No. 8 August 2011

One thing that many businesses fail to realize is: Price has very little to do with cost. Your customers will buy something if they feel it provides sufficient value for the price. If they do not feel it provides sufficient value, they will not.  Period.  How much it cost you to produce whatever it is you sell is not the customer’s problem; your customers do not owe you a profit, or even a “fair price.” Your job, as a business owner, is to figure out how much your customers think your product or service is worth, and charge that amount. No more, no less. (Easier said than done, I know.)

Salespeople mean well, but their job is to sell more product. It is the boss’s job to make sure the company makes money.

Price can be a very effective way to control volume. How are some lawyers and house painters able to charge double what other people charge? They have more customers than they can personally handle, so it is profitable for them to charge more and lose some business — rather than lose business by being overwhelmed.

Pricing is as important as any business decision, but frequently it is treated as if it were no decision at all.

Business owners just keep doing whatever they have always done, for better or worse. They do this because they fear they will — as they’ve been told a thousand times — price themselves out of the market.

No one ever warns them not to underprice themselves out of business. But I think that happens far more often.

Who makes the best negotiators? Herb Cohen, in his book You Can Negotiate Anything, defined the best negotiators as those people who get what they want. And he suggests that the people who seem to get what they want the most are…children. He goes on to say, “Children are little people in a big person’s world. They are people without formal authority or power, yet they seem to get what they want.”

Cohen suggests several reasons why little people do so well. “Number one, they aim high,” he says. “They understand that if you expect more, you get more.

“Second, they recognize that ‘no’ is an opening bargaining position... ‘No’ is not final. It means that at this particular moment in time, the other side looks at this negatively, which is a common reaction when someone hears an idea for the first time.

“Three, they get in the habit of forming coalitions. Who do kids form coalitions with? Their grandparents. Appealing to their grandparents is easy, because they have a common enemy, the parents.”

Cohen also says, “Kids are good negotiators because they are naïve. They say things like ‘I don’t know. I don’t understand. Help me.’ And that works.”

“Last of all,” Cohen says, “kids tend to be tenacious and persistent. They wear you down. So be persistent, repeat your point over and over again. Wear the other side down.”

Cohen suggests, “If you do some of these things, you become much more effective, you become a much better negotiator, and you make things happen.”

So maybe we should all give it a try. But don’t try it out on your wife. Those negotiations are the only ones you’re generally better off losing.

Twitter was valued at $7 billion in early July 2011 for an upcoming IPO. By my calculations, that is $1 for every hour of time it has wasted.

Dan Reynolds is a cartoonist “extraordinaire” whose work you’ve probably seen more often than you realize in popular magazines and on the Internet. One cartoon you might remember because of your relationship to the OPE industry features a cow driving a riding mower and cutting grass, with the discharge chute curved up high so that the grass shoots directly into the cow’s mouth! It’s a classic!

I’ve been following Reynolds’ work for many years. He recently released a gem. A fly is walking a tight rope, and his safety net below is a spider’s web. Talk about pressure!  It’s a “laugh outloud” cartoon and reprints of this cartoon and others are available at www.reynoldsunwrapped.com/index.htm.  No, I don’t receive a commission. I’m just sharing information about one of the world’s best cartoonists and coincidentally an all-around great guy too.

One of our industry’s outstanding personalities is Stan Crader, the owner of Crader Distributing, a long-time Stihl distributor and member of the Outdoor Power Equipment and Engine Service Association (OPEESA). Crader is also an outstanding author and has published two books, The Bridge and Paperboy, in 2007 and 2010, respectively.

Both books are available on Amazon.com, both are great reads, and right now is the perfect time to buy copies of each, as Crader and his wife Debbie recently announced they are donating all of their royalties from book sales in 2011 to the tornado recovery efforts in Joplin, Mo. You’ll feel good about helping with tornado relief efforts, and you’ll have a couple of good books to read on vacation this summer. You can’t beat that.

No. 7 July 2011

Husqvarna’s Orangeburg, SC, manufacturing plant contains more than 1 million square feet of production and distribution space producing consistently high quality units and parts.  This plant typically produces riding lawn tractors, tillers and snow throwers primarily for the North American market. 

But when Husqvarna’s Beatrice, Neb. factory was closed and its production assimilated into the Orangeburg plant along with introducing an ambitious number of new product launches, production problems (“an increase in material complexity” Husqvarna stated) resulted in lower production, fewer shipments and higher costs.  Even you and I can figure out that a result like that translates into unhappy retailers, distributors and dealers.

Knowing the quality of current Husqvarna leadership corporately and at their production facilities, their customers understood that it would just be a matter of time before changes in production processes would pay off with reduced labor costs and on-time delivery.  And it has.  There is finally “light at the end of the tunnel.”

While sales have been affected and customers upset, improvements and investments in processes and facilities will result in a stronger and brighter future for Husqvarna and its customers.  And that’s good for all of its customers and our industry.

The Southern Baptists recently held their annual convention in Phoenix, AZ at which they passed a resolution affirming the literal existence of “Hell.”  I hope that knowledge doesn’t upset your day!  Perhaps you still have time to “change your ways?”  A lot of people in the OPE business are already thinking this particular business year has a head start on the journey there, if you catch my “drift.”

In Tim Harford’s new book Adapt, he argues that success always starts with failure. That is an interesting concept. 

We all know about Johannes Gutenburg, his moveable-type printing press and Gutenburg Bibles.  But did you know the Bible bankrupted him?  Gutenburg was a genius, but not much of a businessman.  He borrowed money to print the Bible, the most popular book of all time.  He ran into debt.  He got into an argument with his business partner.  The lender sued.  His printing presses were confiscated.  Who was successful with Gutenburg’s revolutionary printing press?  Other printers were, but not Gutenburg.  The printing business was revolutionized by his printing press.  Yet Gutenburg became a bankrupt businessman.

There was another business created by Frank Woolworth, a sort of retail Gutenburg.  Mr. Woolworth had a retail innovation.  His retail empire of Woolworth stores became one of the largest retailers in the world.  By 1997, Woolworth’s was closing its last US store.  But his ideas became the basis for chains like Wal-Mart and other big box stores.  Innovation replaces old ideas with new ideas.  The old way of doing things gets wiped out.  And that’s how success builds on failure.  It’s a selection strongly in favor of the ideas that are working.  “You have to get rid of these old ideas and old firms and replace them with something better,” Harford says.  “Otherwise you don’t get economic growth.”  Do you believe that the foundation of great success can begin with someone else’s failure? 

The following service flow chart has been around for some time, but I always chuckle when I see it.  You will too.

 John Quincy Adam’s said “If your actions inspire others to dream more, learn more, do more and become more, you are a leader.”  That statement is definitely easier to say than to do.  But think of the positive impact you could have if you could inspire others to that extent.  You would never be forgotten.