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It’s Only Common Sense: Don’t Give Your Boards Away!

Look, I know getting business is hard. I know that your biggest problem is always having enough business, and I certainly know that most of our customers pride themselves on buying the cheapest circuit board that money can buy.

But that is still no excuse for giving away your boards. You have to make a profit on what you build. It might be a razor-thin profit, but you have to make something on what you build. Otherwise, you are buying into your customer’s opinion that what you do has little or no value.

In fact, I believe that this practice has been one of the worst contributors to the near demise of the North American board industry. We have seen it and we have all felt it, and we have all been victims of it. A shop will get so hungry that it will start practically giving boards away at prices that are even lower than their estimated costs. One of my competitors once offered a price that was lower than the cost of the laminate that the boards were built out of.

A few weeks ago, we talked about the lack of respect that our customers have for our industry. Well, by that same token, giving boards away at a price lower than costs is a pure and evident example of a lack of self-respect.

Now, I know that it is not always easy to hold your prices, especially when you need the business. This becomes especially difficult when some of your competitors—especially the ones who are on the brink of desperation—will lower their prices just to get the business and keep the last of their people employed. Ugh, not a pretty picture!

Here are a few suggestions to avoid getting into the price game with desperate competitors:

1. Don’t play that game. You will know if the competitor’s price is too low, so don’t meet it. By the way, when was the last time a buyer told you your price was too low? When was the last time a buyer showed you the other guy’s prices when they were higher than yours? It just will not happen, so be wary of buyers showing you ridiculously low pricing.
2. Explain to that buyer (you know, the one showing you that ridiculously low price) the total value of going with your company. Ask him what the true costs are for the low-priced guy vs. your company. Point out that in this world, the lowest price does not always mean the lowest cost.
3. Ask him to think about what it would cost his company if he doesn’t get that board on time. And what if the board is no good? Worst of all, if a defective board is put in his system and fails in the field, what then. These are all things the buyer should be considering if he insists on buying the cheapest boards money can buy.
4. Ask the buyer how much trouble she will have replacing a vendor if that vendor goes out of business.
5. Show that buyer what the laminate costs are for that board. For the most part, everyone is paying about the same for laminate, so that is a great comparison factor.
6. Be prepared to walk away. Sorry, but as touchy as it sounds, you are not in the business of making boards; you are the in business of making money, and you can’t make any money selling boards that have no profit margin.
7. And finally, get rid of that ridiculous adage “we’ll make it up in volume,” because you won’t. I have never understood that line of reasoning. Look, if the unit price of one board is below cost, the volume price will also be below cost. Zero profit multiplied by 100 boards is still zero profit or worse. Duh. Actually, it is worse because you are using up valuable production time—not to mention chemicals, laminates and manpower—to build boards for nothing. You are better off not having the order than building it a losing prices. That’s not rocket science either.

In the end, there is just no sense in playing the price game. Now, there are some worthy competitors and you should be aware of those guys. They’re the ones who you have been competing with for years. They are the ones who are on par with you. You know that their capabilities are good and that their quality is good, and that their pricing is usually very similar to yours. They are what I call worthy opponents. They are to be respected and their pricing is to be respected. Be confident that when you compete against them; you are playing on a level playing field. That’s a good and fair game.

But those other guys, those desperados, don’t play their game. They are playing a loser’s game, with bankruptcy being the ultimate outcome. It’s only common sense