A Day in Jerome, AZ

Wednesday, August 19, was the 37th anniversary of the marriage between my wife and me, and we are still going strong. I guess that makes us something of an anomaly in these days, but I’d do it again in a heartbeat!

We married for better or worse. I got the better part, she got the worse. But we still love each other and cannot imagine life without each other, especially now as the grand kids start growing up. Read more…

Why Ain’t There Any Profit?

Each year, I review the statistics on the HVAC trade in America and each year I see the same basic data.  To be sure, from year to year, the numbers change—but only a little.  (The data from the current recession won’t be out for a good while yet, but I shudder to think what it will look like!)

For decades, the net profit after taxes in this trade has run under 3%.  For all the hard work contractors put in, to only keep 3% of what they bill out doesn’t seem fair, does it? (By the way, that is about the average net profit of health insurance companies (3.3%), too; click here for details; not that I am opposed to reform in the health insurance business– I am– but I am not convinced they are making a bundle off their clients. Probably makes more sense to do tort reform, but that’ s another blog!).

The math is simple—and ruthless.  Profit is what is left after overhead and costs are subtracted from sales.  In my consulting practice, I find that most dealers have pared about as much overhead as they can.  (To be sure, there is some waste here and there, but it is often not enough to make a big difference to the bottom line.)  They have also gotten their costs down about as low as they can (to the grief of many manufacturers). Read more…

GM’s New “Baloney” Car

So much for the Chevy “Volt” being the answer to our transportation problems. Check out this blog for a deeper behind-the-scenes report on what the 230 MPG number REALLY means!

But of course, what would we expect? We now own most of GM, so why not have the same truth-bending government produce truth-bending claims?

The Midas Touch: Turning Your Business Into Gold

In a previous blog post, I wrote about not neglecting that 401-K that is your business. I showed how your retirement income needs may well outstrip even an aggressive savings plan and suggested that you not overlook that growth of the most important investment in your life—your business. In this post, I will touch on some ways to build a business that will be worth its weight in gold (well, almost) when you decide to retire.

First, if you are not yet married, consider making your business divorce-resistant (not divorce-proof—there is no such thing).  Consider a pre-nuptial agreement with the spouse-to-be.  And if you are already married, think about putting your business into a trust. Read more…

Is the Tide Turning?

The following article was on the front page of the Wall Street Journal today (August 6, 2009):

TIDE TURNS ‘BASIC’ FOR P&G IN SLUMP

By Ellen Byron

DALLAS—Procter and Gamble Co., under assault by penny-pinching consumers, has quietly rolled out a version of Tide detergent that the company freely admits isn’t “new and improved.”

The product, Tide Basic, is currently for sale in about 100 stores throughout the South. It lacks some of the cleaning capabilities of the iconic brand—and costs about 20% less. Its very existence is one of the most telling signs to date of how the sour U. S. economy is forcing mass marketers to shift course…

The article goes on to state how Tide powder has dropped 9% in market share since 2007 (from 34% to 30%) and Tide liquid has dropped 19% (from 31% to 26%).

As I read the article, I could not help but be struck by how much this parallels the four major brands I work with closely. All four of them have a broad and rich product lineup with some truly amazing high-end models.  All four of them offer their dealers a strong menu of dealer growth and enrichment programs. And all four of them have, until recently, put their gross margin eggs in the high end of their product line up. Read more…

All Things Being Equal, Price Wins

That famous sales maxim has been around about as long as people have been selling things. And it really has a lot of truth in it.

Consider two sales scenarios— in one, a customer is trying to decide between two purchases. In the customer’s eyes (and that is the operative phrase), both offers look alike. Both do the same things for the customer, both have the same basic features and benefit clusters. So which one will the customer probably choose? The one that costs less. After all, if both offers are identical (except for the price), the only differentiator IS the price.

In the second case, there are again two offers on the table, but one is clearly far and away much better than the other. Yes, it costs more, but it clearly does much more for the customer than the cheaper offer. How will the customer choose now? She will probably opt for the offer with the better benefit cluster, even though it costs more.

(I am not saying that price is never an issue in a sale. It is always an issue. But it is not always the issue. In the second scenario, if the better offer costs ten times as much as the cheaper one, the customer may not have selected it.)

So in sales, our mission is to create inequalities so that competing offers are viewed in a disadvantageous light. Then, if our price is higher (and maybe up to 30% higher), the customer will still select our offer over the cheaper offers.

So how do we differentiate ourselves in a meaningful way? I am not

suggesting you wear striped slacks, a plaid jacket, and a chartreuse Polo shirt, but I am suggesting that you come across in a different way so that your offer is not framed in the same old boring frame every other sales hack uses. Read more…

Don’t Neglect That 401-K… In Your Business!

Many of you are being negligent.  You are neglecting the 401-K… in your business.  A 401-K is a retirement investment allowed by tax law that helps you build up funds for retirement.  And although technically your business is not a real 401-K, if handled right, it can pay off much better than any 401-K put together by all the financial gurus of all the investment houses!

To see why this is important, consider this table. It shows the life expectancy of adults in the United States: Read more…

How much profit is “enough?”

“Profit” is not a four-letter word.

“Loss” is.

Having said that, the question is one I hear a lot and is not easy to answer.  I could glibly toss out a number like 16% or 23%, but so what?  Percentages are not what you put into your bank account—dollars are.

So I always advise people who ask me this question to take some time when they can sit for two or three hours (minimum) undisturbed, in a peaceful setting, with no phones or interruptions—say, a beach at sunset (with a favorite beverage in hand), or in a mountain meadow, or a forest glade, or on the back of a horse—whatever it is that brings you peace and joy and lets you relax.  If you have a significant other in your life, they should be there too.  Then ask yourself the following questions: Read more…

Am I Normal?

We’ve all seen them—those little plywood cutouts at theme parks, where a character has his hand held out and says, “You must be this tall to ride this ride.”

I often get a version of that in my contractor workshops during breaks—many times a contractor comes to me and says some variant of, “Am I normal?”  There seems to be so much of this thinking in our trade that I thought I’d devote a blog to it. Read more…

“Ooohs!” and “Aaaahs!” at the Grand Canyon

I returned Sunday night from the Grand Canyon where I spent 8 days at the North Rim Lodge with about 16 other astronomers showing the guests of the lodge and park the wonders of the night sky with our telescopes, which were set up on the Lodge’s veranda. Read more…