The Perils of Reducing Service to Save the Business

Two items on today’s paper got my attention. One was an article about the airline industry. It seems that if you did not have enough of airline delays, lost luggage, oversold flights and plain bad customer service; well, you are in luck. The airline industry intends to fix all this problems by…..giving us more, much more, of the same, and the plan is to charge more for the lousy service! The article by Jeff Bailey of the New York Times News Service states that while the 2007 flying woes might indicate that there is a need for more planes to ease the overcrowding, in fact some airlines are planning to cut flights in the hope of raising prices.

Another example of cutting service, in this case features, in order to improve your business is the newspaper itself, as the San Diego Union-Tribune has been steadily cutting sections and features for some time now.

Usually the first thing that I read in the morning is the editorial section, which in most days consists of three pages. Well, to my surprise today it only had two pages of editorials and letters to the editor. This in the middle of a dramatic election! Of course, this is not new for the San Diego Union-Tribune. For months, actually maybe a couple of years, it has been tinkering with its content in order to make the newspaper more profitable. But the way they have been going about it is by insulting the readers’ intelligence. One trick that they have used several times is to combine, let say, the Food section and the Living section by telling us how much larger the Food section is now going to be. But you find that this particular section is now half of what it used to be, while the Living section is now also half of what it used to be. Some improvement!

Businesses have to find creative ways in order to survive. Newspapers, in particular, are going through a rough time. So many of us rely on the Internet for news, and this makes it very hard for the print media. By the time the newspaper arrives at your door 90% of its content is “old news”. What is a newspaper to do? It certainly makes sense to find the right mix of stories that will interest the reading public, and experimenting seems a logical way to do it. As to the airline industry, I do not claim to understand their thinking process. Abusing your customers doesn’t seem to be a great way attracting more; but heck, what do I know?

The problem here is that with experimentation comes the risk of losing more and more customers, until the business finally becomes irrelevant. Therefore, it is very important that the customer is treated with respect while the company finds a solution.

The newspapers have a right to fear irrelevance, as there are now so many other ways that a person can acquire information. As to the airline industry, clearly they do not fear irrelevance, so they mistreat the flying public with abandon

The lesson here is to not lose sight of the fact that the customer is an intelligent and rational actor, If we want our business to survive, we need to treat him as such, otherwise he will find a solution to bad service by going elsewhere.

Some Days You Just Need a Sense of Humor!

My husband, an avid flying hobbyist and pilot, came across a column on the AOPA (Aircraft Owners and Pilots Association) magazines, Flight Training. He shared it with me, and I had a good laugh.

Mike Collins wrote about the airport in Sioux City Iowa. As you know, every airport has an “identifier”, three letters that identify a particular airport; for example, Los Angeles airport has the identifier of LAX. Well, Sioux City Iowa has the airport identifier of SUX (pronounced “sucks”). It appears that the city and airport authorities were not too happy about this and they petitioned the FAA for a change. Being that the airport is called Sioux City Gateway the FAA answered with the alternate identifier of GAY.

The authorities decided to make the proverbial lemonade out of its lemon. With great sense of humor they have come up with a wonderful solution. They have developed a product line of t-shirts, caps, bumper stickers, etc. with the slogan “Fly SUX”.

I hope that if misfortune ever befalls my business, I will have the sense of humor, and enough wit, to come up with such a clever solution. Who ever said that running a business isn’t fun!

Setting Priorities

Well, you followed my advice, you looked at your goals of last year, and you have identified the ones that fell by the wayside. You are interested in following up with a few, and adding some for this year. Now it is time to set priorities.

It is easy to get lost if we do not prioritize. When we have no focus we tend to dabble in one project and then get distracted by another that seems more interesting at a particular moment. But operating in this manner may take us down the same road that we took last year, with the similar results of having important goals still incomplete.

No one can tell you which goal is more important; you are the only one that can decide that. For one business owner it may be to grow the business by 20%, while for another it may be to stabilize the business by changing the product mix, and still another may want more flexibility. There are as many worthy goals as there are people in the planet, it is up to you to decide what you want your business to look like a year from today. But in order to see the desired changes, set your main concerns and don’t take your eyes.l; off them until you are satisfied.

New Year. New Directions?

As we look in the mirror and pick the confetti off our hair, the realizations comes that it is time to get back to work. The New Year brings great hope but also great trepidation as we ask ourselves if we should be taking our business in a new direction. For these reasons it is an overwhelming period.

The end of the year is a crazy time. If you are in the retail business you are either very busy, or worried that you are not busy enough. If you are a professional, you find that most clients postpone big decisions until the beginning of the year, while a few are frantically pushing you as they take care of matters that have a yearly deadline. The period between Christmas and the New Year can be a little bit of a no-man’s-land.

The end of the holidays forces us to take a good look at or business and decide the direction for the future; it can be very scary. Where and how do we begin the rest of our lives? We ask ourselves a bit melodramatically. Well, the best approach is to take it one step at a time.

One good place to start is to pull out your plan or any notes you may have written last year. Take a look at your goals, and how many of them you actually completed. Those who did not get checked off your list, analyze why they did not get accomplished. Were they too ambitious? Did you lose interest in the project? If you believe that those goals (or at least some of them) are still worthwhile pursuing, think about how they can become more manageable. How can that ambitious goal be brought down to size a little bit so that it becomes a reality this year. And that objective in which you lost interest, how can you make it more interesting to yourself and to your clients?

I hope that these simple steps get you on the right frame of mind, and move you in that new direction that you are contemplating.

My best wishes for the New Year

Should we be Fearless?

Some motivational speakers talk about being fearless. How we need to be without fear in order to succeed. We hear the rah rah of the presentation and become convinced that all we have to do is be unafraid and we will master the world.

Well, I have a great deal of respect for fear. I don’t love it, but I can absolutely understand its value. I see no great virtue in being fearless because to me it means not truly understanding danger, and if we do not understand the peril that we are facing, we cannot fight it effectively.

To me being fearless is being foolish. Would you not be afraid of a roaring lion blocking your path? Would you not be scared silly if you had to enter a burning building? Of course you would! Fear is a very valuable emotion. It is built into our very being for the simple reason that we need it in our lives. Without it we would not survive very long.

But the fact that it is such a useful feeling doesn’t mean that we always have to give in to it. Fear is valuable because it makes us stop and think. Sometimes there isn’t a whole lot to think about. If we see a boulder coming straight at us, it is time to get out of the way. But when we let irrational fear take over our lives, then we waste energy and opportunity.

Sometimes fear is so strong that we feel totally helpless. We become paralyzed by it, and we allow it to control our thinking and our actions. When we feel this way, the best thing to do is to put one foot in front of the other and start moving. I am not writing figuratively here, I really mean this. There have been times in my life that I have been paralyzed by fear. It is almost as if I am under a spell of dread and I cannot move. The way I have broken that spell is by the simple act of taking a step forward. Just one little step; that is all it takes to shatter that nasty hex. Once I am released I can evaluate the situation from all angles.

Lets think clearly about the problem, can the obstacles be overcome? How would we do that? Is it prudent? Is it a risk that is well worth taking? Or is the boulder about to crush us? Life is full of risk. Getting out of bed in the morning is already a risk. But some risks are well worth taking, while others are pure disaster. Properly managed fear, and not the lack of fear, is the key to conquering our world.

Focus on Your Core Business

The temptation to add products or services to your core business can be great. It can come from your own expectations about what a business such as yours “should” be like; or it can come from your clients, who may be pushing you to fill their every need.

When I first started my law practice, and even today, there was great pressure to be all things to all people. The main reason is that I am one of the few attorneys in our area who is fluent in Spanish. I soon realized that as a solo practitioner I could not help everyone, no matter how meritorious the case.

I knew that I would be doing a disservice to my clients and to myself if I took on every case that comes through my door. I cannot possibly be proficient in every area of the law, so my clients would suffer by not having the best attorney for their case. By the same token, I cannot take every case and keep my sanity.

I how do you choose? You probably came into the business with a strong idea about what your main products or services would be. And this is the case because you are probably quite passionate about those products or services. It doesn’t mean that you should keep your eyes and ears closed to new opportunities. But I am sure that you will come to the same conclusion that I did. The type of case that is most enjoyable, and the one that is the most profitable, should be the focus of the business. No, I am not a genius for having come up with this nugget, but sometimes we get overwhelmed and forget to be practical.

Pricing Your Product or Service

Pricing your Product or Service

One of the hardest things to do when you are a business owner is coming up with a fair price to charge for your product or service. I can tell you that it was the hardest thing for me when I started my law practice. I had worked for a non-profit law office where we provided legal services for the indigent. The lawyers did not have to consider billable hours or thinking about how much to charge for our services. The survival of the law office was the headache of the executive director, the lawyers worried about the legal work. Our salaries were rather modest, to say the least; but the lights were always on, and there was always paper and ink for the printer.

When I decided to strike out on my own I had no idea how to charge a fee that was fair to the client and to me. Now I am the one who has to keep the lights on and the ink flowing! And even today I struggle with the question of fees when I am doing legal work that is open ended. The billable hours can add up very quickly! For this reason I always try to charge a flat fee, even if it isn’t always possible. With a fee that I quote before I start the work, the client doesn’t have a nasty surprise; though I sometimes do, if the client is calling me at all hours of the day and night!

The pricing strategy is essential for the success of your business. You need to price your product within a range called the Price Ceiling and Price Floor. The Price Ceiling, as the name suggests, is the highest price that you can charge. The Price Floor, obviously, is the lowest price that you can charge and stay in business. You want to be between these two boundaries. “Well, that sound great”, you may tell yourself, “but what do I need to consider in order to achieve that goal?”

Lets start with the price floor, since this is easier to quantify. In order to come up with your lowest price you must consider all your costs, and I mean all. You will start with the cost of the raw materials, your office overhead; which will include utilities, employees’ salaries and benefits; insurance, loans and interest, the cost to operate your company’s vehicles, shipping charges, and taxes to name a few.

Determining your pricing ceiling is not quite as simple, as you must consider factors that are not easily quantifiable. Some questions that need to be answered are: How much is a client willing to pay for this product or service? What is the quality of this product? Why are people demanding this product or service? Do they need it, or do they merely want it very badly? How much does the competition charge for a similar product? What image am I trying to project? These questions are not always easily answered. Some clients always think that the fee is too high. On the other hand, I once had someone question how efficient could I possibly be, based on the fact that my fee was considerably lower than another attorney he had consulted.

But I want to be an attorney that a small business can afford, and I am happy to give up the image of the powerful lawyer; and in the eyes of at least one person, an efficient one. In that particular case, there was no contest, I didn’t really want to work with a client who forms his opinion of the value he receives based on whether I can charge three times my usual fee. I rather work with many clients who believe they are getting value for their money. That is my niche, and it is the business decision that I am comfortable with. You will make your own choice about niche and price. The important thing to remember is that your decision must result in profit for your business; otherwise you won’t be in business very long.

Is the Customer Always Right?

Most marketing experts will tell you that acquiring a new client is very costly, so it is important to hang on to the ones you have. And the mantra of “the customer is always right” is well engrained in the business owner’s mind. It seems that the first commandment of a company is that no matter what the client wants, we must go along in order to keep him or her happy. I disagree. There are some clients that are not worth the trouble. Sometimes a client will want you to do something unethical or illegal. Other clients want to micromanage every minute of your day. Still others are just plain toxic.

I personally have fired a couple of my clients; very politely, I have to say, but nevertheless, they are gone. The reason why I have done this is that these clients wanted something from me that I was unwilling to give.

As a business owner you have many worries and responsibilities, but this is one of the perks of the job. Yes, obtaining a new client is costly, but keeping a difficult one can be more so. Getting new customers isn’t nearly as difficult as hanging on to troublesome ones. Don’t be afraid; being free of a toxic customer will liberate you, and you will find that you have more time in your day, time to find new clients.

Tip of the Day: Your Professional Team

It is very important to bring together a good professional team to help you run your business. You will need a good accountant as well as an attorney that has experience in business law. Among many other things, your accountant will help you to organize your records so that you do not run afoul of the IRS. Your attorney can advise you about legal issues such as: the best entity to form for your business, help you with trademark issues, review contracts, just to name a few. Running a business can be a bumpy ride, your professional help to clear some of the rocks from the road.

Have a smooth ride!