As part of the mix of services I provide to clients, sometimes I write RFPs and evaluate the responses in order to select the top couple of potential vendors. It’s not all that different from what I used to do in a previous life. Hardly a day went by that some new company asked for a meeting in order to pitch the latest and greatest piece of technology or a service that was going to increase my group’s revenues dramatically. Then and now, the conversation turns to the business model: how are the two organizations to work together, where does money change hands, and what accountability do we have to one another?
It was usually during that part of the discussion that there was a “tell”, as poker players call it – the thing that gives away how good a hand you’re playing. For me, this tell was always about how much skin the company had in the game, and to this day I think it’s an important factor in evaluating partnerships.
The expression, which may or may not have originated with Warren Buffet, has to do with how much money a company’s executives have invested personally in the project. To me, it was, and is, a bit different.
When a vendor says to me “we will grow your revenues” or “we will show huge cost-savings”, I liked them to have skin in the game. If their business model was for me to pay them a straight fee, regardless of results, I would suggest a smaller fee with far greater upside than what they proposed as a fixed fee based on increased sales. This aligns our interests and the “tell” was pretty obvious. If they wouldn’t demonstrate faith in their product by putting skin in the game, why should I have faith it would deliver?
We can talk about how great a product we have all until our jaws get tired, but the best vote of confidence is putting one’s own money on the line. To this day, I’ll do that in my own business by taking a smaller fee and a large success fee when a potential client thinks that aligns us perfectly. The monthly fee, frankly, is their skin in the game.
What skin have you put it?
Consult Keith 