As "luck" would have it I met a rather interesting person last night who said something that got the hamster in my brain running. I was sitting in one of my favorite watering holes having dinner and a beer when a guy in his late 60's sat down (lets call him John). Being the only person in the bar I struck up a conversation that eventually led to work.

Being me, I was quite inquisitive about his business, how he got into it etc. I have always been fascinated by stories of business success and/or failure since I was a kid and first heard Earl Nightengale. John's story has made me realize that many people don't have a clue how business works even when they are involved in one. There is no school that really teaches how to run a business, a MBA program will teach you to be a corporate cog but not how to build your own.

Building a business is very much a learn as you go process. I was fortunate enough to be the son of a businessman surrounded by businessmen who's conversation often centered around business and what works and what doesn't. When I was young my father encouraged me in various minor business endeavors like landscaping, car washing, sales and leather making so by the time I was headed into the military I had already failed and succeeded in several endeavors and had a pretty good grounding in business. 

I have often been surprised at some of the things businesses do. I watch Ramsays Kitchen Nightmares and can't believe the complete ignorance displayed by people who have invested heavily into an industry. Granted on tv much of it is staged and for the cameras, but I so often see business owners making massive mistakes and they are seemingly oblivious to it. When John was telling me his story, I was stunned that this seemingly intelligent man credits his success to a chance meeting with a man who simply made a comment that made me say "No shit Sherlock" in my head. I'm glad I didn't say that out loud because in reflection what seems complete common sense to me isn't to someone who has never ran a business before. Kind of like Netflix which grew huge off of the very simple idea of mailing dvd's, a very simple idea that has everyone scratching their heads going "Why didn't I think of that? Well duh."

So I have decided that I will share John's story with you and follow it with a little commentary. Not that there is anything really earth shattering about it, but I know there are many on this site who have found themselves in employment difficulties in the recent recession. Such a simple comment changed John's life, so maybe someone out there might come across something in the story that makes them go "Well duh!" At the very least I find the story inspiring and I think too much attention is paid to the stories of a few super successes like Bill Gates or Mark Zuckerberg that most people simply can't relate to. Most don't see themselves as ever having that kind of massive success. I think John's story is far easier for people to relate with as he is an average guy who found a way to make a good living doing what he loves.  

John was a high school dropout who served in Vietnam as a mechanic and when he got back was able to find work as a welder. When the shop he worked for went out of business John bought some second hand equipment and started welding out of his own garage. He was able to make enough to get by, but just barely. He decided that he was going to start his own company and hire some employees so he could do some more complex work.

John said that he was in over his head, he was a good welder, but didn't even know how to read a blueprint. When he attracted his first commercial job they handed him a blueprint, not wanting to display his ignorance, John took the blueprint and went back to his shop. John started calling architectural firms until he found one with a secretary that was willing to teach him how to read a blueprint. He paid her to come help him after work then did the welding late into the night. Eventually, he learned to read blueprints and picked up more commercial jobs building metal staircases, railings etc.

John expanded his workforce so he had 8 people working for him in two shifts while he worked both shifts himself. He was getting jobs, the problem was that he was barely making enough to cover payroll. For several years his company muddled along while he worked constantly for no pay. He says he was getting ready to throw in the towel and shut things down because the amount of work wasn't worth the pay.

Then he met a man who changed everything. He did a job and apparently the contractor was so impressed with the quality of the workmanship that he referred people to John. The contractor apparently told John he wasn't charging enough. He suggested John charge a certain percentage over materials cost (I was not informed what that percentage was, trade secret I guess). John was uncertain, he thought the percentage was way too high but the contractor insisted and when John bid for the jobs he used the number the contractor had provided. John commented on how surprised he had been when his much higher bids were readily accepted. He commented that in the last 30 years he only had maybe a half dozen people walk away because of his higher prices.

He still uses that percentage to this day. The company became quite profitable and provided John with a good income. Based on the way he was talking I would estimate the company probably does revenue in the $2-3 million range and John probably brings home something in the low six figures. And you'll like this if your reading this Brian- he apparently is good to his employees because he has 3 guys of the original 8 that still work for him. He actually went on at length how hard it is to find young people who are willing to do the physical work. Apparently, young people usually quit after a few weeks and he complained about their work ethic. During which I kept quiet because my work ethic isn't much to brag about.

The thing I think there is to take away from John's story is valuing yourself. IME most people have a tendency to undervalue themselves and their labor. Much in our society puts an emphasis on low prices and conventional wisdom is that the lower the price the better. I have seen small shops attempt to compete with bulk giants like Walmart on price. That is a losing proposition. Your not going to undercut those kinds of giants and make a decent profit, so don't try. Price isn't everything.

Look at your own life, when you buy X at a store are you always 100% certain it is cheaper than anywhere else in town? Most likely not. I have seen some people that are super coupon users and go at great length to save a few pennies, but for the most part Americans aren't going to drive to the other side of town to save a buck, gas is too expensive. And if you are providing a product that is specialized like John's welding you don't even have that kind of competition.

I used to sell newspapers for a telemarketing company when I was first starting out. Initially, I couldn't give the papers away. I mean literally, my job was to call people and tell them they were getting a free newspapers for two weeks, all I had to do was prevent them from saying "No don't do that". I was asking them if I could send them free newspapers. Asking doesn't work. When I learned to TELL them they were getting free newspapers I was having a 97% acceptance rate and I was then able to translate that into telling them they were going to buy the paper for only $1.99/week because I told them it was a great deal. 

When you are trying to get money from someone, don't ask them what the price is. Whether you are negotiating for a job or selling a product do your research so you know approximately what your competitors are charging, obviously you don't want your number to be absurd. Once you settle on a number that is reasonable but perhaps a little high tell them that is what you are worth. Be confident and know that you or your product is worth that price. Your confidence will come across to the other person and you will be surprised at how often they simply accept the number you give them. If they don't, well you made it high enough to leave a little room for negotiation right?

I'm willing to bet that most of you reading this far have at some point in your life gotten a job and the interviewer TOLD you what your pay would be. Did you question it? Challenge it? If you are like most people I have employed, probably not. Perhaps you should have because if it was me offering you the job I guarantee I told you a lower number than I was really willing to pay. Don't let other people tell you or your products are worth, do some research and be the one to tell them, you might be scared of the other person backing out of the deal and that might happen on rare occasions, but for the most part, if your number is reasonable they will pay it even if it is slightly higher than they were planning.

There is also a line of thinking among people that if the price is too low the quality must be low as well. This is especially true if the potential customer is unfamiliar with the business and wants someone who is experienced and professional. I'm sure we have all gone the cheap route once or twice and wished we went the more expensive route instead of eating at a cheap restaurant. There is some truth behind the adage that you get what you pay for. 

Know your value and don't be afraid to demand it, because if you don't others will always be happy to underpay you.