By Steve Rausch
As business owners, our day-to-day operations involve various factors of duties and commitments. In this article, I’d like to explore some of the issues and obstacles that face our industry.
Government. We battle our own federal, state, and local government every day in business. State and local regulations, as well as EPA, IRS and other federal agencies, cause huge amounts of compliance and paperwork. Now with the health care mandates, independent businesses struggle to comply, as well as afford everything required to meet the law.
Competitive Pay. The problem isn’t the desire of the boss. It’s because consumers who buy our services/products don’t want to pay a fair price. Everyone is looking for a deal, bargain or the lowest pricing. Whatever you want to call it, it forces businesses to underbid and use products without regard to the real value the job requires. Earning a fair profit today seems to be a dishonorable action. It seems every business, homeowner, builder, commercial customer and supplier will quote, bid, and cherry-pick every price, every day. This continuous devaluation of pricing (and profits) creates a huge trap for our industry ‒ one that is leading us into a downward spiral and directly causes the next problem.
Training and Quality Cutting. Companies are hiring under-skilled workers to fill slots and not investing the time and money to train them properly for fear those workers will quit as soon as skills are developed. They may move to other industries, where margins and labor are more appreciated, or they may just move to a competitor who will benefit from your investments. However, the true cost of using improperly or undertrained employees will far outweigh the false cost savings of not training.
One mistake within the process of construction work can easily cost many dollars of damage, as well as the potential permanent loss of not only that customer, but the many potential new customers when the problems with the job are shared with others. Once, I failed to properly train my wood installers in protecting the newly installed hardwood floors. During the work, we scratched the new floors requiring sanding and refinishing, which cost me more than the profit on the installation. It was a costly but memorable lesson learned.
Expected Services. In most marketing efforts, we over promise our work, services, and quality, while delivering the work based on cost-cutting, shabby efforts and products that can’t reasonably be expected to perform as we promised. Lifetime warranties are a perfect example of this. We promise these based upon studies that suggest the average homeowner will lose the paperwork or move by the time this product fails. Another lingering issue is the homeowner remembers the company that made that promise and proceeds to tell everyone who will listen to never use that company based upon what happened to them.
This one hits me personally as I purchased a top line carpet pad based on its lifetime warranty. Within five to six years of installation with a family of five, many friends, and a dog, the pad failed. My installing dealer was out of business so another store put me in contact with the pad manufacturer but because I couldn’t verify how, or from whom the store actually purchased my padding, they never honored the warranty. This was even though I had the store invoice showing my purchase by name and date.
The Bottom Line
How can our industry and your company get off this cycle of doom? First, develop and maintain programs that can do the job for you and your company. Understand the purpose of training and benefits – to attract, hire, and retain great employees. Pay competitive rates to your employees, and then charge fair prices for your products and services.
Don’t allow your marketing folks to oversell your products or services. Instead, use your marketing to tell the story to your customers as to why your company is worth more than the lowball or low bid competitors. It is time to just say no to stupid pricing. Understand the value of the products and services you provide. When you find a customer who only cares about price, run from them as quickly as you can, and align yourself with customers who value the total package of quality, service, and products that are proper for the job to be accomplished.
Above all, your job is to create value and make life easier or better for everyone. Look for ways to add value beyond your category, and I promise you that your customers will reward you with more business than you can handle. Please contact me with your success stories.