Late Fee or Late Business?

Whenever I talk to one of the perpetually busy people about seminars or association memberships, I usually hear the same responses: “I can’t afford that,” or “I can’t afford to miss a day at the office or on the job,” or “Those seminars are expensive.”
They talk a big game about being busy, but they seem to have no money for themselves or to invest in their companies’ futures. I thought about this when I rented a movie recently, and then it hit me clearly: My friends in the business aren’t charging late fees!
No, I didn’t lose my mind contemplating the vast selection of Adam Sandler vehicles. I made the connection when I thought of the sad-but-true saga of two video stores (and the names have been changed to protect the innocent+.
One of the stores – we’ll call it Bl … er, A Video, charges late fees automatically if you’re one minute late in returning a rental. The other, which gets the title of B Video, casually dismisses the late fee and says, “I’ll let it slide this time.”
When you want a movie as a customer who would you rather go to? B Video, right?
Here is where you run into the problem that got me thinking about my peers. B Video only has one or two copies of the latest, hottest release, and it’s never in. A Video has 20 copies and, since you want to see it tonight, you rent it at A Video.
You forget it on your way to work the next day, so you drop it off two days later. When you go back the next time, they want to charge you the $7 late fee because it was two days late. You vow never to go back and you head on over to B Video to get your movie fix.
As usual, he doesn’t have this week’s release, but he has that blockbuster movie released two weeks ago, so you rent that. Again, you forget it for two days and bring it back; you go to rent another and the owner says, “Your other movie was two days late, but I will let it slide because you are renting another and you are a loyal customer.”
Now, the latest rental is also brought back two days late; after all, you know he won’t charge you a late fee. So why bring it back on his time frame? There’s no real penalty, so as a customer you take your time.
Putting aside the impression that B Video’s owner is a real pal, let’s analyze the situation before we continue. A Video had a movie out for three days and, because of late fees, received 3 days’ rental for the movie. B Video had two separate movies out for a total of six days and only got paid for two days’ rental.
A Video’s movie pulled in money for every day it worked as a loanable asset. B Video’s movies worked for three days each and only got paid for one day each.
Would you go to work for an employer for three days and only receive one days’ wage? Would you expect to stay in business if you sent out a truck with a restoration crew for three days worth of work and only received pay for one day? What if you had two crews out costing you money for a total of six days and they each returned only one day’s receipts?
You could justify it by saying, “Wow, we’ve been really busy lately.” Would you expect, operating like this day after day, to stay in business? The answer would obviously be no.
The example of the video stores shows that putting their assets – the videos – out on the street cost the stores money. That’s the money to buy them, the money for staff to catalog and rent them, and the money to advertise them. If they are not bringing in money for all the days that the assets are out, the store loses money … even if it looks busy.
Take a look at your business. Your trucks, your employees and all the rest of your overhead costs you money. Are you being sufficiently compensated? Is each crew bringing in the desired amount of money per day and per job? If so, membership in associations and seminars to invest in future growth should be chump change.
The tale of the two video stores also illustrates a valuable point, on how you end up conditioning the customer to how they’ll treat you.”
With the A Video store, you’ll learn to always bring the movies back on time (if not early), because you know you’ll be charged a late fee. At B Video, you’ll always take your time bringing back the movies, because you know there’s no penalty (or it’s not enforced). As a customer you are only doing what you are conditioned to do.
As a customer, you like to do business with B Video, but the story now hits a snag: After a while, you go to B Video and find the doors locked. You can’t rent movies there, because the store’s out of business. They couldn’t buy new movies because they never finished paying for the last shipment, and they were behind on the lease, because their movies weren’t making money for the all the days they were out.
So, what do you do? You drive down to A Video, pay your $7 late fee from before, and make sure you have that movie in the drop-off box before they open the next day to avoid the late fee.
Now, are you going to hunt down the owner of B Video and offer to put his kids through college? After all, didn’t he save you hundreds in late fees? Yes, but you were conditioned to play the game by his choice in not enforcing the late-fee penalty. He was the master of his own demise.
Now why should we be the masters of our own demise by working for free? How loyal are your customers? In restoration, if you do the job right, you’re not going to see them again for a few years; you need to get paid for the work you do now, not on speculation that they will send you more.
If you’re always working for a low price just to get work, you’re conditioning your customer to use you for your low price. If you charge what you are worth (something covered this year in my May and June columns for Stone Business), you’ll still be in business for your customer and yourself when they need your services again. That, my friends is a win-win scenario.
Next month: How to overcome the general contractor looking for volume discounts. Until then, keep your stick on the ice.
Tom McNall is founder and owner of Great Northern Stone Care, a Huron Park, Ontario-based stone-cleaning and -restoration company servicing all of southern Ontario. Tom also offers corporate and private consultation and serves as a trainer for the MIA.