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We talk about having Win-Win relationships in selling. Iberia and Verizon aren't interested in Win-Win. They only want the lowest prices. Nothing else matters.
If you're running a business and not making money, everybody suffers. The goal isn't to have large gross sales, it's to have a strong bottom line.
What's the value of having a lot of volume flow through your business, if you've no profits to show for it? When you quote a project, or sell a product, for very little profit, your margin for error is very thin.
Should there be a problem or something unexpected happens, a small profit will turn into a very large loss.
The primary focus in business today appears to be on sales volume. Everybody talks about their sales volume. But the name of the game is net profits, i.e. the amount of money you've got after expenses. (Very few people talk about that.)
I think everybody should have an MBA: A Massive Bank Account!
You must also get paid for the products or services that you sell. If you're selling a lot of product, but not making money, at the end of the day you don't have much to show for your effort.
During the dot-com craze, lots of companies were showing sales and profits - on paper - but weren't getting paid. The most important part of running a business is cash flow. The amount of money you have in the bank!
No business ever got into trouble by having too much cash.
Protecting Yourself From Price Competition
You can't avoid price competition, but here are three things you can do to protect yourself:
1. Have Lots Of Prospects.
If you've only got a few prospects, than you've put yourself at the mercy of the seller. In Boeing and Airbus's case, there aren't many opportunities to bid on new aircraft so they both wanted very badly to get the order.
And with the terrible state of the airline industry, there aren't many orders to bid on.
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Copyright © 2005, Jeffrey J. Mayer. All Rights Reserved.
Copyright © 2005, The Negotiator Magazine