I started writing about what I call “the creep” just after dinner on a recent evening. At least, that’s what I thought I was doing.
Evidently, I was wrong because when I looked down after a little more than three-and-a-half hours, that wasn’t what I had written about at all. Instead, I found an almost finished column focused on increasing your bottom line, sales, margins, expenses, language and the profound impact the pictures you paint with the words you use can have on the way you perceive the world around you and on your success (see “Return on Expense” in the July issue).
Looking back, it was obvious my subconscious mind was working feverishly to lay a foundation for this subsequent piece on “the creep,” that wouldn’t just talk about your chart of accounts and the expenses that are continually creeping up until they just about bury your business. A piece that would at least attempt to offer a solution.
But first, a definition, since a discussion of “the creep” and its profoundly negative impact on your business isn’t something you are likely to find anywhere else.
The closest metaphor would be boiling a frog one degree at a time. If you increase the temperature of the water one degree at a time, the frog will never notice the temperature is constantly rising until it’s too late. The water just gets warmer and warmer until the poor little guy finds himself floating face down in a bucket of frog soup! If you bring the water to a boil first and then try to drop the frog in, the chances are very good he’ll pop out of there like toast out of a toaster!
Your vendors and the folks who provide you service, especially the larger, more sophisticated ones, are very much aware of this phenomenon and are very careful when it comes to increasing the cost of their goods and services. They don’t want you to pop out of their pot of boiling water and into someone else’s—someone whose pot may be simmering at a temperature far below what you’ve become accustomed to. They know if that happens they’ve lost you, that you aren’t coming back and that you’re likely to tell everyone you know.
The problem is the majority of us are so busy dealing with the every day chaos of life in this industry, the seemingly endless distractions continually crashing over us until we feel like we’re drowning in them, that we never feel “the creep” until it’s just about too late. Parts go up a penny or two at a time, and unless your service management software automatically compensates, your margins disappear like sand from some of our coastal beaches.
Fuel costs go up a couple of cents, but certainly not enough to raise your labor rate. After all, shuttling clients back and forth is a necessity, a cost of doing business. No one is going to increase or decrease their prices based on something like that, are they?
You don’t call your attorney every day, so you have no real sense of what their cost per hour is or how much it’s increased since you last called. The cost of your bookkeeper or accountant goes up, but only by a couple of bucks a month.
Taxes have remained relatively stable, but the associated cost of licenses and fees, everything the government has to do to keep the doors open and the wheels turning without raising taxes, continues to increase every day in almost every way.
But, who tracks that?
And, your technicians and office staff… Well, they are always asking for more, aren’t they? And, in the current job market with the shortage of qualified people as acute as it’s finally become, it’s somewhere between hard and self-destructive to say no.
So, what do you do?
“The creep” is constantly advancing if only incrementally, so slowly most of us will never feel it or see it until the water is just below our nose or the temperature has gotten so high our skin is melting! So slowly we never think to raise our prices. We never compensate.
That is, until something happens that isn’t incremental—an increase that’s exponential, that is almost perceived as an affront. When that happens, we begin to look around. We begin to focus.
One price is so far out of line it makes the hairs on the back of your neck stand at attention. It causes that little voice that is constantly whispering in your ear to shout, “Hey! Pay attention! The water is getting warmer and you’re too damned dumb to realize it! Someone is taking advantage of you because they’re convinced you’re not paying attention!”
When that happens, you begin to question everything and everyone. And frankly, that isn’t a bad thing.
You see, “the creep” is going to happen no matter what you do. Like a law of nature, expenses are going to increase. They always have. They always will. I hate to say it, but there is little you can do to stop it, and even less to control it.
However, because each legitimate increase is reflected in your cost of doing business, you must prevent those increases from eroding your margins. You must remain constantly vigilant and then change the way you respond. You have to find a way to pass these increases along to your clients or risk being forced to absorb them yourself.