How to Make Assessments Worth Selling
Think Like An Investor When Pricing
Most people invest at the wrong time (according to the Billionaire Investors Interviewed by Tony Robbins in his book, Money, Master The Game). They jump on the bandwagon when things are high, and they sell when the market drops.
Running a for-profit assessment team in the early 2000s (for a global technology integrator) was more a lesson in financial management than sales for me.
Assessments are often sold at prices that leave little in gross profit. Free assessments tend to offer no value, and simply leave the prospect disillusioned. And only a handful of these heavyweight documents ever result in any long-term financial gain.
Today I Want To Change This Lack-Luster Profit Prophecy Once And For All!
Here are Three Things to Consider That Will Change Your View of Assessment Profitability Forever.
- Free Assessments Can Offer Some of The Greatest Returns on Your Investment.
- High-end Assessments are Expensive To Sell – The Real Profit Is In The Aftermath.
- Every Assessment Should and Can Lead to Annuity Business.
Free or High Stakes – Which Has The Bigger Payoff?
In my workshop, The Security Sales Mastery Program, assessments are central to the sales process. I covered some of this in an article on scope last week…
When I bring up the idea of using free assessments to drive business, I often get pushback. In response, I offer up three examples of assessments I was personally involved in. Let’s take a look…
The $125,000 Hospital Assessment
This first example comes from a large hospital assessment, sold and delivered in the southeast. If you know healthcare (and you work in security) you know it’s a match made in heaven. Lots of needs, endless compliance regulations (many unmet), and an industry with deep pockets.
Our assessment was priced for profit. It took a total of 40 man-hours onsite, and another 40 man-hours of analysis and documentation. Total burden cost, about $10,000. $125,000 with a cost of 10K is high margin business, even to lawyers.
However, there were NO follow-on projects.
It’s our fault!!! Back then I did not understand how to create business from an assessment. Most don’t – the conversion rates from assessments like these are low, averaging about 20 percent.
So our total gross profit landed at around $115,000. Not bad for a two week effort. However, the upside potential (had we closed just one of our recommended changes) would have more than doubled our take.
The $36,000 State University Assessment
The university deal was won on a last ditch effort to get in the door. The university was looking at a number of projects to upgrade both the administrative and student networks, however, largely undecided on their direction.
On the way out the door I casually suggested an assessment might bring clarity to their needs, and to my surprise, they agreed. A few days later we signed the $36,000 agreement and scheduled to begin work.
Our team spent about 3 man-weeks on this initiative, engaged with the IT team on campus. When the report was complete, a meeting was scheduled to review our findings with the university’s key stake holders.
Just 5 minutes into it, the leader of the pack put our document on his desk in a sudden pause, and complained, “This is not what we asked for.”
Keep in mind, our three weeks were spent, side by side, with their IT people. They were basically leading the charge…and here we were being reprimanded for missing the mark. As you might have guessed, the IT people stood back, nodding, as though they had nothing to do with our missing the mark. They effectively hung us out to dry.
The meeting ended abruptly, and the invoice was NEVER PAID.
Final gross profit: ZERO DOLLARS. Very disappointing…
Free Assessment: Thanks For Attending This Business Leader Event!
Finally, there’s the dreaded free assessment. My classroom example offers a total of five pages, including the cover letter. This particular example-giveaway was offered to small business owners on the heels of an educational event. Our audience was well qualified – mostly healthcare.
Our total time spent marketing and selling: About 2 Days plus a few days of phone follow up using call scripts from a product on my webstore…
At the close of our risk-measuring initiatives (we closed about 30 assessments in that one event – in just 60 minutes!)…
One of the larger prospect-companies signed up for $36,000 in remediation work, signed an $8,000/month – 3 year agreement (and renewed for 3 more years), and went on to do at least two more projects worth $100,000 in revenue (figure 50% burden on projects and manage IT Services).
Total gross profit: $356,000 (and still going)…
It’s important to note the cost of sales. The first two projects required 3 to 6 months of selling. The third, 3 mailings, a couple of days on the phone (done by contractors), 1 live event (with speaker), and about 4 days between starting and delivering the assessment.
Which of these three deals would you choose to get paid on? If you own a technology business, which would you choose to build your business on?
The Free Assessment Worked, So When Do You Charge? What Would The Investor Do?
There is a time to charge!
So don’t just read the first half of this and think, “He always gives them away.” Free is RISKY.
Free requires the right audience, and a predictable conversion strategy – it requires knowing how to drive business through an assessment, just like choosing the right asset allocation has everything to do with an investor’s success.
All investments are tied to risk. Your paid assessment is largely a paper document, with a big price tag…If your paper offers tremendous value (like a stack of green paper with government markings on it) it’s worth a lot. On the other hand, if it has my child’s markings, it’s only worth something to me.
I’ve seen free assessments work in all size markets, however, as you scale the corporate ecosystem, closing gets harder. Client expectations grow as you engage with the more sophisticated organizations.
So, if the ROI looks great, you can afford to do assessments for free or for less. However, the likelihood of getting that follow-on business from a new, enterprise prospect is much lower than it would be in the SMB (Small/Medium Business) market.
So, in the larger markets, assume you’re going to charge when you assess. But charge enough to make it worth your sales and delivery time.
Enterprise deals (like the first one mentioned above) are margin-rich. However, as you can see, we didn’t achieve our goal of long-term financial returns.
So, while the margin was high, the cost of sales was also high.
If you’re the selling agent, you may not care – you still get your fat commission check. On the other hand, if you get paid on bottom line performance, suddenly it matters.
How much does a 6 month sales cycle cost? Drive time, office time, lunches, etc. It all comes straight off the bottom line. Not to mention benefits, base salary, and opportunity costs associated with the seller.
In the SMB market, the financial picture is completely different. Small business prospects rarely spend much on remediation, however, the IT Services deal is there (unlike most enterprise accounts), so there’s your long-term profit.
There’s one more factor though. And it has to do with account control. Every sales person knows that controlling the deal is essential to the close. As soon as you hand in a proposal, you’re at the mercy of the prospect.
In the case of an assessment, once a contract is signed (with a fee attached), you no longer control the deal.
Don’t miss this…
Assessments are like proposals. Unless your company is highly specialized in audits/assessments (with high-end and frequent assessment/audit business), your quota achievement depends on closing follow-on business (projects and managed services). The fee-based assessment is controlled by the buyer – reducing your assessment-deliverable to a quote.
That’s were I went wrong on the University Deal…
IT was in charge – My team was directed by them, and executive involvement was not part of the plan. Yet, an asset owners’ inputs are the most important part of understanding risk! Without Asset Owner Understanding, closing follow on business (with a new prospect) is nearly impossible.
Assessing risk has everything to do with assets and their owners. Their business will live or die based on asset exposure and a realtime detection/response to cyberthreats.
Without leadership involvement, you can’t possibly understand the company’s data value, most crucial systems, and greatest threats. How often do IT staffers know how much down time can be absorbed or how much data can be lost before shareholder value is impacted?
Sure, IT has an opinion, but to deliver risk, your process must look more like a Business Impact Analysis Report than a typical Vulnerability Assessment.
Here’s the thing. When the assessment is free, you’re in control. What does that mean?
Since no one is paying you, you have the right (and authority) to proceed according to your recommended approach. If you’re wrong, you’ll pay for it on the back end. If the client balks, you can always stop the process. It’s free, so you’re in control. Do it right, and business will follow (along with profits).
When money changes hands, the buyer is in control. If they want you to submit questions and take their written answers (without any face time), it’s their choice.
Since all sales have an emotional component, you know that face time is important to any high-involvement sale…even if that face time is virtual. There has to be trust and advice to be a trusted advisor. And that requires interaction with those making the decisions.
The final analysis – in the SMB market, lead with free assessments almost every time. The $500 to $2500 price tag on SMB assessments leaves no budget for IT services, and will take months to close.
In the enterprise, carefully weigh the risks, and what factors must be present to take on the risk of assessing pro bono. If the cards are stacked against you, go with the fee based, and sell them on the high-ticket approach to ensure your profits are worth doing the deal. Remember, you need asset-owner involvement to justify any assessment worth doing at this level.
Every Assessment Should Be Ongoing Business – Here’s Two Ways To Create Annuity Business
The biggest upside in both free and paid assessments is in the ongoing annuity business.
There are two ways to create annuity business with assessments (and maybe more that I haven’t thought of).
First, let’s look at the theory. Risk is a measure of impact vs. likelihood. You can’t affect impact; losing data or suffering downtime is going to cost the company, no matter how secure the company is.
Your variable is in likelihood. Solid security lowers likelihood (however, even GREAT security does not eliminate threats).
The assessment identifies (at least it should) the threats, and provides a measure of likelihood. Remediation is the process of reducing the likelihood to an acceptable level.
Managed services or MSSP, is your program designed to maintain an acceptable level of risk over a period of time – your long term annuity engagement.
So the first way to sell ongoing business through assessments is to demonstrate an organization’s unacceptable level of exposure, provide a way to reduce it.
And then show them how to maintain it by contracting with you to oversee, or detect and respond to issues as they arise.
The second way, generally better geared for enterprise accounts, and using fee based assessments, is to sell a quarterly update.
Keeping the same scope, and simply updating the document quarterly, can provide tremendous value to the client that houses sensitive data.
Two up-sells come with the ongoing assessment approach. First, you’ll get a quarterly opportunity to check in on your recommended remediation steps. Over time, and given you are providing value, your client is likely to engage you to keep working on your recommendations as threats grow.
Second, the scope is likely to change over time as new IT initiatives invite you to consider added systems as part of your analysis. One additional bonus, you’ll be up on all your client’s latest planned initiatives since new projects always affect the client’s security risk analysis.
Going forward, add this quarterly update with just enough money to cover your added cost (in other words, do it at break even). It adds value, costs you nothing, and offers great upside.
© David Stelzl, CISSP