Winning Business as a Service Provider

Corporate spending on services is set to fall this year, but opportunities remain for savvy entrepreneurs

The business environment looks grim, but there are plenty of opportunities available for small firms willing to capture their fair share. And the smart ones are, says Michael Schultz, co-founder of Wellesley Hills Group, a Framingham (Mass.)-based sales and marketing consultancy focused on services firms. His new report, "How Clients Buy: The Benchmark Report on Marketing and Selling from the Client Perspective," illuminates trends about how buyers choose service providers. He recently spoke with Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.

Your survey asks buyers from more than 200 companies in various industries how they purchase such services as management consulting, accounting, human resources, and information technology. You did a similar survey in 2005. What in the more recent study was markedly different from your earlier results?

In 2005, up to 60% of respondents said they expected to increase their spending on services that year. In this year's survey, fewer than half said they expect spending to increase in 2009-2010, and a substantial portion—39%—said they expected spending to decrease.

And we found in this survey, as opposed to the 2005 survey, that buyers are more likely to find a written proposal extremely important and to consider proximity to their work location. That means there are more local companies taking on new clients, and most buyers prefer to work with service providers they can meet face to face regularly. Also, clients are more concerned about the bottom line.

Those spending figures certainly are discouraging. Was there a glimmer of hope for service providers in the survey results?

The survey showed that there are a huge amount of businesses that are open to switching to new service providers, particularly if they're not extremely happy with the ones they're currently using. When we asked these buyers whether they would consider switching to new service providers in the next two years, more than 50% said yes.

What recommendations would you have specifically for small firms that provide services to business clients?

In this research we did and in other recent reports, we're finding that a company's brand is becoming increasingly important. A lot of smaller businesses believe that they can't compete with firms 20 times their size, but if they have a strong local brand, small firms are often rated among the most well-known firms in their space. I tell small companies that they can create a brand without spending millions on advertising and they can compete against the big boys and play against them on brand.

So if I were just starting a consultancy, I'd identify all my target clients within a 30-mile radius and I'd put on seminars maybe three times a year with good content and value, and I'd invite them to attend. Over two years, you could go from being a nobody to being the most well-known local coach and specialist in your target market.

You asked why buyers decided against hiring certain service providers. What were the problems they listed?

The top three were: Service providers who did not listen to them, did not respond to requests or correspondence in a timely manner, and did not understand their needs. This is what I call deaf, inattentive, late, and dumb. These are core things that businesspeople have to do—understand clients' problems and respond effectively.

If business owners listened better, they wouldn't lose so many clients, but the reality is that people like to hear themselves talk. The economy is a convenient excuse for a lot of failing businesses when the truth is that their problems stem from ineffectiveness. We can all blame the lousy economy, but if we've decided not to retire, we have to get out there and make the good things happen for our companies.

A service firm's Web site influences buyers' hiring decisions 83% of the time, according to your survey. Do you think small firms are fully cognizant of how important their online presence is?

It takes really good management to not only craft an excellent Web site but also keep it updated and relevant. For instance, I plan to attend a seminar in March that's being promoted by a service firm, but when I went to their Web site, under their "recent news" section, the last date was 2006. My first reaction was, "When did they go out of business?" Here they are actively promoting a program that they know people will look for at their Web site, and it hasn't been updated in three years.

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