Danny Detailer was worried. For the past 6 months his detail business revenues were really in trouble. So much so that he had to do something. He simply was not getting enough business in the door of his shop.
Not a sophisticated businessman nor a master of finances he believed that he had to do something to increase sales and other detailers he knew or met on the detail forums told him the fastest way to get more business was to discount.
He figured that since he had no business, something was better than nothing so he began to hand out flyers with big discounts off his normal prices and when people stopped in or called, he offered them substantially lower prices, even before they asked, assuming he would get the business.
Yes, he got an increase in business volume, and what even happened that the customers who got the discounts told their friends about the quality and good price, and he started getting more business, but he did not see the bigger picture.
Not being too good with numbers and not even knowing is cost of operation he was not aware from a simple accounting fact: "if a company's net profit, after all expenses is 10%, and you reduce prices by 5% that amounts to a 50% hit on the bottomline.
If your price for an exterior detail is $100 and the net profit after all expenses & salary is 10% ($10) but you discount 5% ($5.00) to get the sale that is half of your net profit. That is real money, not funny money on paper. See the point?
If your detail business is not making a profit then you do not have a business, you have a job, and often a bad paying job. A company makes a profit after all expenses are paid, including your salary, benefits, etc.
It seems that discounting is so innocent. Nothing but a few bucks off the normal price, but as you can see it can have a major impact on your making profit or even breaking even.
If you ever want to sell your detail business you have to show that it is making a profit, not just paying you a salary.
CREATE VALUE
What Danny had to learn, and maybe some of you here on Autopia have to learn is that instead of discounting you learn to give your service more value that the customer can understand. If you do that the good customer will not ask for or expect a discount.
Remember that your willingness to discount sends a message that maybe there is not as much value in your detail service.
If you have to discount then get something of equal value or greater value in return. For example, if the customer has a vehicle that someone has never sat in the back seat and it is not dirty at all and the trunk is completely clean you will not have to do as much work.
If you take credit cards, a cash payment will save you a few percentage points on the sale. For example if you have a $200 detail and the credit card company charges 2% for the transaction it is like you discounting the $200 price by $4. Not much but multiplied by several transactions a day by a month can mean a great deal of money.
Regards
Bud Abraham
DETAIL PLUS SYSTEMS
Not a sophisticated businessman nor a master of finances he believed that he had to do something to increase sales and other detailers he knew or met on the detail forums told him the fastest way to get more business was to discount.
He figured that since he had no business, something was better than nothing so he began to hand out flyers with big discounts off his normal prices and when people stopped in or called, he offered them substantially lower prices, even before they asked, assuming he would get the business.
Yes, he got an increase in business volume, and what even happened that the customers who got the discounts told their friends about the quality and good price, and he started getting more business, but he did not see the bigger picture.
Not being too good with numbers and not even knowing is cost of operation he was not aware from a simple accounting fact: "if a company's net profit, after all expenses is 10%, and you reduce prices by 5% that amounts to a 50% hit on the bottomline.
If your price for an exterior detail is $100 and the net profit after all expenses & salary is 10% ($10) but you discount 5% ($5.00) to get the sale that is half of your net profit. That is real money, not funny money on paper. See the point?
If your detail business is not making a profit then you do not have a business, you have a job, and often a bad paying job. A company makes a profit after all expenses are paid, including your salary, benefits, etc.
It seems that discounting is so innocent. Nothing but a few bucks off the normal price, but as you can see it can have a major impact on your making profit or even breaking even.
If you ever want to sell your detail business you have to show that it is making a profit, not just paying you a salary.
CREATE VALUE
What Danny had to learn, and maybe some of you here on Autopia have to learn is that instead of discounting you learn to give your service more value that the customer can understand. If you do that the good customer will not ask for or expect a discount.
Remember that your willingness to discount sends a message that maybe there is not as much value in your detail service.
If you have to discount then get something of equal value or greater value in return. For example, if the customer has a vehicle that someone has never sat in the back seat and it is not dirty at all and the trunk is completely clean you will not have to do as much work.
If you take credit cards, a cash payment will save you a few percentage points on the sale. For example if you have a $200 detail and the credit card company charges 2% for the transaction it is like you discounting the $200 price by $4. Not much but multiplied by several transactions a day by a month can mean a great deal of money.
Regards
Bud Abraham
DETAIL PLUS SYSTEMS
