Bill was a hard worker in an extremely competitive industry, but margins did not provide enough of a return on his investment or his hard work. What Bill didn’t realize was that most of his competition had failed and disappeared.
Bill Cohen was a truck driver for an Oklahoma trucking company. While on Highway 99 in a Sacramento valley town, his rig broke down. There he sat for 20 minutes contemplating his miserable life, the one on the road and the one back in Oklahoma. With a newly found clarity of mind, he crossed the street to a phone booth and called his boss: “your truck broke down and I quit—now!”
Leaving the phone booth, Bill noticed a small factory. He went to the owner’s office and asked him for a job—and was hired on the spot. It was a metal fabrication plant that produced after-market products and services for the manufactured home industry.
Bill was a hard worker in an extremely competitive industry. Within 10 years he had purchased the business. Over the next decade he struggled to stay alive, just barely succeeding, while most of his competition dropped from the scene. But for Bill, the margins did not provide enough of a return on either his original investment or his hard work. What Bill didn’t realize was that most of his competition had failed and disappeared. Yet he kept pricing his products and services as though they were still low bidding against him.
Using the Competition Analysis portion of The Profit Process, we discovered that there really was an opportunity for a premium provider in the marketplace. It took a while for the company to change its mindset from rock bottom pricing to premium pricing. But by emphasizing superior product and service offerings, Bill was finally able to command a premium price.
By refocusing on premium product and services with the associated pricing, Bill was able to change the profit structure of his business. Now he was rewarded both for his investment and for his hard work. He could also afford to pay better wages, attracting a better class of worker. He was able to hire better managers, allowing him to step away from the daily grind of running everything himself. Now with a professional management team in place that produced a significant return on investment, the business attracted a national firm seeking a presence in that market. Bill sold the company and retired.
Many business owners are the captives of their legacy. They come to believe that the future will simply be an extension of the past. But in the daily routine of running a business, slow changes can be difficult to notice. The legacy of hard work and low prices was a workable strategy in a very competitive market. But when the competition died out, it opened the door for a new type of competitor. By exploiting this new reality, Bill was able to finally realize the rewards for all the lean years of struggle.