There Seems To Be A Trend… So What Does It Take?

Each and every time I work with a client company, I find that no matter how many times I go through the growth and development process with each of them, that it renews and confirms my beliefs in the process of planning. Equally, I find that whilst all clients are within the repossession industry, they are so very much individual in their own sense and that each one demands their own growth and development plan process, personalized to their geography, their company culture and indeed, to that of the company owners and their needs and wants.

The companies I work with range from being in the repossession business from 12 months to 15 years plus, but irrespective of age, location and size, their commonality does not waiver at all. The common denominator between them all is most definitely their determination, tenacity, and hunger for success and to probably many people’s surprise, their recognition that they as a company have to change their philosophy on an ongoing basis towards the art of ….yes that wonderful word again…..CHANGE!

The most perceived problem that companies think they have is their want/need for more new clients. More often than not this highlights to me the fact that this is often the symptom of a problem within the company and the actual underlying problem is much more serious/important than they think or even recognize.

Everyone without fail wants to get ‘into bed’ in doing business with corporations such as HSBC and I take them as an example to highlight the need to understand the type of client HSBC will be in doing business with them.

HSBC is one of the largest financial corporations in the world, spreading their corporate tentacles to all corners of the globe and in doing so, this giant demands the need for a corporate structure to support their mammoth business services. So, in recognizing that on a .much more local level, there are reasons as to why HSBC and corporations like them have standards, processes and procedures in place so that they can carry out the day-to-day business activities that demand their attention.

They in turn have expectations of their suppliers and knowing that they can ‘pick and choose’, you as a potential supplier need to get ‘all your ducks in a row’ in every aspect of your business, to have a chance joining their supplier network.

Amongst many things that a company has to get in order, to compete with other repossession companies and gain clients such as HSBC, is to be in control of their finances, the services they deliver and the fees they charge for them.

Having worked with thousands of companies throughout my career, I have seen the resistance that the owner/ president of a company has in charging the right price for their product/service ….and needless to say, the repossession industry is no different.
There is a resistance to charging what is a true market price and instead they charge a price that is so low that it is impossible to make a profit. That means of course, that eventually they will go out of business. Not only that, but large corporations will and do view companies that charge lower than market value fees, irrespective of the industry that they are in, as ‘cowboy’ outfits.

Undercutting your competitors is definitely NOT the way forward and should never be done just to get business. It’s commercial suicide.

There is a variation in prices that clients will pay but that should not stop you from having your own fee schedule and for you to stick with that. There will be clients that offer a price and that is it – no negotiation. Then there are clients that will pay what you ask, and there are those clients that you can negotiate with. If your prices are already low, there is no room for negotiation. Unfortunately many will take the business even if it means that they will lose money.

Controlling your finances is crucial to the continuous growth of your company and that includes when and if you take on more new clients. You have to be prepared to sometimes say NO as growing too fast is just as bad as not growing at all. Each and every time you take on a new client, it eats into your cashflow until you get paid for the services you provide to that new client.. Not having liquid cash, i.e. working capital, provides another stranglehold on your company. And then you multiply that by taking on several clients at the same time or over a short period of time, can stop your business from functioning.

So, would you like to improve your profits? To achieve that you have to do more of the right things. That’s obvious, but which things? One strategy is outstanding in its ability to produce an immediate and dramatic increase in profits. That strategy is to SET AND OBTAIN THE ‘RIGHT’ PRICES.

Many pricing decisions are made arbitrarily, either in the absence of information, or on the basis of cost plus a preconceived mark up. Once pries have been determined, by whatever means, there is a natural reluctance to change them. This is sad. Sad because even if the price was ‘right’ in the first place, it probably won’t be some months later. And it’s unlikely that a price set in that way will be ‘right’ in the first place. Sad too, because price is NOT something to do with costing. It is in fact a key element of marketing and is concerned with VALUE to your clients. It is the one element which unlocks the treasure chest of profits the fastest.

WHAT DOES ‘THE RIGHT PRICE’ MEAN?

Let me ask you this question. Who does it need to be right for? Right for your clients OR Right for you OR Right for you and your clients.

The ‘Right Price’ means that it should be RIGHT FOR YOU ANDYOUR CLIENTS!
‘Right for you’ means that it has to meet your objectives eg., how much profit you want to make, how many sales, how fast you want to grow, which part of the market you want to be in, the image of quality you wish to project etc., etc.

This of course requires that you know what your objectives are. And to achieve your objectives, you will usually have to sell at a price higher than your costs, so you must also know what your costs are.

‘Right for your clients’ means what they are prepared to pay – their ‘demand’.

There is a 3-step way to help determine your best price and give you a break-even and profit figure –

1. Add up business costs for the year
2. Divide the total by your estimated number of sales over the year and you get a cost per repossession
3. Add on the desired profit per repossession to give you a price per repossession activity

THAT IS: COST + PROFIT = PRICE

This is just one of the major factors that you should be aware of when growing your company, but not only that, it will differentiate you away from your competition.

So when you are looking to gain more clients, just bear in mind that they can ‘make or break you!’

SUSAN A L MARSTON, MBA
BUSINESS EDITOR
The American Repossessor Online Magazine