I know, I know! I deserve what I got. I talk all the time about spending your money wisely, using your time wisely and on and on. The last week has proven to me that I also need to put my money where my mouth is.

Two years ago, I was preparing to sell my house. On a Saturday morning, as we were heavy into the final cleaning, getting ready for the real estate agent to come over for the listing and to take the pictures and video of the house, I found a trail of water leaking out of the bottom of our water heater and across the basement floor. The original water heater was a plumbers brand water heater and was good quality but it was past it’s design life and owed me nothing. I remember thinking “It’s Saturday morning…it’s not likely that I can get my hands on a new power vented water heater this morning with out a lot of extra charges (I know, those same charges that I teach you about charging), and I don’t need a plumber to install it. Remember, I did this stuff for years and taught other contractors how to do it. It’s a simple job.

I have to admit, I let my integrity slip and ran down to the big box store to pick up a new water heater. I remember thinking “I wont own the house so I don’t have to go with my usual quality”. A real integrity slip I know! I regret it today.

As it turns out, we did not sell the house – we are still here in Wisconsin and Last Friday I found myself without hot water. A quick troubleshooting session proved that the problem was the thermostatic control valve. I called the big box store where it came from only to find out they did not stock the parts for the more expensive power vented units. I would have to call the manufacturer. When I did, they told me they would happily ship one out at no charge but since it was now New Years Eve (Saturday morning), they would have to wait until Tuesday to ship it out. That’s 5 days without hot water!

I humbled myself enough to call a plumber friend of mine and asked what the chances are that he would have a valve that might work in this case. He was nice enough not to laugh me off the phone. Thanks Rick! I checked all over town and got the same answer. Finally, Wednesday morning came and the valve would be arriving. Keep in mind that this is now 5 days into it and although I used it as an excuse to go to the gym each day and work out just so I could benefit from the hot shower afterwards, my wife was not as pleased. I called the manufacturer to get a tracking number on the shipment only to learn that they were out of this part and as a result, had not shipped anything. AARRGGHH!

Long story – short, they found a replacement, shipped it next day air and as of Friday, I had hot water. There was not enough value in what I saved on that water heater to do it again. Are you telling your customers the whole story? You do so much right. Your are there for them when there is a problem. You run after hours service. Sure there is a cost for it but let me tell you, I paid a price for not having that service and it’s not worth it. Tell your story every time you are in front of your customer. Don’t leave anything out-even if you think it’s obvious and everyone knows that. That’s not the case. When the value exceeds the price, the customer will buy.

Don’t let your customers pay the price I did. Build the value in everything you do!

Do you have a line of credit for your company? If so, how often use it? Some of you may read that question and think I’m nuts. “How often do I use my line of credit? I can’t remember a time when I haven’t been into my line of credit”. If that’s you, beware! You don’t want to run your business on your credit line. A line of credit is of intended for one thing and one thing only – shot term borrowing against receivables. That’s it! If you run your business on a line of credit, as many business do, you may be setting yourself up for disaster if your bank decides to reduce or eliminate your credit line. This has happened to many small business owners in the current rough economy. Try to wean yourself off your line of credit if at all possible.

If you talk to any banker, they will tell you that the perfect line of credit is one that gets lots and lots of activity and comes back to zero at least once per year. If yours has been at a high level and you are making monthly interest payments, you are at risk of getting it called by your lender.

Start your planning for 2012 and make one of your goals to pay down the principle of your credit line. If you don’t plan for it, it will never happen.

It’s a good thing I don’t do the grocery shopping in our family.  A few days ago, I was walking through the grocery store with my wife.  As we walked down the laundry detergent aisle, I was overcome — so overcome that I took out my cell phone and shot a photo.  I thought Tide was simply the option for laundry detergent to wash clothes with; the choices were overwhelming!  There was Tide Original, Tide Coldwater Mountain Spring, and Tide Cold Mountain Spring plus Bleach.  You could select Tide Clean Breeze plus Fabreze, and there was Tide Free and Gentle that contains Downy.  But, the choices didn’t stop there…  Then you had to determine what size you wanted to purchase — 50 ounce, 75 ounce, 100 ounce or 150 ounces?

Now this was just the Tide brand; it didn’t include all the other offerings from all the other manufacturers.   It’s no wonder people eat out so much, the grocery-shopping experience is so cluttered with choices the average American (or at least myself) simply throws up their hands in frustration.   It reminds me of Steve Martin in the movie, Father of the Bride.  He went to buy hot dogs and buns.  However, the hot dogs came in packages of 10 and the buns in packages of 12.  He threw a comical tantrum, and began ripping open the bun packages and removing two buns….because he didn’t need 12 buns.

The question is simply: “How much choice is too much choice?”  To begin to answer that question let’s put ourselves in our customers’ shoes.  When was the last time you were given a price from a contractor for a service?  How was it presented?  Was it a call on the phone, sent in the mail, personally delivered, e-mailed or simply written on the back of a basic business card?  What did each delivery method “say” about the company and the quality of work that would be performed?

Are you beginning to see “how” you present is just as important as “what” you present? However, we will deal with that a bit later.  Let’s start by talking about choices.

Too Little Choice
If someone opens a pack of gum and asks if you would you like a piece, the choice is simple.  The answer is yes or no. Period. Now think about yourself as the contractor giving the customer a proposal with only one choice.  Again, the choice is simple, it’s yes or no!  It might be simple, but did you get the sale?  If you presented exactly what the customer wanted, things are great.  If the customer was thinking about other options or price levels, you just lost the sale.  One choice — and one choice only — is not the right answer.

Too Much Choice
Think about Tide detergents again.  Six product options with four different sizes was too much choice.  A good friend of mine, who has been a consultant to the industry for over 30 years, made a statement I will never forget.  He said, “Tom, any time there is confusion in the customer’s mind, the answer is NO!”   Choice is good, but too much choice will only confuse the customer … at which point they will say no.

Just Right
Again, think about yourself as a consumer.  Would you like one choice where the answer has to be yes or no?  Of course not. You, as a consumer, want to be involved in choosing what you want.  However, the “Tide approach” is way out of bounds.   When there are too many choices, confusion sets in and the answer is no.  But you do want some choice.

The best balance are “Good, Better, Best” options for the customer.  Each choice has different equipment options, and each has a different price tag.  The customer is now in control.  If they want the best, then that is the option is for them.  If they simply want a system that provides some general options, but without fluff, then  the better option is for them.  If the customer has a basic need that must be filled, but has little money, then perhaps the good option is more than sufficient.

When you only offer one solution, the only negotiating point  is price.  “Can you do the job for $300 less?”  Notice what happened on the Good, Better Best approach.  The customer now has price options, but in each case you are offering different equipment and/or options.  If you are priced right, that means you hit your profit margins on each option, you are simply offering different equipment.  Does that make sense?

By the way, most customers select the Better option!  If you only offer one option, and you lower your price, you are offering the same equipment, but at a lower profit margin.

How you present options is important, too.  It says a lot about your business and how professional you are.  The customer forms a direct relationship in their mind between how you present the information and the quality of work you do.  What is your impression of the contractor, and the quality of their work, when the contractor walks into the home, glances at the current equipment, and then writes a price down on the back of a black and white business card?  No comment necessary.  Now think about the contractor who took the time to ask questions and develop a Good, Better, Best proposal, and then handed it you to in a printed format.  Again, no comment needed.

The objective is to always allow the customer the ability to be in charge.  Thank means to offer choices, but not so many that they are confused.  Try the Good, Better Best approach on your next proposal and let me know how you make out. Let us know how it goes.

What should we charge per hour?  How should by financial statement be set up?  Why does my P/L show a profit but there is no money in my checkbook?  What do we need to do to increase profitability?  These are questions most contractors ask their accountants.  After all, they work with numbers all day long; therefore they must know how to run a business, right?  Wrong!

Nearly all business owners turn to their accountant for help when they need advice on how to run a profitable business.  The date is set and the meeting takes place.  After the meeting is over the average business owners head is spinning with the accountants comments and you still have no idea what he or she just said, nor did you gain any additional knowledge on how to run a more business.  All you know for sure is that the meeting you just left cost you several hundred dollars.

No, you don’t necessarily have a poor accountant.  The answer is deeper than that.  Accountants are trained to do taxes, not how to run a business!  That’s right, after years of training at the university they have a very good understanding of how to properly file your tax returns.  Well trained accountants can actually save you some money through proper tax planning.  However, accountants receive no “business training”.  We are asking someone to teach us how to run a business that has no business training.  That is kind of like asking a professional baseball player how to properly maintain your furnace.  Your accountant won’t be much help when it comes to answering business questions and the baseball player won’t be of much value in maintaining your furnace.

If you want to learn the “business side of your business” you might want to check out Grandy & Associates three-day “Basic Business Boot Camp”. We have trained over 14,000 contractors how to run profitable businesses.  For more information click on www.GrandyAssoicates.com/bbb or call our office at 800-432-7963.