The balance between Being Competetive and Profitable

[Joe Marconi]

The market has changed. We need to realize that we need to be competitive in certain areas (such as basic services) and highly profitable in other areas (diagnostic testing and electrical). The consumer has choice today and is looking to save. Give your customers outstanding service and charge a fair price. Understand what you need to make in order to be profitable. Sell more of what is most profitable.

[xrac]

The market has changed. We need to realize that we need to be competitive in certain areas (such as basic services) and highly profitable in other areas (diagnostic testing and electrical). The consumer has choice today and is looking to save. Give your customers outstanding service and charge a fair price. Understand what you need to make in order to be profitable. Sell more of what is most profitable.

 

What job makes the most money for a service shop? Is it a water pump? One of the flush services? Alignments? I think I know for my shop but I’m not sure. Where do you lose the most?

 

TB Service Zone Newsletter

[Southeast Tire Co.]

In the balance between being competitive and profitable, I think it depends on the goals of the business. Profitability goals depend on the overall direction of the business as the owner sees it. While many owner's goal is to be as profitable as possible, it is not mine. My goal is growth. Growth at all costs. Being a fairly new business, I want to build a huge customer base first and make money later. As long as I am covering overhead, providing my employees with good pay and benefits, and am personally able to take a reasonable salary, I will cut prices to the bone to beat my competitors and gain their customers.

 

I can honestly say that I have never priced any service or product by a profitability projection. My prices are based on the market and I change my business to make sure it can operate under those margins. I feel that the most important thing in this economy is a strong customer base not maximizing the profit of each job/sale. While I think both can be done, I will never lose a reasonable customer to price. Never. I'll take a 15% overall profit on a tire sale if I know I gain a customer in the process.

 

I envision one day changing my business goals to maximize profit and when I do that, I will already have a strong and loyal customer base to support me. So again, I think that balance you are talking about depends on where you see your business in the future.

[Joe Marconi]

In the balance between being competitive and profitable, I think it depends on the goals of the business. Profitability goals depend on the overall direction of the business as the owner sees it. While many owner's goal is to be as profitable as possible, it is not mine. My goal is growth. Growth at all costs. Being a fairly new business, I want to build a huge customer base first and make money later. As long as I am covering overhead, providing my employees with good pay and benefits, and am personally able to take a reasonable salary, I will cut prices to the bone to beat my competitors and gain their customers.

 

I can honestly say that I have never priced any service or product by a profitability projection. My prices are based on the market and I change my business to make sure it can operate under those margins. I feel that the most important thing in this economy is a strong customer base not maximizing the profit of each job/sale. While I think both can be done, I will never lose a reasonable customer to price. Never. I'll take a 15% overall profit on a tire sale if I know I gain a customer in the process.

 

I envision one day changing my business goals to maximize profit and when I do that, I will already have a strong and loyal customer base to support me. So again, I think that balance you are talking about depends on where you see your business in the future.

 

I completely understand what you are saying. We too, believe that growth is our number one goal; but how you get there depends on making a profit. No company can grow without making a profit. To say, growth all cost, may be one way to achieve that, but I do believe that a company can be competitive and profitable by having a strategy based price structure and not give the farm away.

 

You need to remember that a business like mine which has been around for 30 years has gone through many recessions and growth spurts. We recently built another facility and for the large part, adhered to you paradigm.

 

Building a strong customer base is vital to you growth and survival, you are 100% correct. For me, building my customer base with the right kind of customers is equally important.

[Evan Smith]

In the balance between being competitive and profitable, I think it depends on the goals of the business. Profitability goals depend on the overall direction of the business as the owner sees it. While many owner's goal is to be as profitable as possible, it is not mine. My goal is growth. Growth at all costs. Being a fairly new business, I want to build a huge customer base first and make money later. As long as I am covering overhead, providing my employees with good pay and benefits, and am personally able to take a reasonable salary, I will cut prices to the bone to beat my competitors and gain their customers.

 

I can honestly say that I have never priced any service or product by a profitability projection. My prices are based on the market and I change my business to make sure it can operate under those margins. I feel that the most important thing in this economy is a strong customer base not maximizing the profit of each job/sale. While I think both can be done, I will never lose a reasonable customer to price. Never. I'll take a 15% overall profit on a tire sale if I know I gain a customer in the process.

 

I envision one day changing my business goals to maximize profit and when I do that, I will already have a strong and loyal customer base to support me. So again, I think that balance you are talking about depends on where you see your business in the future.

 

Greetings--

 

I'd like to respectfully put a few ideas out on the table - for your consideration. I believe your assertions regarding how you manage your business would be familiar to many shop owners, and other small-business people – and many would strongly agree with you. HOWEVER... following through on some of your assertions in the long run can put your business at risk. Having done a lot of work in this area - I have a lot to say. I've held off here on a longer response--but the key ideas I'd challenge small business owners to answer for their business are:

1. 
    
   
2. How do you create profitable growth in your business (because growth “at any cost” will create a “race to the bottom” for you and your competitors)?
   
3. What differentiates your business in the eyes of your customers – what value do they get from your business that they’re willing to pay for? (HINT: The answer is not “lowest price”. Customers who seek the lowest price are loyal to … the lowest price. They’re not loyal to your business).
   
4. How do you find more customers like your MOST DESIRABLE customers (the ones who come back over and over again, the ones from whom you make the most money; and/ or the ones who refer others to you…)?
   
5. How do you change your business cost structure to operate effectively in line with “prices the market will bear” – AND to deliver the value that the MOST DESIRABLE customers find in your business?
   
6. What is the lifetime value of each of your customers – and how do you extend/ add to that lifetime value your business can capture from your MOST DESIRABLE customers?
   

 

If you'd like to hear/ read more: please see our pageson small business growth & development... or drop me an email offline: [email protected]

[Joe Marconi]

Greetings--

 

I'd like to respectfully put a few ideas out on the table - for your consideration. I believe your assertions regarding how you manage your business would be familiar to many shop owners, and other small-business people – and many would strongly agree with you. HOWEVER... following through on some of your assertions in the long run can put your business at risk. Having done a lot of work in this area - I have a lot to say. I've held off here on a longer response--but the key ideas I'd challenge small business owners to answer for their business are:

 

1. How do you create profitable growth in your business (because growth “at any cost” will create a “race to the bottom” for you and your competitors)?
   
2. What differentiates your business in the eyes of your customers – what value do they get from your business that they’re willing to pay for? (HINT: The answer is not “lowest price”. Customers who seek the lowest price are loyal to … the lowest price. They’re not loyal to your business).
   
3. How do you find more customers like your MOST DESIRABLE customers (the ones who come back over and over again, the ones from whom you make the most money; and/ or the ones who refer others to you…)?
   
4. How do you change your business cost structure to operate effectively in line with “prices the market will bear” – AND to deliver the value that the MOST DESIRABLE customers find in your business?
   
5. What is the lifetime value of each of your customers – and how do you extend/ add to that lifetime value your business can capture from your MOST DESIRABLE customers?
   

 

If you'd like to hear/ read more: please see our pageson small business growth & development... or drop me an email offline: [email protected]

 

Evan, first, welcome to the forum! It’s about time you joined in.

 

For those of you who don’t know Evan, he was very instrumental in helping me during my expansion project working on getting my focus directed in the right direction with respect with understanding customer demographics, marketing to “My Customer”, branding and understand value proposition.

 

As usual, you clarified princely what needed to be said, nice job.

 

Question; do you think that some shop owners resort to "desperation marketing" when the see their bays empty and perceive that other shops may be doing better?

[xrac]

Here is another great article on profitability by our own Joe Marconi:

 

TB Service Zone Newsletter

[Joe Marconi]

Here is another great article on profitability by our own Joe Marconi:

 

TB Service Zone Newsletter

 

Thanks xrac, I think I may make you my PR agent...

[xrac]

Thanks xrac, I think I may make you my PR agent...

 

I would make a great MC to introduce you for your speeches and I also could collect money at the book table!

[Joe Marconi]

I would make a great MC to introduce you for your speeches and I also could collect money at the book table!

 

You will be the first I call, trust me!

[xrac]

You will be the first I call, trust me!

 

Hey, everybody listen up. Here is a new article by Joe and I believe this is the best one that I have ever read that he has written. You have got to read this because it may mean the difference in survival and success in your business:

 

Service Zone Story

[Brett_Duke]

My first post.................... . In response to desperation marketing, I've been in a shop where this has happened. Empty bays, techs sleeping on their work benches.......Here comes the manager with a "new idea". " Let's start selling any and every possible Flush available." This didn't work at all, especially because most cars coming in were still under warranty and had never heard of these flushes when they brought their last 5 cars in. This kind of marketing leads to unhappy customers and unhappy techs.

[Brett_Duke]

BTW, I'm not knocking all "flushes", just a good example that i've experienced.

[Brianp]

My first post.................... . In response to desperation marketing, I've been in a shop where this has happened. Empty bays, techs sleeping on their work benches.......Here comes the manager with a "new idea". " Let's start selling any and every possible Flush available." This didn't work at all, especially because most cars coming in were still under warranty and had never heard of these flushes when they brought their last 5 cars in. This kind of marketing leads to unhappy customers and unhappy techs.

 

 

First I would never "sell" any unneeded service. If its a preventative fluid replacement it better need it. Like 30K transflush or ph of coolant is low. etc. The fasted way to put you out of buisness is a bad reputation. If a vehicle is in your shop on a regular basis for the maintenance then you should rarely find anything that is needed unexpectidly. Like flushes, belts etc. Those items can be predicted at an previous stage and then even posibly split up so that the customer can do them in intervals that cost less each time but are still doen in a timely fashion. Like telling them they need a transmission flush at the next oil change. or tune up at 60k. etc. This keeps the workflow nice and easily scheduled. While keeping a customer loyal and satisfied.

[KMS]

I believe in telling all customers all issues with their vehicles I see. Then, I prioritize it. Even the small concerns that aren't really an issue yet. It earns their trust, and helps them save for their next visit. Also, many times they just tell me to take care of it all now. Always put the ball in their court. I agree with not selling un-needed services. This is one of the main reasons I get calls from customer's who have their vehicle at the dealer.