December 1, 2020
The price is right — sometimes
BY ROD McDONALD
Like many of us, I started out as a one-man band working from my kitchen table, answering the home telephone and storing what little equipment I had in the garage. It was an auspicious beginning, and I learned many lessons during that initial period of my business career.I associated only with other one-man band operators, as at the time, the big boys of the trade wanted little to do with us small guys. One of the fellows I hung out with always bid lower than the rest of us. One day I asked him to explain his reasoning behind low pricing.
He rationalized he didn’t include his truck cost since he needed a vehicle anyway. He didn’t include his office costs since it was his kitchen. Same went for his house phone. He did not place much value on his overhead. As to his labour, he calculated he could install so many units of sod in an hour and he multiplied those hours by his rate. His rate was similar to the rest of us, but he included no provision for less-than-perfect experiences.
I asked him point blank: “What about the days when the sod truck is late and you spend an hour or two waiting?” He offered a blank stare. “What about the days when it rains and you get very little done?” Another blank stare. And on it went. He had no concept or recognition of those time-consuming delays when pricing a job. All of us have met someone similar to this fellow.
There was no surprise when he eventually declared bankruptcy. His financing was so precarious that he never got up at the eight count after a customer lodged a $2,000 judgment against him. He did not have the money and that was the end of that chapter of his life.
There always has been, and always will be, someone who will underbid everyone else. That is absolutely allowed under the basic tenets of free enterprise. It is like Whack-A-Mole. One gets knocked down and another pops up. Predictably, each new one is quite confident they are on the right path, and you, the experienced operator, do not have a clue. All of us have been there.
When pricing a job, unforeseen difficulties and delays have to be factored in. I have always believed I was better off pricing a job and not getting it because I was a bit high, then getting it with pricing that was too low. I realize there is always a balance to maintain between pricing profitably and gouging. Having written that, it is critically important to include in your pricing the concept you want to be around for many years to come. This concept is equally valid to all businesses.
Have you ever been interested in doing business with a company or individual, but hesitated because you were not convinced they would be around to honour warranty or service your purchase? The reputation of a company is important to me when I am making a decision to do business with them. Why would I want to make a purchase, either personal or business related, without a support system in place?
On more than one occasion, I’ve had people approach me wanting to sell plants or products for the garden centre/greenhouse. They are making their offer on a one-off basis. My question has always been: “If I make this purchase, how do I explain my lack of loyalty to my regular suppliers?” There are so many pitfalls doing business with one-off companies and individuals.
When I purchase a quality house plant from a homeowner, the first thing they do is to come down the next day to see the retail price I’ve placed on ‘their’ plant. Homeowners often have no concept of what overhead is or should be. One customer, a doctor, decided my overhead should be 10 per cent. It’s a good thing he is a physician and not anaccountant.
When you observe greenhouse and garden centre operators jumping around from supplier to supplier and good deal to better deal, you will notice they are never the leaders of the trade. They are so busy chasing down deals that allow them to make quick money on a one-time basis, they have no concept of building their business. My Baptist upbringing emerges when I am reminded we can build upon the rock or upon the sand. Those are our two choices.
Pricing is never easy; writing we need to price to be profitable can sound trite as well as true. Pricing to follow the lead of box stores is a direct path to bankruptcy. Independents can never match the pricing of the chains, as we have higher input costs. We are not the ones who take product off the trucks and leave it on the racks for display. We are not the ones who employ limited maintenance or qualified sales staff. We are not the ones who pay rock-bottom wages. So why would we compete with the box stores on price? We are worth so much more than what they charge.
There will always be those who compare your pricing to the box store. They are the same people who expect you to assist them with their gardening problems, or with purchases from the box store. Two-thirds of the phone calls I received for advice were for products not purchased from my garden centre. The callers told me the problem plant had been purchased at Walmart or Superstore and when I asked why they did not call the place of purchase, they would laugh, “Are you kidding? Walmart doesn’t know what they are talking about.” I would often think to myself “When it comes to free advice, people will settle for only the best.”
I was not alone in my experience. Rick Van Duyvendyk from Dutch Growers in Saskatoon, Sask. had a caller seeking advice while shopping at Canadian Tire, even reading the tags to him. Wow! The same thing happened to Michel Touchette at Jeffries Nursery in Portage la Prairie, Man. He could hear the Canadian Tire intercom in the background. At the very least, people do see us as the experts, even when shopping elsewhere.
Successful garden centres, greenhouses and landscape contractors have learned the importance of both the Wow Factor and service and they charge for those added benefits accordingly. They have learned to recruit a customer base impressed by what they do. That solid customer base is what sustains the independent for the years ahead and keeps all of us on the road to success.
Rod McDonald owned and operated Lakeview Gardens, a successful garden centre/landscape firm in Regina, Sask., for 28 years. He now works full-time in the world of fine arts, writing, acting and producing in film, television and stage.