April 10, 2009 - 2:43:04 PM
Doug M

I own a small motorcycle, ATV and scooter service shop in Martinsburg, West Virginia. We officially opened our doors on 1 July of 2008. We are making enough to pay the shop overhead, but not enough to pay ourselves yet. Luckily my wife has kept her regular job for now. I charge $55.00 an hour for labor and some people have asked me why I charge so little. I am trying to offer the community quality service at affordable prices. The closest dealership charges $89.00 per hour. Do you think low labor rates turn people away thinking they are getting less quality work, or do you think if I stay at that rate that the business will build? Should I raise the rates to make them think they are getting better service? We have been building the business pretty much just by word of mouth since we do not have much in the advertising budget. We do outstanding work, judging by the comments the customers make. But I want to build this business to the point that it can sustain me and a couple of employees. This business is actually my retirement plan, hoping my sons will take it over and I can continue to draw a paycheck from it after I retire. What are your opinions for me to build this to where I want it?

Dear Doug,

I’ll start with the good news. You’re doing almost everything wrong and you’re still managing to break even! Heck, that is actually fantastic news because once you start doing a few things the right way; you’re going to blow the doors off this thing! There are so many ideas I’d like to give you that I’m not sure even where to start. Let’s start with the fact that you’re not charging enough for your services. While I agree that it might be a good idea to slightly undercut local dealership labor rates you certainly shouldn’t be charging only $55 per hour! Furthermore, I admire your desire to offer quality service at “affordable prices,” but if you continue to offer such “affordable prices” you’ll eventually be out of business! (And then you’ll be helping NOBODY!) By the way, you’re right on with your comment about the perceived value of “low-priced” services. I’d never take my bike to a guy who is charging almost HALF of what most shops are charging!

People will pay for good quality work! Customer service is KEY!

Here’s what I propose. Your unique selling position is that you offer BETTER service than the local dealerships at a slightly LOWER price. If the local dealerships are charging $89 per hour, then you should be charging $79 per hour. You just have to be darn sure that you’re doing a better job than the dealerships! (Which shouldn’t be too hard.) Okay, now that we’ve got that out of the way let’s address your fatal flaw in your comment about marketing and advertising.

Doug, word-of-mouth is great but you MUST have an advertising and marketing plan. Now, it doesn’t have to be a giant, expensive, multi-media ad campaign… but you have to have SOME kind of PLAN. And here is what this plan should look like.

ONE: Every cent you spend or every action you take MUST be trackable. So if you take a “Yellow Pages” ad out you have to have a way of knowing every single customer that was sent to your shop from this ad.

TWO: You need to come up with some sort of mechanism to lure potential customers to your shop. Ideally this BAIT would be for something FREE that would cost you little. For example, you could create a brochure or handout that highlights 7 “Little-Known” Awesome Motorcycle Rides around Martinsburg. Do you get where I’m going here? Now you get people coming in to your shop who OWN motorcycles and you’re giving them a free gift that provides REAL value. So the next time they actually need service, well guess where they’re going to go? That’s right! They’re coming to YOU!

THREE: Your marketing plan must be consistent. Let’s say the first step of your “super-low-budget” marketing plan is to distribute flyers to motorcycles parked around Martinsburg. Well, it’s important that you consistently hand out 10 of these per day. (Of course the MORE the better, but it’s more important to be consistent.) This flyer could be as simple as a business card that has your shops name and address on one side and a coupon for the “FREE Map to 7 Secret Motorcycle Tours” on the other! (Here’s a place to get 1,000 business cards for only $26.50! www.PrintPlace.com)

Okay, I could go on forever with this stuff but I think I’ve given you a few solid ideas here. Now go and get them done! If you’re truly building this business for your sons to take over to provide you with a retirement then you must go about this with an attitude that you will NOT accept defeat. Be ready and willing to do whatever it takes to make this work.

Good luck my friend,

Tim Schmidt

Hello Fellow Entrepreneur,

You may have stumbled across this excellent article by Stephen Moore, but just in case I’m going to reprint it here again. I first read Atlas Shrugged when I was 17 years old (Wow… that’s over 2 decades ago).  Needless to say, that book had a tremendous impact on my life. It had such an impact that I decided to name my daughter after the heroine of the book, Dagny Taggart. If you haven’t read this book, I highly recommend you read it right now. 
 
All the best,

 
Tim Schmidt

One of my top 5 favorite books for sure!!

“Atlas Shrugged” - From Fiction to Fact in 52 Years
By STEPHEN MOORE
 
    Some years ago when I worked at the libertarian Cato Institute, we used to label any new hire who had not yet read Atlas Shrugged a “virgin.”  Being conversant in Ayn Rand’s classic novel about the economic carnage caused by big government run amok was practically a job requirement.  If only “Atlas” were required reading for every member of Congress and political appointee in the Obama administration, I’m confident that we’d get out of the current financial mess a lot faster.
 
    Many of us who know Rand’s work have noticed that with each passing week, and with each successive bailout plan and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic lunacy that “Atlas Shrugged” parodied in 1957, when this 1,000-page novel was first published and became an instant hit.
 
    Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness of socialism, was already a celebrity.  The left, naturally, hated her.  But as recently as 1991, a survey by the Library of Congress and the Book of the Month Club found that readers rated “Atlas” as the second-most influential book in their lives, behind only the Bible. 
 
    For the uninitiated, the moral of the story is simply this; politicians invariably respond to crises - that in most cases they themselves created - by spawning new government programs, laws and regulations.  These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive-sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.   
 
    In Rand’s book, these relentless “wealth-redistributionist” and their programs are parodied as “the looters and their laws.”  Every new act of government futility and stupidity carries with it a benevolent-sounding title.  These include the “Anti-Greed Act” - to redistribute income (sounds like Charlie Rangel’s promises soak-the-rich tax bill); and the “Equalization of Opportunity Act” - to prevent people from starting more than one business (to give other people a chance).  My personal favorite, the “Anti Dog-Eat-Dog Act,” - which aims to restrict cut-throat competition between firms, and thus slow the wave of business bankruptcies.  Why didn’t Hank Paulson think of that?  Inevitably, every do-gooder strategy has its inescapable unintended consequences - which lead to the next round of Congressional meddling, with still worse consequences.
 
    These acts and edicts sound farcical, yes, but no more so than the actual events in Washington, circa 2008.  We already have been served up the $700-billion “Emergency Economic Stabilization Act” and the “Auto Industry Financing and Restructuring Act.”   Now that Barack Obama is in town, he will soon sign into law with great urgency the “American Recovery and Reinvestment Plan.”   This latest Hail-Mary pass will increase the federal budget (which has already expanded by $1.5-trillion in eight years under George Bush) by an additional $1-trillion — in roughly his first 100 days in office. 
 
    The current economic strategy is right out of Atlas Shrugged; the more incompetent you are in business, the more handouts the politicians will bestow on you.  That’s the justification for the $2-trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies.  Standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers.  With each successive bailout to “calm the markets,” another $-trillion of national wealth is subsequently lost. 
 
    Yet, as “Atlas” grimly foretold, we now treat the incompetent who wreck their companies as “victims.”  Those resourceful business owners who manage to make a profit are portrayed as recipients of “illegitimate windfalls.” 
 
    When Rand was writing in the 1950s, one of the pillars of American industrial-might was the railroads.   In her novel the railroad owner, Dagny Taggart, was an enterprising industrialist - with a FedEx-like vision for expansion and first-rate service by rail.  But our “public servants” in Congress see to it she is continuously badgered, cajoled, taxed, ruled and regulated (always in the public interest) into bankruptcy.  Sound far-fetched?   On the day I sat down to write this ode to “Atlas,” a Wall Street Journal headline blared: “Rail Shippers Ask Congress to Regulate Freight Prices.” 
 
    In one chapter of the book, an entrepreneur invents a new miracle metal — stronger but lighter than steel.   The government immediately appropriates the invention in “the public good.”   The politicians demand that the metal inventor come to Washington and sign over ownership of his invention or lose everything. 
 
    The scene is eerily similar to an event late last year when six bank-presidents were summoned by Treasury Secretary Hank Paulson to Washington, and then shuttled into a conference room and told, in effect, that they could not leave until they collectively signed a document handing over percentages of their future profits to the government.  The Treasury folks insisted that this shakedown, too, was all in “the public interest.”
 
    Ultimately, Atlas Shrugged is a celebration of the entrepreneur, the risk taker and the cultivator of wealth through human intellect and hard work.  Critics dismissed the novel as simple-minded, and even some of Rand’s political admirers complained that she lacked compassion.  Yet one pertinent warning resounds throughout the book; when profits and wealth and creativity are denigrated in society, they start to disappear — leaving everyone the poorer.
 
    One memorable moment in “Atlas” occurs near the very end, when the economy has been rendered comatose by all the great economic minds in Washington.  Finally, and out of desperation, the politicians come to the heroic businessman John Galt (who has resisted their assault on capitalism) and beg him to help them get the economy back on track.  The discussion sounds much like what would happen today.
 
    Galt:  “You want me to be Economic Dictator?” 
    Mr. Thompson:  “Yes!” 
    “And you’ll obey any order I give?” 
    “Implicitly!”  
    “Then start by abolishing all income taxes.”  
    “Oh no!” screamed Mr. Thompson, leaping to his feet. “We couldn’t do that . . . How would we pay government employees?”  
    “Fire your government employees.”
    “Oh, no!”
 
    Abolishing the income tax?  Now that really would be a genuine economic stimulus.   But Mr. Obama and the Democrats in Washington want to do the opposite - to raise the income tax - “for purposes of fairness,” as Barack Obama puts it. 
 
    David Kelley, the president of the Atlas Society, which is dedicated to promoting Rand’s ideas, explains that “the older the book gets, the more timely its message.”   He tells me that there are plans to make “Atlas Shrugged” into a major motion picture — it is the only classic novel of recent decades that was never made into a movie.  “We don’t need to make a movie out of the book,” Mr. Kelley jokes.  “We are living it right now.” 
 
 Stephen Moore is senior economics writer for The Wall Street Journal editorial page.