Many years ago when I started my closet business, I remember doing what everyone said to do, take cost and double it, so I did. It worked for a while, and as my company grew, I began to think differently. Somewhere along the way, I began to think of the company as different than me. You see, until that moment, I thought the company and myself were the same thing. I’m not sure what it was, it could have been hiring someone, it could have been buying another truck, but something happened. It was in this moment that I realized that the company needed to make money, and I needed a paycheck. The slight difference is that each job needed to make enough to pay both of us.
Well, as time went on, I began to read books, subscribe to various trade magazines, I joined the local homebuilders association, and as my thinking changed, a funny thing happened. My business changed. I started to realize that the price I decide to sell my products and services at is my decision. I know of a competitor who adjusts his prices by the week. If he is slow, he lowers his prices and if he is busy, he raises his prices. I decided that I want consistent prices. I wanted my company to have a dependable paycheck every week, just like my employees. So, I started to look at my costs, really look at them. I began with the simple things, like a truck payment, gasoline, and insurance, oh, and the material as well. But, as time went on, I started to dig deeper. I then added the oil changes, and sales tax, and advertising. I started to learn more about Income Statements, and a funny thing happened. My prices went up. It got to the point that I knew if we got a job, it would make good money. But, sometimes, we would not get the job.
A new lesson I had to learn was not just understanding my costs, all of them, but how do I compare to my competition. At this point I developed my 10% rule. I should always be within 10% of any “legitimate” competitor. I believed so strongly in our products and service, that I should be able to sell our difference, up to 10%. It seemed that anything more than that, people would not see the extra value.
Now, when we do decide on what to sell something for, it is well thought out, with all of our costs in mind. We create a formula, and apply it to establish our Selling Price. Then, when a client asks me for a discount, I will really know if we can do it. The question we all need to ask ourselves is “What am I worth?” I do not want to take on the responsibility of starting a company, and only work for $10 an hour at the end of the day. I’ll bet some of you are thinking, hey right now I’ll take $10 an hour. I believe that it is easy to sell as the “low price provider”. The problem is, if that is what you want to be, then you will always be that, and soon you will have to compete with Home Depot and IKEA, and none of us can do that!
For me, I want to invest in learning how to sell, my products, my services, and why we are at least 10% better than the next guy. Besides, if we all did this, and the market moved higher, we would all make more money. Care to join me?
"Seize Today"
Guest Blogger: Tim Coleman, Coleman Home Solutions
