Chasing cheap options instead of quality will undermine and possibly destroy your business.
Remember the Yugo? It was a cheap car. Not just an inexpensive car, not a good deal, not a good value. It was cheap. People who bought the car realized they wasted the entire purchase amount on it.
Now take a look at the sticker price of a Cadillac ATS-V coupe or a Corvette. Why would someone pay more than $55,000 for a Corvette or nearly $63,000 for a Cadillac ATS-V coupe? They do so because they want a premium car that performs extremely well on the road. They also know the service and maintenance programs that accompany these types of cars are best in class.
These comparisons provide some lessons in bolstering your own electrical service business. For example:
• Don’t chase cheap. This forces you to provide an inferior experience to your customer — one who won’t speak highly of your company.
• It’s not so bad to offer high-quality service for a respectable price. You may not get every job, but you will also avoid bottom-dragging for customers.
• It’s not so bad to be a strict premium player. Cadillac’s offerings are all high-dollar. That’s the brand image it wants. You could specialize in some way to do only premium work.
• It’s not so bad to have a premium offering or two along with “normal” offerings. Chevrolet has positioned the Corvette as its premium product, but the company has offerings for all budget levels (except the very lowest, of course).
• It’s not so bad to have an “economy” offering, but reduce features rather than skimp on quality. Keep in mind that today’s Malibu buyers may be Corvette buyers years later.
Most small electrical shops don’t last more than a couple of years, and the owners typically have significant debts once they throw in the towel. They don’t grow to become mid-size shops; they die as debt-ridden small shops. One of the most common reasons is the owner chases cheap.
In addition to making very little on jobs, or losing money on them, the cheap chasers end up snagging the worst customers. Think about the kind of company that (nearly) always goes for the lowest price. Where else do they cost-cut?
Here are some examples:
• Safety training. It’s probably a dangerous place in which to send your people. To verify, just walk through and count how many people are not wearing eye protection. See what other unsafe acts you can spot.
• Staffing. Your counterpart, who probably took an underpaying job out of desperation, is likely to be sticking you with vague specifications followed by “you must do it for free” change orders.
• Standards library. Try to find a copy of any technical standard. Try to find somebody who is familiar with one of them. Or even knows what one is.
• Standards compliance. If a customer is chasing cheap, see how many NEC violations you can find in a 15-minute walk-through of any area in the plant.
• Housekeeping. Poor housekeeping is a sign of poor management and slipshod ways. These people do not expect or respect quality work.
Then, of course, they are going to play games with invoices, borrowing money from you at zero interest for several months. What little you made on this job after dodging all the other bullets gets vaporized by interest charges.
Yes, you want to bid competitively. But walk away from jobs where the customer is too focused on price. Define your value position (Camry, Corvette, Cadillac, etc., in your marketplace) or multiposition (Chevrolet’s strategy) and know what your work is worth. Cutting price isn’t the answer to price resistance from a customer; communicating the value proposition is.
If a customer is seeking multiple bids, you might try to “win” and start on the path to going out of business. Instead of that, add a section to the bid that clearly communicates your value proposition. And discuss this personally with your counterpart.
That doesn’t mean to make empty claims that you are the premier shop. Provide specific bullet points such as:
• A licensed Master Electrician will be on site.
• All test technicians are NETA-certified.
• Each of our thermographers is Level II certified and has more than 1,500 hours of field experience.
• Our on-staff NEC expert will review all plans and work for Code compliance.
• Because of our safety program, we have not had a lost-time accident in eight years.
Notice how these points communicate in detail what makes your shop the one to trust with this project? Try to think of qualities that your competitors cannot match, so that in comparison to you they look deficient. If they drop their price in response, they will only reinforce that point.
If you’re tempted to chase cheap out of fear of losing the work, just remember the Yugo.
Of course, if you’re already doing the things we’ve discussed here, you can afford your own Corvette.