Keeping (Your) Cash in Your Pocket
“It’s not what you bring in, it’s what you keep.” You’ve heard that many times before. Are you doing enough to keep what you should? If cash seems to be slipping through your fingers, read on.
First, let’s give a round of applause to the OFA Short Course audience that shared some of these ideas. The collective genius that gathers at these industry events provides powerful solutions for your frustrations.
These concepts are being used by real garden centers and have gotten real results. Your challenge is threefold. First, pick the tactics that will yield the biggest dollars in the shortest time. Second, commit to a program to save yourself lots of cash. Third, commit the time and energy necessary to follow the program. Then count the new cash you’ve generated.
One of the dumbest things McCurry’s ever did was continue to pay for an oversized dumpster that was ordered during a remodel. It was easier for the staff to use the larger dumpster, so we never told the garbage company to drop back to the smaller size when the work was completed. Thousands of dollars were wasted over multiple years before it was “discovered.” Had we asked the garbage company for their input, they would have questioned why an operation our size needed such a big container, or why it was picked up so frequently.
We used the same shortsighted and expensive reasoning after combining our accounting, purchasing and sales offices into one room. There had been three separate fax machines, and now one served all three departments. You already figured out what we didn’t. Nobody called and canceled the two unused fax lines. It was “only” $45 a month for almost three years! By having your supplier help you look for these expenditures, it’s more likely you’ll find them. A call to the phone company to review our bill would have raised the question of unused service.
Pay Out Less… Keep More
Well that certainly sounds simple enough. The frustration is that no vendor or supplier will call you to say, “Don’t spend as much with me.” You have to be proactive to reduce your costs.
It’s always dangerous to provide a script detailing how conversations with other people should unfold because they rarely go according to the script. The OFA Short Course audience had the opportunity to talk through this process. (We will also be talking through this process at the 33 Money Making Moments workshop in Columbus at the CENTS show Jan. 20, 2008.) So the written script is only a guideline. Use your own words, and don’t read from the script while on the phone. Make bulleted notes to help guide you along in your own unique style.
Here’s a sample script that has worked for others and can work for you, but only if you pick up the phone and make the calls.
Garden Center: [Calling your local friendly banker, for example] Good morning, Fred, this is Bill McCurry. Is this a good time to talk for a couple minutes?
Banker/Supplier: [Nobody’s ever asked him whether it’s a good time to talk, so he may be thinking, “What’s this all about?”] Yes, of course. Great to hear from you.
Garden Center: Fred, I’ve certainly appreciated all you’ve done for us in the many years we’ve worked together. No matter how things work out, I really want you to know that I appreciate your support and encouragement. [Pause here. It will be uncomfortable to stop talking, but stay silent for four
seconds. Chances are the banker/supplier will respond.]
Banker/Supplier: What are you trying to tell me? [This is the most common response. Each supplier will respond differently. Try to stick with the concept outlined in the script. If there’s no response, don’t let that bother you.]
Garden Center: You know retail is a tough business. You know how diligently we strive to make a return on our efforts. Unfortunately, the costs we’re incurring are more and more difficult for us to absorb. It’s a competitive world out there, and we need to keep our offerings competitive for our customers. They will only pay so much for our superb service and the high quality of our products. We need to keep our costs in line so we can continue to thrive. [Pause again here to give your words time to sink in.]
Banker/Supplier: What are you saying?
Garden Center: I need you to review our relationship, see if there are ways we can reduce our expenses. Maybe there are services we’re being charged for that we don’t use. Maybe there are services we’re using that we can do another way or get along without. Maybe our account hasn’t been reviewed recently in light of the competitive environment in your industry. Can you look at our situation and call me back by ______ (date/time)? [It’s critical that you give a specific date/time. Never say “in a couple of days.” This indicates urgency and that you’re serious about this process.]
Banker/Supplier: Is another bank making you a more attractive offer? [You should expect a question like this from your supplier. Don’t dodge the question, but answer it in a manner that will keep the relationship open while giving you the highest chance of success.]
Garden Center: As you can imagine, we frequently get calls from companies wanting our business. We’ve had a great relationship with you, and I’d like that to continue. To do that, I need you to give us the best program you possibly can. It’s important that you make some profit on our account, or you won’t care about us anymore. It’s also important that you don’t price the deal with so much profit that we can’t afford to stay with you. So please price it with enough profit that you’re happy when we stay, but not so much profit that you’ll cry if we have to leave. Can you get back to me by ______ (date/time)?
Banker/Supplier: What kind of a deal are you being offered?
Garden Center: Fred, we all have to work together in our community. I don’t want to be in the position of sharing what you offer with every other supplier in town. That’s why each offer we get is confidential. Understand that if you’re able to stretch something for us, it won’t be spread all over town, which could cause you embarrassment with another customer.
[If you succumb to giving them the competitor’s offer, you limit your potential savings and any creativity on their part.] I have to go now, but if you’d like to talk about this in more detail, maybe you could call me tomorrow. I would like to get this wrapped up by ______ (date/time). [You’ve left the door open to talk, as a good partner/customer should. And you’ve reiterated the deadline the banker/supplier has to meet.]
You’ve caught the concept. Ask your suppliers to review your account to be sure they are giving you the best and most competitive situation possible.
You aren’t threatening to take your business away. You’re promising that you’re acting like a prudent businessperson. You need to get competitive value for your dollars. No one can fault that reasoning. You’ve also given them options, such as deleting some services you’re currently getting.
Savings Possibilities
Here are some of the areas where garden center owners have found savings:
1. Banking (checking)
2. Banking (loans)
3. Credit-card processing
4. Business-only credit card
5. Waste removal
6. Cleaning service
7. Yellow Pages
8. Long-distance carrier
9. Local phone carrier
10. Cellular carrier
11. ISP (Web hosting)
12. ISP (broadband)
13. Business insurance
14. Freight
15. Electric company
16. Water company
17. Gas company
18. Sewer charges
19. Local/state licenses
20. Fringe benefits
Some of you are saying, “My gas company isn’t going to help me cut my expenses.” That’s not the experience of other garden centers. In many communities, the public utilities are required to help conserve energy so they don’t have to build new pipelines, power plants, etc. What’s the worst you can get by calling? True, the exact conversation you use with a banker or insurance broker won’t work with the gas company. You can make that adjustment in the conversation. Ask for help in reducing your costs even public utility employees like to help people who ask.
Some industries (think cellular and long distance carriers, credit card processors) are extremely competitive and price sensitive. Many times just calling and telling them you’re getting competitive quotes will help them to find “a new program that will fit you perfectly.”
In case you’ve missed it, both AOL and Netflix have gotten some bad PR because if you call to cancel, they’ll give you the moon in lower prices and freebies to keep your account. But if you don’t call, you won’t get the incentives.
Don’t stop to lament the fact that you’re a good customer and they should call you when they lower the prices they’re charging other people. Yes, they should, but they don’t and very likely won’t. So be proactive. The cash you save will go directly into your pocket.
By now you’re thinking, “Wow! I can’t wait to call my XYZ supplier of products I resell.” Here you may find a different version of the script will pay bigger dividends. These suppliers are more accustomed to getting beat up over pricing and have much thicker skin than the average banker, phone company or insurance broker. Chances are that asking for a better price won’t get you the result you really want. Remember, we’re looking for more cash in our pockets, right?
Surprise them. When you call, ask them how they can help you sell more of their stuff. From your perspective, let’s say you’re paying $1 per flat, selling it for $2.75 and will buy 100 flats. That’s a total cost of $100 with total sales of $275. What’s the most you can save? The maximum theoretical savings is exactly $100. It’s highly unlikely they’ll give it to you free, but it’s theoretically possible. What would happen if, instead of dropping their price, they were able to help you in a marketing campaign that would triple your volume with the same margin? That would put the sales at $825 with a cost of $300 or $525 in your pocket instead of $175. What a difference!
In all situations, don’t browbeat, yell or make demands. The most effective style seems to be a quiet and somber tone, almost apologetic that you have to ask and somewhat embarrassed that you may have to take your business elsewhere. Your goal is to create a situation where the vendor wants to continue with your business where they truly want to help you. Where the supplier understands that you need to be competitive in your marketplace, too.
We’ve never seen a situation in which going through this process didn’t yield immediate cash savings. We’ve also heard many business owners say, “I’ll do it when I can get around to it.” Think of all the money being wasted in the meantime. The cash you’re wasting belongs in your pocket. Take action now to put it there.
SIDEBAR
Watch the Percentages
Probably the biggest scam, outside of Nigerian fortune-promise e-mails, is credit card processing rates. Every credit card processor can save you money just ask them. They all quote a fee that sounds too good to be true. Because it is.
Don’t get suckered in by any percentage quotes. Instead, take your busiest three months of credit card transactions. Copy them for anyone who is seeking your business. Make them quote, in writing, exactly what it would cost in dollars and cents to handle these actual transactions. Make them include each and every cost, including equipment, supplies and all the funny extra charges they forget to tell you about.
Demand that their written statement be amended to whatever contract you are asked to sign, and indicate this is an example of how you are to be billed. They will balk because the “extra” charges are where their money is being made. Don’t be surprised if these extra charges add ½-1½ percent to your overall fee. The overcharges we’ve seen have come from some of the largest as well as the smallest processors. It’s a shame this entire industry is built on non- disclosure of your actual costs.
Guidelines for Supplier Conversation
1. Have a “script” of ideas/concepts you want to get on the table. Do NOT read your script. Keep things as natural as possible. Your goal is to build long-term relationships you both can afford to continue.
2. Make the first conversation as short as possible so the supplier can ponder what you’ve said. If it’s necessary to go into detail, wait until a second conversation.
3. Have a firm deadline by which you are asking for a response. Give a specific date and time (e.g., 11 a.m. Friday, Nov. 30). Never say “in a few days” because that doesn’t make it imperative for them to take action.
4. Don’t tell the vendor you’re asking for competitive bids. Let them assume that. The fact that you’re not threatening them, but they know they must be competitive, will work in your favor.
5. Your goal is to get the highest value for your dollar. Don’t be locked into a preconceived idea; listen to what is offered. (Take garbage service, for example: How about seasonal service? Daily pickup when you’re busy and weekly during your off-season?)
6. You’re looking to gain cash while allowing the other party to make a profit as well. If your vendor hates you, there is a limited future. If you have no cash, there is no future. It’s a balancing act.
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