A Principle that Will Make Your Business More Profitable by Allen Bostrom
Sales are critical to your business’s success! But those sales must be good sales—meeting and exceeding customers’ needs while also being profitable for you.
Several years ago, my father recognized a demand for small, light-weight utility trailers that could be pulled by small cars, since they were beginning to take over the roads due to increasing gas prices. He had a trailer designed, then requested bids from local manufacturers. One bid was significantly lower than the other two. He questioned the manufacturer to ensure they hadn’t made a mistake. They told him that the bid was correct.
As expected, the 200 trailers sold quickly and he was ready to order 500 more. The manufacturer informed him that the price would have to double for the next group, because they had not included many of the costs in the original design.
So, my father had to go through the process of re-bidding, reworking the economics, and re-pricing the trailers. What appeared to be a good deal at first actually created more problems because the original deal was not good for both parties. The purpose of negotiating is to find a price point where the transaction is beneficial to the seller and the buyer.
In negotiating a deal that benefits both parties, consider the following:
- WIIFM (What’s In It for Me?) is a great theme to remember for this principle. If there is nothing in the deal that is good for me, why go through with it? And conversely, if there is nothing good in the deal for the customer, why should he or she go through with the transaction? The deal must be worthwhile for both parties.
- Every customer has different needs. Ask from the customer’s point of view. Then express your point of view and decide how the sale will meet and exceed both parties’ needs.
- Major customer motivators are health, wealth, and happiness. I have heard them expressed also as time, money and peace of mind. Whatever their motivation, show customers how your products provide benefits for that which they are searching.
One story I remember well was when an auto dealership sales manager, without permission, advertised an International Scout (an early type of Sports Utility Vehicle) at a ridiculously low price. When customers came in, the sales people would fill in the paperwork at the advertised price, and then ask: “Which transmission would you like?” The transmission was an option! The Sales Manager produced more traffic, but angered a lot of people. (This situation changed very quickly when the owner learned about the advertisement.)
Yes, sales need to be profitable. Customers’ needs must be met also. And there must be a balance between the two. Don’t ruin your most effective and least expensive marketing tool: “word of mouth” advertising. It can lead to your success or demise overnight.
In the Black: You’re One Principle Closer to a More Profitable Business
“A deal is only good when it is good for both parties” is just one of 9 principles that will make your business more profitable. If you enjoyed this article, than you’ll want to read the rest of In the Black: 9 Principles to Make Your Business Profitable, written by Allen Bostrom, president of Universal Accounting Center. This book helps small business owners like you succeed by effectively managing the three key functions of business: marketing, production, and accounting. If this one principle has helped you, order the book to read 8 more tried and true principles that you can apply immediately! For less than $20, you can take the necessary steps to build a more lucrative business today.
