A December 2, 2016 Wall Street Journal article was titled, “Car Sales Roll Along; Aided by Discounts.*” The gist of the article was sales are up over the same month a year earlier and the average discount was 11%, versus 9.4% in 2015.
This reminded me of a story I tell in a couple of my talks. It’s about a past (and dearly departed) friend and associate, Jerry. To put it mildly, Jerry was financially incompetent. As I recall his only financial acumen was because of his experience as a business owner. He knew cash flow. Or should we say he knew short-term cash flow.
He watched his cash flow like a hawk. If he got to the last half of a month and it looked like his monthly income would be short, well, he’d go and make a deal (I should mention his prior business was in retail, he was a wheeler-dealer).
Prospective clients were offered a lower, introductory fee to hire him now versus later, even if later was only a couple weeks. Now when it came time to renew his services he would ask for the original fee, the client would say, “No, I’ll pay the same as before,” and he was in a loop of working for much less than the value he provided. Concentrating on the month-to-month hurt him.
There’s an old saying in business, “We can offer you two of the following, quality, service, and price but it’s impossible to give you all three.” You grow by leveraging your competitive advantage and that advantage can’t be price (in the long-term). It costs more money to provide quality products and services.
As we head into another new year, my advice to all of you is to not be like Jerry (or the car industry). Create a sustainable business by charging a fair price for fantastic service and a great product.
“When someone asks you, ‘A penny for your thoughts,’ and you put your two cents in, what happens to the other penny?” George Carlin
* The online article is titled, “Auto Makers’ November Sales on Track for Record – Black Friday deals and deep discounts drew shoppers