obviously because it’s not just, you know, it’s, it’s, it’s so easy to make the transition from the feature of, of the, of the design to the benefit. It’s so easy to imagine the person sitting there having coffee in the morning or walking into the building in the morning or pulling up and, and the, um, the impact that, that has. The challenge is that there are different forms of value. You could take all the value that you would create or help to create and you can put them into three buckets. The first two are economics, so there’s revenue gains and cost reductions. And then the third one’s the big murky, messy one that’s known as emotional contributions to value. And I suspect that so much of an architect’s work is in that third murky bucket in that emotional contributions to value. You can’t, there’s not a lot about your designs that are going to say, I mean, I’m sure certain things will save you money. Maybe in some commercial instances the design will make you more money, certainly in retail. Um, but really, especially in the residential stuff, you’re, it’s so emotional. Therefore, it’s vital that you kind of have a framework for uncovering all of the emotional stuff and getting the client. You really want to put the client into the future and have the project have gone swimmingly. Everything’s been wonderful. You’re experiencing it. Now you’re looking back. Tell me about the journey. Tell me about everything that’s wonderful right now. And tell me about the journey and then you get that out of them. And I think one of the interesting things about a value conversation is when you get good at it, you will. One day you will realize that your entire focus has shifted in these conversations with clients. It used to be about you thinking what you could do, what you could sell them, etc. And then you realize that, you know what? I don’t even think about solutions until I’ve had the client kind of effusively described this wonderful desired future state. And then we’ve talked about the money side of it and then you know the value and then I’ve thrown out a price range and it’s only then after the value. After you’ve done all these things and you’ve thrown out prices, it’s only then that you are really free or you really should start thinking about your solutions. And so that’s… The longer you’ve been pricing and selling the old way, the harder it is to make this transition because it is a fundamental 180 degrees flip on how you enter into these conversations and where your focus is on the conversations and man, clients can feel it when you are on the buying side of somebody who is completely focused on your desired future state and the value they might help create for you. The feeling is night and day different from somebody who’s thinking about hours or percentages or build solutions. Mark: 45:21 Yeah, so important. I think that is the biggest takeaway of what our conversation is all about is that conversation and reframing the idea of of what we’re providing within the client’s mind and I think that that very often when our… When our services are over and our and our client is living in that project or working in that project that we’ve created, they understand at that point, but at that point it’s too late and so what our job needs to be is to create this conversation. How do we get them to that point? Because we all recognize that as architects, we recognize that moment when you go and visit the client in the finished project and they tour you through the space and they show you the new kitchen and they show you that how the pantry opens in the, in the, in the, in the kitchen, and they’re just so happy about it and start talking about how it affects their kids and how their kids are learning better now because of that space that you designed. Now they get it. So how do we now take all of that emotion and all that thought and all that experience and bring it to the front end and bring it to the beginning of this process where you’re pricing your value, pricing… the value of what you’re doing. That’s what we need to do. We need to learn how to have that conversation so we can get them to that future state before they’re there. Blair Enns: 46:38 Yeah. And let me give you a marketing idea just to build on exactly what you just said. So we, I don’t have television at home I guess haven’t had for over 20 years, but now that comes in the internet. But when my wife and I, who’s my business partner, when we travel for work, we’re in a hotel room, she’s always watching HGTV and we’re always watching the renovation shows and that they all follow the arc of any good story. So in the beginning there’s somebody who’s like a happy but unhappy. They want something, they’d go through this pain, they have to give up something and in the end they are transformed. And what I would suggest is if I were an architect, I were running a small practice. I would, with the very next engagement that I had, I would take a, not necessarily a film crew because you don’t need a crew. I’d probably go a little bit better than an iphone, but I would sit the client down in their existing house, pre renovation or prebuilt and I would get them. I would essentially recreate that story arc, which is talk to me about the space now and the challenges now. And then document throughout. You don’t have to follow the whole thing like a, like a television network would do, but you know, check in from time to time. If things start to go wrong, record that, but in the end the most important thing is the beginning and then the end and then have these people sitting in this space talking about you so you can see they’re talking about how much value there is in this and you as somebody who’s watching this video, I would create these little video segments as my marketing and I would have my perspective clients watch that at the right moments. Mark: 48:18 Yeah. Yeah. I think that’s very, very valuable. Um, the, the whole idea of the value conversation. Actually your current episode, we’re recording this on April 6th. This comes out in a few weeks, so we’ll be a few weeks behind, but your current episode of 2Bobs, you’re talking about this value conversation. Blair Enns: 48:18 Yeah. Mark: 48:36 And so if people want to get deeper into that, they should go check out that episode. I will link to that on our show notes so you can go to the show notes and you just click over and listened to that episode. Super valuable. I’m very, I think that’s so important for us to do. Architects aren’t doing that right now. They’re not having that value conversation, they’re not pricing based on value, their pricing very often just on either percentage or some hourly fee and they don’t even know what that’s based on. And so I think having this value based pricing will be so valuable. Um, and, and, and it talks all about it in this book, Pricing Creativity. Um, you also have a, a Win Without Pitching program, right? So there’s a, you’ll do a workshop? Blair Enns: 49:18 Yeah. So we, our program is in workshop form or it’s an ongoing remote training over 12 week terms. Um, and the next I’ve got a workshop coming up next week in Austin will probably be passed by the time this goes live and we’ve got training that starts in April and then we do private, onsite training for larger organizations too. So your listeners, if they’re interested, can learn more at winwithoutpitching.com. Mark: 49:41 And you’re going to, you’re going to be in the UK as well, correct? Blair Enns: 49:44 Yep. Doing something June 25th and 26th. Mark: 49:47 So they drive a bunch of UK listeners too. So. Blair Enns: 49:51 Great. That’s an event that I used to do once a year with David C. Baker, my podcast cohost, so it’s called The New Business Summit. So he and I are doing a two day event in London, June 25th, 26th. Mark: 50:01 Yeah. So if anybody wants to do that, you go to a winwithoutpitching.com to learn about that? Blair Enns: 50:01 Right. That’s right. Mark: 50:09 Alright, cool. Um, so definitely I would definitely highly recommend all the two books and that program, but the two books are Win Without Pitching Manifesto and Pricing Creativity. Definitely check out both of those. Blair, before we wrap up here, this has been a super valuable conversation and there’s so much more to talk about, but we’re running low on time here. Um, so I definitely recommend people go to the website, learn more about it and maybe we’ll have you back and talk more about this at another time, but I want, I want you to, to answer our question here that we have everybody answer. What’s one thing that a small firm architects can do today to build a better business for tomorrow? Blair Enns: 50:51 Yeah. So what I have always said to my target audience and it’s a, it’s a challenge with creative professionals and it’s easiest to do when you’re small and that is to focus, to specialize in something. Um, we had somebody sign up for a program yesterday. She’s based in Australia. She does interior, she does high end scandinavian design interiors for residences. That’s pretty specialized. Mark: 50:51 Yeah, yeah. Blair Enns: 51:19 Yeah. Uh, so yes. Specialize first and you can look at broadening out later if it makes sense to do so. Um, but any… Mark: 51:29 Let’s get into this a little bit. Blair Enns: 51:29 Okay. Mark: 51:32 Let’s spend a little bit more time on this. This is very important. This is something that I talk about all the time. I talk about the target market and architects very often, we want to be generalists, so I want to just take a little bit more time here at the end and get into this a little bit because I think you have a different point of view on it. And so, why? Why should we focus on one specific thing and specialize? Blair Enns: 51:53 Well, if I flip that around and say why should you be a generalist? Like there’s, there’s, just go out into the rest of the business world and just ask, are, you know, is it better to be a specialist or is it better to be a generalist? And everybody’s gonna look at you like you’re nuts. Like, and creative people, including architects. They have this little conversation where they, you know, they’ve quit trying to justify it to me because they know it’s an argument that’s just full of shit. So I, because I’ve been talking about it for so long, um, but the, the, the challenge with… The reason why most creative businesses are poorly positioned, they’re too broadly focused, is because the nature of creativity is the ability to see. The ability to bring fresh perspective to a problem. So it is in the nature of the creative personality to be drawn to the problem they have not previously solved. So creative people want, ooh, wouldn’t it be cool if we did this? I’ve never done. A client comes to you and says, hey, I need somebody with some expertise in this area. Oh, I’ve never done that before. That would be cool. Those are the words of a generalist and specialist who has deep expertise in an area who is invited to step outside of that expertise should get nervous, so I’ve never done that, but I don’t know. I don’t know what the patterns are. Right? So it’s in the nature of a creative personality to want to do things that are new and different, but your business needs you to focus because expertise comes from… This comes from my podcast cohost David C. Baker. Expertise comes from pattern matching, from observing the same thing over and over again, so you can start to see the patterns. You see the patterns and the problems. You start to see the patterns in the solution. So at the crux of this poorly positioned creative practice problem is this conflict between the creative persons, individual desire for variety and the business’ need to focus. So they come up with these ridiculous ideas on why they should be a generalist. Meanwhile, the rest of the business world says you’re nuts. It’s the specialist who make all the money. Mark: 54:04 Yeah, exactly. And it makes everything else easier, right? It makes it easier to market and making it easier to sell. It makes it easier to price because you’re only focused on one thing that you were an expert at. Blair Enns: 54:15 Yeah. Your ability to command a price premium is rooted in a few different things, but the biggest one is the availability of substitutes. So if the client looks at you and says, well, I can see four or five or 45 or 4,500 other architects just like yours, who can do this, then you have no power in the buy/sell relationship. You have no ability to dictate how your services will be bought and sold. You have no ability to command a price premium. It’s not until you narrow your focus and you build deep specialized expertise. That’s when you reduce the available alternatives to hiring you and now you have more power. You have more power to push back, to lead the sale, to lead the engagement and to command more money. Like it’s… arguing against this is like arguing against gravity. It’s that absurd. And if you are a small architect, you should specialize, period Mark: 55:16 Today. Immediately. Do it right now. Decide right now. Then stop doing everything else. Blair Enns: 55:17 You said the Win Without Pitching Manifesto has got 12 chapters. 12 proclamations. That’s the first proclamation. It is, we will specialize. Mark: 55:25 Yeah. Yeah. So this is my, my, my charge to each one of you listening. Go buy the Win Without Pitching Manifesto. Read it. It’s very quick. Um, it will inspire you to change the way you’re doing what you’re doing. So go check that out. The website is winwithoutpitching.com. For Pricing Creativity, it’s pricingcreativity.com. On Twitter, you can go thank Blair for being here @blairenns… its two Ns. So it’s Blair E-N-N-S, and the podcast is 2Bobs.com. Go check it out. And uh, Blair Enns. Thank you for being here at EntreArchitect Podcast and for sharing your knowledge. Blair Enns: 56:02 My pleasure, Mark. Thank you for having me. 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