“I always seem to get customer complaints about how much I charge them for the work I do. My vendors say they are giving me the best pricing levels that they can and I’ve cut my labor pricing to the bone. I’m driving older trucks as are my employees. I’m not paying the top pay scales that some of my competitors are paying, and they often steal my workers. Any suggestions of where I can cut to be more competitive and still make a living?”

I have a story that provides some good lessons. Several years ago I was elected to a board of directors for a local community college. My first board meeting ended with me wondering what I had gotten into.

The college had no reserve funds, was getting evicted from its rental space for classes, and had a president who lived 250 miles away from the facilities. The college maintained the lowest per hour charges for tuition and provided books to students at cost. It used adjunct professors who were paid very poorly and many were volunteers as they felt charitable to the community and the college’s mission. The college served non-traditional students who were working and attended evening classes to get trained for career advancement. I was asked to serve to provide some business perspective to the largely academic board. They had enough cash to last another 60 days and served about 350 students.

I asked if they had considered raising prices to cover their operating costs and they said they were concerned that they would lose enrollment. My next statement was, “If you don’t raise your tuition rates, get some involvement from the business community that you are training the students for, and find some permanent quarters, the tuition issue won’t matter as you will be out of business.”

The room went completely silent. They asked me for a plan to accomplish the issues I raised. Here’s what I proposed — raise tuition rates to the levels that were competitive with other colleges in the area. It’s pretty easy to find out what your competition charges. The next step was to find housing for the college so I went to the business community and asked for help in finding housing as well as financial support for the college’s efforts to provide them with a trained workforce.

Guess what? The college didn’t lose any students and in fact gained another 150. Some of the lessons here can be applied to any business. All of us want the best deal we can possibly get, but if you only concentrate on getting the cheapest price for your supplies and forget about the revenue side, you will eventually become the low-cost provider. In doing so, you will be providing a lower level of service to make ends meet.

Here’s an example to prove my point. You take your significant other out to dinner. Do you rave about how cheap the meal is or do you complain that the meal isn’t up to what you think the standards should be? When you look at business reviews, do you see anyone writing a great review based on how cheap it was? Do you ever see reviews mentioning poor quality but still being happy because of a much lower cost than the other price levels quoted? 

When your customers ask for the best pricing, that isn’t necessarily a signal for you to drop your pricing levels. They are looking for assurances from you that you are providing the best service at the best pricing you can. If you discount your work every time someone asks for a price break, eventually you will become the low-cost provider who doesn’t make any money. And when you cut corners to try to stay the low-cost provider it also means you attract a lower quality workforce, doing lower quality work. Eventually you’ll be remembered for the poor quality work you provided long after the cheaper price you gave.

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About the author: John Heisler is the owner of Pipe Lining Supply and Quik-Lining Systems. He has more than 20 years of experience in the CIPP lining industry and 40-plus years in the underground construction industry.