Competition Drives Prices

Every summer we take a road trip. I’ve noticed motel prices going down over the last few years and it seems obvious why they’re doing so – there’s a proliferation of franchise/chain motels everywhere.

In Bozeman, our dog-friendly place sits in the middle of five similar places. Across the highway are five or six “lower-level” motels and in back of our place there’s a development for a two-hotel convention center. The same seems to be true in other places along our route.

So, what’s going on here that we should pay attention to? Here are a few things.

  • Saturation – Too many similar businesses means price competition. Doesn’t matter if it’s motels, sandwich shops, oil change places, or something trendy like Curves used to be. Be unique.
  • Commodity – No differentiation. If you didn’t see the name you’d have a hard time telling one from another. Again, be unique.
  • Low barriers to entry – What’d it take to get into the motel business? Pay your franchise fee, build a building, and away you go. Whether it’s skills, a product, or something else, make it hard for others to duplicate.
  • Little competitive advantage – See above about being a commodity. Other than rewards programs what’s the reason to stay at any particular place? Oh, I got it, price is the reason. Make quality and service, i.e. value, your competitive advantage, not price.

Price shopping – Which brings us to how easy it is to compare prices these days with Expedia, Kayak, Hotels.com, etc. Position yourself so competitive pricing and shopping is not an issue.

Bottom line, if it’s easy to duplicate someone will duplicate it. Be unique.

“It’s better to prepare children than repair them.” Jim Zimmerman

Asking Why – A Great Question

I’m known in my family for constantly asking, “Why?” Others will say something about what they’re going to do, what they want to get, etc. and I’ll ask, Why?

Sometimes I get the answer, “Because.” And no, that’s not a reason why you want to do something.

  • A client told me if he had the money (at the time) he’d like to buy a larger machine. Why? It turns out because he likes big machines, not because the business needed it.
  • Years ago, one of my clients bought a business with way too much inventory. Why? Because the owner loved seeing full racks of stuff (and those full racks turned into cash with better management).
  • An owner had way too many employees. Why? Seems he didn’t want to work too hard, so he didn’t pay attention, and therefore made less money.

A client of mine, in a buy-sell deal, made it a (conscious) point of avoiding the why question by giving the answer in advance. For example, “This information is needed by Friday because (let’s say, to keep the bank on schedule).”

It’s a great simple one-word question to ask about marketing tactics, purchases, hiring, and much more.

“Even the smallest act of service, the simplest act of kindness, is a way to honor those we lost, a way to reclaim that spirit of unity that followed 9/11.”President Barack Obama

 

Control Doesn’t Mean Controlling

“I like being in control. I don’t like to listen to anything from anybody.”

The above is from the owner of a struggling business on the TV show Restaurant Impossible. When my wife and I heard it we immediately hit rewind so we could play it again and transcribe it.

I’m sure there are all kinds of fancy names for this as it’s one of the most common traits of business owners, especially founders. Ironically, in my opinion, the strongest statements about being in control come from owners of business not firing on all cylinders. No wonder there are over 1,000 books on Amazon when searching by “delegation” and over 300,000 when searching by “management.”

The top “blemish” I see in the hundreds of companies I come in contact with every year is a controlling owner who:

  • Has his or her hands in everything
  • Thinks they’re the only person who can do it right
  • Believes delegating is a sign of weakness

I recently visited my friend and past client Keith Jackson, owner of Industrial Revolution. He told me his four-person management team pretty much runs the day-to-day. On a personal note, Jessica has been with me since January 1. I turned over some client-based office work and she’s doing things I don’t know how to do, getting it done faster than I could, and this allows us to grow the business.

Being in control doesn’t mean doing it all. It means making sure it gets done and done right, and that makes the business more valuable.

“Only the educated are free.” Epictetus

It’s Always the Little (Unseen) Things

We had a perplexing problem with one of our garage door openers, as in it wouldn’t close, which usually means the safety beam is out of whack. My friend and I tried all kinds of stuff after trying to move the sensors in case they were out of line.

So I cleaned out the lenses with a wet Q-tip, and it worked. Then it didn’t, cleaned it again, it works, doesn’t work, repeat, etc. Finally, I took off one of the sensors to clean it and voila, there’s some stuff in the lens that looks like a little caterpillar cocoon. The Q-tip pushed it aside, but it would fall back into place, blocking the lens. Once removed, no problems.

It’s often the unseen things that get in the way.

  • One of my clients had a professional evaluation of the business (not a valuation but an operational assessment). One of the items in the report was, “the employees have an informal union,” meaning they were setting their own work polices, rules, etc.
  • A company thought their top customer (25%) was in love with them. In fact, it was the opposite. They were interviewing other providers and didn’t even ask for a quote from their existing vendor.
  • A rep firm did 80% of their business with one manufacturer, they switched firms, he almost went bankrupt, we turned it around, and guess what? Ten or so years later the same thing happened (although closer to a 50% manufacturer). Blinded by success he couldn’t see the risk.

There are too many techniques (to go over here) to see most of what has been unseen. It just takes the effort to peek behind the curtain.

“You’ve got to tell the world how to treat you. If the world tells you how you are going to be treated, you are in trouble.” James Baldwin

 

Routines Rule

It’s football season and one of the lessons we can all learn from football teams is the importance of routines. Once the preseason games start in the NFL the coaches get their players into their seven-day routine, which is includes an off-day, full contact day, planning day, game day, recovery day, etc.

I remember going to a professional group meeting many, many years ago. One of the panelists said her policy (her routine) was to do all her marketing on Mondays. I thought it stupid, but my friend Jerry latched on to this. At least he was blocking out time for it (he wasn’t the most organized of people).

Routines can, and should, cover many areas.

  • If you do creative work, what is the best time of day or day of week to do it?
  • If it’s keeping a team focused and on-point, when are those meetings and what do you cover?
  • Salespeople need to plan for phone calls, emails, in-person meetings, and have a schedule to get these things accomplished.

I have a reminder in my system for 7:30 every morning that is simply one word – reflection. To me it means think about what happened, what I’m going to get done that day, and look at the big picture. It’s a routine to get focused.

“The future has arrived – it’s just not evenly distributed yet.” William Gibson

 

Sabotage is All Around Us

I caught a small amount of the NFL Hall of Fame ceremonies on TV and was particularly drawn to Jerry Kramer’s acceptance speech. He mentioned how his high school line coach, after noticing him struggle, told him, “You can, if you will.”

At first he was befuddled by it. Then he figured it out, got a scholarship to the University of Idaho, won five NFL championships, was oron the NFL’s 50thanniversary team, and now the HOF.

We can all, “Figure it out.” Now I can’t be a surgeon, engineer, lawyer, etc. but I’ve figured out how I can help others, be successful, contribute to the good of the whole, and have an enjoyable life – if I will do what it takes. One of my favorite lines, to clients and others, is, “If you do the things you’re supposed to do good things will happen.”

It doesn’t matter what your vocation, the above applies. The same holds for what you do with your family, community, and elsewhere. But it does take effort, perseverance, and (especially these days in our ever-faster world) urgency.

Kramer ended with some motivation from his coach, Vince Lombardi, which is the quote below. Sports, business, family, etc. all will thrive if you’ll do what you’re supposed to do.

“After the game is over, the stadium lights are out, the parking lot’s empty, you’re back in the quiet of your room, the championship ring on the dresser, the only thing left at this time is to lead a life of quality and excellence, and to make this old world a little bit better place because you were in it.” Vince Lombardi

Revisiting an Old Friend – The Importance of Employees

I read a short article recently where the writer was describing his frustrating experience when making a food and beverage order, which he repeated twice, had it said back to him, and it still was wrong. His sub-headline was, “It’s hard to get good help these days.”

I’m sure he was being somewhat sarcastic, but it’s true. It’s really hard to find good people and keep them. Almost every business owner or executive I talk with tells me the same story, which is, they could grow faster if they could find more employees. Notice I didn’t write “good” employees.

I know businesses that have stopped doing drug tests for positions not requiring one (like for a commercial driving job where it’s a requirement). A friend was surprised last year when his new employer told him they don’t do drug testing (and this was not in a state which legalized marijuana, which adds its own set of issues).

On July 30, 2018 the Wall Street Journal had a front-page article titled, “Employers Eager to Hire Try a New Policy: ‘No Experience Necessary.’” This is a big swing from the post-Great Recession era when talent was abundant, and employers could be fussy. This covers a wide range of industries from mechanics, to programmers, to management and everything in between. The article also mentions reduced drug testing and reduced background checks.

Which bring us to the situation facing most business owners, which is, “How do I attract and retain good people.” In fact, I have added this as one of the first few things an owner should do when preparing their business for an exit.

One of my favorite stories is about a business buyer who, when the seller said he couldn’t talk to the key people prior to the deal closing, said to the seller, “You may think I’m buying your business but I’m really buying your people.” Private equity groups buy management teams and individuals buy an operation having capable people with diverse responsibilities.

What this means to an ongoing operation is invest in your people because they’re hard to replace. The tech firms get this with all the amenities they offer on and off campus. Most people work for small companies because they don’t want to be one of thousands. My friends at Pacific Tool have monthly BBQs, at Pacific Studio they have regular “Beer Fridays,” and Spectra Labs has Tacoma Rainiers tickets for their staff.

But it starts with hiring good people. Another of my favorite stories is about when a client almost gagged when I recommended he hire two new salespeople with a monthly base salary double the highest they had ever paid before. He smiled three months later when both of those salespeople were into commission (and in record time). They were worth it!

Finally, all of the people who can help you grow don’t have to be employees, especially if you don’t need them full time. You can outsource bookkeepers, controllers, CFOs, IT experts, HR, sales experts, C-level management, and more.

Conclusion

Computers, machines, and artificial intelligence can replace some people and improve productivity. But you still need people, good people. Find them and keep them. The cost of replacing them is incredibly high.

When All Employees are on the Same Page…

At a meeting with a group of clients last week our presenter, my friend Hugh Blane, asked an interesting question – “Can every employee articulate your strategy and their role in accomplishing it?” The question stumped a few people and in a test phone call to one client’s company the manager receiving the call was a bit indecisive with the answer. It’s a good exercise to make sure employees, especially those who have customer contact, know the firm’s strategy and value proposition.