Find the constraint and choose the next move 15 of 17 in this group
SOP 206
Run the B2B service and software playbook stack
What this page is for. Use it when you sell to other businesses, whether the thing you sell is a service or software delivered as a service, and you want to know which fixes to work through and in what order. It sets out why they are grouped, the two situations such businesses are described in (one driven by ads, one driven by referrals) and the stack for each; for the referral side it adds a way of closing built around a calculator, the case against pricing on cost, and a worked example of selling to a goal. What a playbook stack is, and the rule that a business works on one constraint at a time, are set out on SOP 204 — Run the influencer playbook, one constraint at a time; they are not repeated here.
SOP-206-Run-the-B2B-service-and-software-playbook-stack.md
1. Why a service and software sit together
Business-to-business services and business-to-business software sold as a service (SaaS) go into one group here. You might wonder what they have in common. The answer: at bottom they sell the same thing and differ only in how it is delivered. Put another way, a service business sells service as a service, and a software business sells software as a service.
- What the software side is meant to add. Because technology does the work, software should be more consistent, and its gross margins should, in theory, be higher. That is not always so.
- The selling barely changes. Selling a B2B service and selling B2B software are almost the same motion. In one pairing, a software business and a service business ran the same sales motion, line for line.
2. The two archetypes
What goes wrong in these businesses is described through two examples, especially for those that lean on ads, called archetypes here. They need different stacks.
| Archetype | What it looks like |
|---|---|
| One: driven by ads | Winning each customer keeps costing more. Margins keep compressing. Churn is likely climbing too, because what gets delivered on the back end has kept getting diluted: the business is less good at training and recruiting than at marketing and selling. |
| Two: driven by referrals | The whole business runs on referrals and does almost no marketing. |
3. The stack for a business driven by ads
The steps come in this order.
3.1 Content comes first
This may seem counterintuitive: step one is content. That sounds crazy, admittedly, since your first reaction will be to ask how content is supposed to help. The reason given is that you have a brand problem. Nobody trusts you, and they are right not to, because you are diluting: what customers say about you, in reviews and by word of mouth, keeps shrinking toward almost nothing. The fix is to rebuild the brand and begin handing out more value before anyone pays.
What that buys you, by time frame:
- Short term: a higher share of prospects convert.
- Long term: it starts to generate deals and a flow of leads for you.
That is the first thing you will have to do. What a brand is, in terms you can measure, is on SOP 92 — Measure brand as reach, influence and direction; the basic unit of a piece of content is on SOP 20 — Build the content unit: hook, retain, reward.
3.2 Then a video for each call
Most businesses in this group could benefit from more than one video sales letter. If your sale takes two calls or three, then two or three videos is probably what you should have, rather than one. How such a video is put together, and why every conversation gets its own, is worked through on SOP 207 — Build a video sales letter.
3.3 Then the avatar
This one is super common too. The business cannot say which customer it helps more than any other, and the job is to decide which customer segment you will serve.
What goes wrong without that: because you do too many things for too many kinds of people,
- your prices cannot be set right;
- winning a customer costs too much;
- your margins compress;
- your ability to serve customers thins out, because you are serving too many people.
So much of the work becomes custom that being good at it is impossible.
Narrow it. Narrow the customer so that you can turn the work into a template and get consistent outcomes. One consistent avatar brings consistent messaging and consistent results; the whole offer becomes more like a product, and in the end that drives more value. It also lets you set a price that fits the far more valuable avatar you have chosen.
The figure offered. It is reportedly not uncommon to see prices double, triple or quadruple once you get really clear on the 20 percent or 30 percent slice of your present customers who are the ideal customer base for you.
A longer treatment of finding your best customers and pricing to the narrower group is on SOP 149 — Prioritize and niche down at five to nine people, section 3.
3.4 Then pricing
The avatar leads into pricing: once the higher-value customer is chosen, the price follows it. Choosing among the common pricing models is covered on SOP 82 — Set price from the pricing rules and the three models.
3.5 The stack in one line
Content; then the sales motion, with a video for each call; then picking the right avatar; then pricing. It is offered as a practitioner's own stack, framed as, kind of, "whitewashed consulting": advice for whole groups of businesses at a time.
4. The stack for a business driven by referrals
Now the other side. Say you run a law firm or an accounting firm, you have been at it for a while, and people keep coming to you. Typically, more than anything else, firms like this are bad at selling.
So the work is the sales motion. Content is not what you need; a sales motion is. Typically, the sales motion and a change in pricing are, almost certainly, the two changes you are going to be making.
4.1 The calculator close
For changes of this kind, the approach is a calculator close. It works if yours is the kind of business that can show a customer a saving.
Where it fits, as listed:
- It is super common in accounting, and super common in tax.
- It can serve various kinds of restoration work, commercial services, IT and security.
- There are a bunch of others, wherever you cut a client's costs, add to its income, or do some mix of the two.
How it works: build a sales motion that anchors your price with a calculator around the savings, or around the earnings. That holds as long as you can show the result and prove it afterward, and in a business of that kind, you can.
5. Stop pricing on cost
You want to be rid of cost-plus pricing entirely. If you are unsure what it is: you look at what something costs you, then add something on top. The view here is that it is a terrible way to price, the worst way there is; stop doing it now.
Value-based pricing, in the view here, is the only kind that matters: what is a person willing to pay? What it costs you to do the work and deliver it is not the customer's problem at all. The whole question is what they will pay and how many people will pay it, and then you do your math. These are not up for negotiation.
A different price for each customer. You might object that everyone would then pay something different. That is fine, as long as:
- there is a method to how you do it;
- the margin still works out well for you, which it should do if you are pricing the right way;
- the delivery stays more or less the same, in terms of what each of your teammates actually has to do.
The same verdict, reached by weighing cost plus, competitor pricing and value-based pricing side by side, is on SOP 82, section 2.
6. Selling to a goal
A totally different example, a weight-loss business such as a gym, shows one of the best approaches there, one that is a little bit more advanced.
- The easiest sale is a program with a fixed end: six weeks, framed as a challenge or whatever, a detox or a transformation.
- A little more advanced: sell to a goal. That is exactly what a calculator close is. It is a diagnostic sale.
6.1 The worked case
A person comes in and says they want to lose 50 pounds. The seller aims for two pounds a week, a pace described as reasonable.
| Phase | The figure offered |
|---|---|
| Reach the goal | 25 weeks |
| Maintenance | Half that time, given as 12 weeks, which makes 37 in total |
| Recalibration | Another 12 weeks |
| All in | 49 weeks |
| Price | $200 a week |
| The sale | $9,800 |
With the plan laid out, the next question is simply how they want to pay, and it has become a $9,800 sale. The sums hold as stated here: 25 weeks plus 12 weeks is 37 in total, 12 weeks more is 49 weeks, and 49 weeks at $200 a week is $9,800. One step does not match: half of 25 weeks is twelve and a half, and the maintenance phase is given as 12 weeks.
6.2 A smaller goal, a shorter plan
Someone who comes in later and only needs to lose 30 pounds just gets less time. No problem there: what you take in per person per month does not change; only the durations do. And what each of your team does is still the same: stop eating badly, move more, turn up at the gym.
So the price can stretch and shrink like an accordion while the revenue per customer stays the same, and you renew people at different times.
If you are in either one or the other, driven by referrals or driven by ads, these are meant to give you some playbooks to follow.
7. What this page does not decide for you
- What is not up for negotiation. The words come straight after pricing on what people will pay and doing your math; they may mean the prices you set, or the rule of pricing on value. This page does not settle which reading is right.
8. The checklist
| Step | What to do |
|---|---|
| 1 | Work out which archetype you are: driven by ads (rising acquisition cost, compressing margins, churn likely climbing) or driven by referrals (almost no marketing) |
| 2 | Driven by ads: start with content, to rebuild trust in the brand and give value up front |
| 3 | Driven by ads: if the sale takes more than one call, you should probably have a video for each |
| 4 | Driven by ads: get clear on the avatar, the 20 or 30 percent slice you serve best, and narrow until the work becomes a template |
| 5 | Driven by ads: price to that higher-value avatar |
| 6 | Driven by referrals: typically, work on the sales motion and the price, not on content |
| 7 | If you can show savings or earnings and prove them afterward, anchor your price with a calculator close |
| 8 | Price on what people will pay, not on cost plus a margin |
| 9 | Different prices for different customers are fine as long as there is a method to them, the margin holds and delivery stays more or less the same |
| 10 | For something a little more advanced than a fixed program, sell to a goal: the plan's length follows the goal, and the price follows the length |
9. What this page does not cover
Building the calculator itself and setting the weekly rate are not covered on this page. Training and recruiting for delivery are not covered on this page.
Terms defined on this page
- Ads-driven archetype
- A business-to-business company whose cost to win each customer keeps rising, whose margins are squeezed, and whose churn is probably climbing because delivery has been watered down.
- B2B
- Business-to-business; see that entry.
- Business-to-business
- Selling to other companies. Services and software sold this way are grouped together because the selling is almost the same; mostly the delivery differs. SOP 232 adds that selling to companies can raise the quantity each buyer takes.
- Calculator close
- A way of selling that anchors the price on a calculator of the savings or earnings you create, where you can show the result and later prove it, as in accounting, tax, IT or security work.
- Cost-plus pricing
- Adding a margin on top of your costs. It is easy and covers costs, but earns nothing extra from buyers who would pay more, and buyers neither see nor care about your costs. SOP 206 calls it the worst way to price.
- Referral-driven archetype
- A business-to-business firm, such as a law or accounting practice, that runs on referrals, does almost no marketing, and is usually bad at selling.
- SaaS
- Software sold as a service. In theory steadier and higher in gross margin than a service business, though not always.
- Sales motion
- The steps a business uses to take a lead through to a sale, such as a video sales letter before each call. A firm driven by referrals usually needs a sales motion more than content.
- Selling to a goal
- Setting the plan's length from the customer's goal and the price from the length, as in 50 pounds at two a week plus upkeep: 49 weeks at $200. The first rung of the service and continuity downsell ladders.
- Value-based pricing
- Pricing by what customers will pay, worked back from the avatar, rather than by what rivals charge or cost plus a margin; the recommended model. Charging different customers different prices is fine with a method, a sound margin and similar delivery.