Have you ever heard “You can have a quality job, great service or low price; but pick only two.”? That’s something I have heard many years ago from a colleague and have repeated it several times when explaining to my customers why my pricing was higher than the competitors. In this case I was justifying my business model: high quality & great service. But there are other valid business models as well.
Using the combination of quality, service or price we can come up with the following viable models:
Before we go on, I would like to define the above terms so that there is no confusion. I define high quality as not only better than average materials, but a scope of work that exceeds the minimum. High quality would also mean that your company has checks and balances in place to ensure the quality is delivered. In the contracting world the minimum may be defined as “code”. In offering high quality, you would exceed the minimum code. Great service referrs to your customer service, meaning that your staff is attentive and responds promptly and solves any problems or challenges in a timely manner. Great service also means that you set realistic expectations with your customer and then meet or exceed those expectations. Low price is just that, pricing that is at or below the average, sometimes called the “going rate”.
It’d be incredibly difficult to run a profitable business offering all three great service, high quality products and workmanship and offering this at a low price. If you are offering high quality and great service, that means you have less time to service multiple customers so you must achieve more gross profit per job. If you offer high quality products and workmanship at a low price you’re going to need a high volume in order to be profitable. Often at a high volume business model, service tends to suffer. If you offer great service at a low price, chances are likely you are going to use cheaper materials and perform the minimum scope of work.
I personally never saw the logic in offering anything other than high quality. This is not only for the peace of mind of my customer but also for my own peace of mind. Making sure the job is done right with materials that I can trust means I have less mistakes to fix. Fixing mistakes costs me money, where as doing the job to the best of my ability in the first place means I don’t have to come back and fix it, and pay for it, later.
Sure there is nothing wrong with volume and high volume is something most people asipre to, but volume without profit is a recipe for disaster. There is no such thing as “making it up on volume”. A loss on every job equals a big loss at the end of the year. Something to remember if you are going after a high volume business model: Mistakes will be made no matter what, even with a high quality business model. You may make fewer mistakes with a high quality business model, but mistakes are human nature and inevitable. Therefore there is always liability with ever customer or job you take on. Higher volume means higher liability.
Therefore since I wasn’t offering a low price but was doing high quality work, I had no choice but to offer great service to justify that higher price. I have always said, “If you want the extra dollar, you go the extra mile.” meaning when my customer pay me more, they get more for their money.
Some of my observations regarding my competitors throughout the years. It appears to me that the majority of my competitors offer a low price business model. Some even offer low quality at a low price, but they seldom last in the market very long. It seems to me that most of my larger, established, older competitors in the market offer the high quality / great service model.
But my opinion is meaningless to your business. It’s up to you, as the manager of your business, to decide which business model you wish to implement. The end goal is to ensure, though, that you are always profitable in every job you do while still operating with honesty and integrity.