Yesterday, during a conversation with a friend, I was reminded of why saying no is important.
I met my friend George for lunch.
It had been many years since we saw each, so we spent the first part of lunch, discussing how each of our businesses was performing.
I commented to George that I was taking my business in another direction.
As part of the new direction, I shared that I was phasing out of someone of my service lines.
George didn’t quite understand my logic and said all I had to do was hire someone to do the work that I was phasing out.
He continued to encourage me that the service line I was phasing out could be an important lead to my new service offerings.
Then George went on to share how he had discontinued the service line that was a primary service from a few years ago.
As he shared with me his logic for discontinuing the service, it sounded very similar to my reasoning for phasing out my work.
I smiled and pointed out that his login was very similar to my logic, to which he laughed.
I’m reminded of a story my friend David who shared with me about how he decided to grow his business.
When David was a teenager, he had a lawn mowing business.
David would push his lawnmower around the neighborhood, knock on people’s doors, and ask them if they wanted to hire David to mow their lawn.
One person hired David and then asked if David would weed his flower beds. “David,” the homeowner said, “I’ll pay you $10 extra to weed the flower beds.”
David was excited about the prospect of earning an additional $10.
David charged $20 to mow the lawn, so this was going to be an opportunity to earn $30.
David mowed the lawn and then began to work on the flower beds.
David soon learned that weeding flower beds is back-breaking work.
It turned out that it took twice as long for David to weed the flower beds as it had for him to mow the lawn.
David wanted to quit weeding the flower beds, but he had committed to finishing the job.
Finally, David finished mowing both jobs and knocked on the house door to collect the money he had earned.
David reflected on this job and realized he hated weeding flower beds.
David earned less money for his time weeding the flower beds.
David had learned his lesson.
David still had some time left in his day, so he continued knocking on other doors in the hopes of earning some more money from mowing lawns.
Another person hired David to mow the lawn.
This person then asked if David would weed his flower beds.
David smiled and replied, “I don’t do weed work.”
David was like most business owners I know, including myself.
He saw an opportunity to do additional work for one of his customers.
The customer was happy to hire David to do the work.
However, David quickly learned that there were two major negatives to doing the weed work.
- He didn’t like doing the work.
- He made less money doing the work.
I’ve found myself in this same situation at various times in my business life.
As I’ve looked to grow my business, I’ve added new service lines.
As I’ve rolled out those services, some have been winners, and some have been losers.
When I roll out the new services, I usually begin with a few existing customers where I have a good business relationship.
This testing approach enables me to gather valuable feedback on what works and what doesn’t work.
However, when I find the new service ends up being weed work, I know it doesn’t make good business sense, I discontinue that service.
Provided products and services to others must be a win-win scenario for all parties involved.
The products or services need to be priced in a way that has more value than the price the customer pays for the products and services.
The products and services also need to be priced in a way that the business owner makes money for providing those products and services.
Ensuring there is profit with products and services sounds like a no brainer.
Of course, it needs to be profitable for the company.
I bring this point up because every day, I see business owners struggling because the price of their products and services so low that those products and services are unprofitable.
The lack of profits can result from the following reasons:
- Business overhead is too high.
- The cost of labor for the products or services is too high.
- The cost of materials is too high.
- The profit margin for the products or services is too low.
Ultimately the cost to make those products and services to the customers is too high for the price that the business is selling the products and services for.
This becomes a precarious position for the business because when more of the products or services are sold, it will lead to significant money problems.
If the business is selling products or services at a loss, then selling more of those products and services can put send the business into bankruptcy.
This is often the situation when businesses sell products and services that have become commodities.
The problem with selling commoditized service is customers place lower value on commodities than their unique products and services.
When businesses sell commodities, the only way customers judge those commodities is on price.
If a business isn’t able to make a good enough profit on selling those commodities, then the business is better off not selling those commodities unless the commodities lead to further customer purchases of higher profit margin products and services.
However, selling commodities can extract a toll if it becomes like the weed work my friend David experienced while mowing laws.
Sometimes you are better off saying no because saying yes just isn’t worth it.