The slippery slope

In trying to compete and stay in business, prices can end up getting cut to the bone, resulting in a minimal profit.

Many years ago a well-established designer looked at my portfolio. She told me that, if I was not careful, I would end up with a book of beautiful pieces, all done for people who could have easily afforded to pay more than I was charging, and I would end up with little profit. This is the great dilemma of the small shop owner.

At the time, I was feeling pretty good about the prices I was getting for my work. But, at the same time, the cost of everything was slowly increasing and I had begun to waffle a bit on my prices because there was a lot of manufactured stuff appearing on the market that was selling for less than I could make it for. As the years went on, I began to see the designer’s prediction come true.

I was working really hard and had a big overhead to cover. Even though I was generating a good cash flow, very little of that cash was actually available to me personally. It covered my family’s expenses, but that’s about it.

I remember an HVAC guy and client were discussing his bid while I was in earshot. After a half hour or so of excruciating negotiations, the guy said, “But I’m not making any money!” The customer answered with a look that said “Good. That’s how it should be!”

Good for the customer. Not so good for us.

D.D.

COMMENTS

  1. Michael wrote:

    The customer comment at the end was what I’ve witnessed many times in my 35 years of business. We decided many years ago that we don’t try to match competitors, there cost is there cost. Our business must operate under our own set of costs. What has happened is that competitors that operate on thin margins fold. A good company that provides good products, good quality and all at a fair price will survive.

  2. Kevin Kring wrote:

    I feel your pain. I’m in that same boat and I’m glad my wife works a good job. Otherwise I would be out of business. We do enough different things which serve different yet similar needs. Building custom case work, custom mill work, repainting cabinetry and refacing. We also install, sand and finish hardwood flooring. Often one of these projects leads to another for the same customer. People’s desires, lately, seem to exceed their means. Of course there are folks out there cutting my prices too. I try to differentiate our business by being top notch in outcome and service. It’s still hard to have much of anything left after paying the bills these days, more often than not.

  3. John Gresko wrote:

    I so agree with you. I too seem to have been afflicted with not the best business sense regarding profitability. I seem to have suffered from the ‘ I can do that syndrome’, often just making enough to live and buy more tools. I can say that I have enjoyed my work and doing things that I took great pride in. Sure wish I had taken some business classes back in the day. Money isn’t everything but hindsight is always 20/20.

  4. Doug wrote:

    I had a prospect tell me once that he “hoped I made a lot of money just none on his project”. I thanked him for the opportunity and told him “good luck with your project” and left. Learning to walk away from an unprofitable project has been the hardest thing to learn but also the most important for me.

POST A NEW COMMENT




The content of this field is kept private and will not be shown publicly.

Comments *



* Required fields
Read our Comments Policy