Thursday, August 9, 2012

1 Big Mistake That Will Cost You Customers

Something happened this week that so astounded me that I just had to share it so that others can learn from one man's poor judgement. This comes down to knowing your value and being prepared to walk away from a negotiation that does not suit you. Beginning entrepreneurs pay close attention, as this may one day save your business.


This week a friend of mine, let's call him Ray, who owns several real estate properties hired a contractor to clean a house to prepare for showings. The house has been vacant for a few months and is costing Ray thousands in rental income. It is an expensive home in an upper middle class neighborhood and needed to "look like a 5 star hotel" (Ray's words) for the showing. Ray hired a cleaning contractor, let's call him Joe,  to spruce the place up.

Customer dis-Service

As a favor I have been helping Ray get this property ready because I live just down the street. This allows him to tend to his other properties as well as other aspects of his business. So, I decided to drop in on this "professional" cleaner to check his progress. I arrived at 7:30am and according to the cleaner, he had been there since 5:30am. I thought to myself, Great! He's really on the ball! I told him I would be back in a couple of hours to check on his work and lock up the place.

Two hours later when I returned, my enthusiasm sunk. Almost every surface I touched had dry wall dust left over from the prior day's ceiling repair. This was the main thing to clean up. The fireplace mantle was not only dusty but grimy. There was also dry wall dust in the corners. Honestly, I was not sure what this guy had spent the last 4 hours doing. I started asking about the discrepancies and here's how the conversation went.

Me: "So, how should we address some of these areas that aren't finished?"
Joe: "Well, Ray really likes to negotiate, you know?"
Me: "Yeah, I know. He's always trying to get a deal."
Joe: "So, yeah. You know."
Me: "So, how should we address some of these issues? Do you need more time?"
Joe: "You know, I asked for $175 and he got me down to $125. He just really likes to negotiate."
Me: "I understand. He does that a lot. So, what do we do now?"
Joe: "Look, I have to buy supplies with that $125 and then I get what's left over. You know..."
Me: Silent with a perplexed smile on my face.
Joe: "I already did more than what I was paid for so..."
Me: "Ok..."
Joe: "A deep thorough cleaning is going to cost more."
Me: "What about the inside of the oven? Did you do that? I know that's a big one for him."
Joe: "That's an extra $20."
Me: "Really?"
Joe: "Yeah."
Me: "Ok."
Joe: "So, whose going to pay me, you or him?"
Me: "Let me talk to him and he will contact you about payment."

Do you see what happened here? Joe reluctantly took a job that he felt was far below his worth. In fact, he originally turned down the job but later called Ray and asked for the job at the reduced rate.  But Joe obviously felt he was taken advantage of and this was reflected in his work. He was agitated and uncooperative when I pointed out the discrepancies, making no effort to correct his work.

The lesson here is quite clear. Never agree to an amount that you feel is beneath you. It is far better to walk away than to accept a contract and do a poor job. In the first place, you will not get paid. In the second place, you will hurt your reputation. Once Joe accepted the contract, he was obligated to do a thorough job. Furthermore, I am of the school of thought that says one should over deliver for every customer, no matter what. Always make your customer feel like they got more than they paid for, and you will never be out of work.

It Takes Two...

Ray is not off the hook here. Something I noticed while working with him over the last couple of weeks is he tends to look for the cheapest workers he can find. Then, he aggressively negotiates price. On more than one occasion I've seen these workers accept low rates and walk away looking deflated and defeated. Yet, Ray complains constantly about the poor service he gets from contractors. He often has to redo subpar work himself or hire additional contractors to fix it, which amounts to lost time and revenue. To an outside observer, the problem is obvious. I finally told him that he needs to raise his standards, higher better quality professionals and pay better. Only then will he be deserving of quality work. 

No Substitute for Win-Win

In negotiations it is important that all parties feel satisfied with the outcome. Otherwise, if only one party wins, then nobody wins. You may think you gained the upper hand but your shortsightedness will eventually come back to haunt you.

Life has a way of returning to us precisely what we send out into the world, whether good or bad. Call it by whatever name or philosophy you wish. It has been proven multiple times across time, cultures and continents. If you want to have a long term successful business, learn to treat everyone fairly and with dignity. It will pay off many times over in the short and long term. 

Godspeed and I look forward to seeing you in The Player's Lounge.

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