Breakeven doesn’t cut it in retail
By Rich Lindblom, YSN
When you get right down to it, we all show up to work for one basic reason: to make money.
Sure, you may love your staff and you may love your customers, but ultimately you still go to work for one reason and one reason only, and that is to make a living for yourself, your family, and your employees.
The problem is that customers don’t always want to pay you a fair price for the products and services you and your company provide. It’s not that they are being unreasonable or even cheap, necessarily. Quite often I think it’s simply because they just don’t understand the costs involved in doing business.
I had a line that I used many times over the years with customers who were trying to beat me up on price. Now mind you, I was very careful about who I used it with, as it had to be someone with whom I felt I had established a good rapport. But with the right customer it was a very effective line. When I was at my rock-bottom price and the customer was still trying to chisel me down further, I would simply say, “I’m sorry, but at the end of the day, I am here to make money, not friends.” Most of the time they would get it, and I would get the sale.
In extreme circumstances, I would even go so far as to say, “OK, my cost on this appliance is $500. How much money do you think I should be allowed to make?” And that goes back to what I said earlier: Customers don’t really have any idea how much money you are (or aren’t) making when you sell them something. The point is that when people realize you’re not getting rich selling what you sell, they often become much easier to deal with. And again, you need to know your customers well enough to figure out who you can say that to and who you can’t. But I think you get the idea.
Now don’t get me wrong — it was never all about money for me because I always enjoyed what I did. But in the end, even if you enjoy what you do, you still must make money for doing it.
My father, who started our family business way back in 1956, told me something when I first started working for the company. He said, “You need to make money on everything you touch.” And when you think about it, it makes a whole lot of sense. Maybe I didn’t understand it as a 15-year-old kid, but over time I figured it out. Look, it costs you money to unload a truck from the manufacturer and move the stuff into your warehouse — a warehouse that also costs you money. Of course, you need to heat or cool or power that warehouse, and then you have to pay someone to sell, deliver and install the inventory. And let’s not forget that there is the actual cost of money itself, which according to the Freddie Mac index for this month was 0.47 percent.
Looking back on it, I think my dad was right all those years ago; you really do need to make money on everything you touch.
Hey, each of you are the best within your market area and in your respective industries at what you do, so don’t be afraid to charge appropriately for your merchandise and your services. The sad reality is that too many dealers are afraid to charge a fair price for their products and, just as importantly, their services. Don’t be afraid to raise your service or install rates. You are better than your competition and that means you are worth it.
Because the bottom line is … if it doesn’t make dollars, then it doesn’t make sense!
I have three goals in mind with my columns: To motivate, educate and entertain. If I have achieved at least one of those, then I’ve done my job. Don’t be shy about letting me know if you agree — write me at email@example.com.