Everyday, Graff-Pinkert runs into a myriad of excuses why people won’t purchase a used machine tool from us. Maybe they don’t have the work. Maybe they don’t have the expertise to run a machine. Maybe they are not sophisticated in negotiating with buyers and suppliers. Maybe they don’t have enough money.
All of these things can stop a sale of a used machine, and when we do sell a machine we often run into the problem that the customer says they have another option that is cheaper, so we have to lower our price and reduce our margin. If we can provide a machine that people can’t find anywhere else, we can make a nice deal, but still, there is only so much value we are providing to the customer, so there is a clear ceiling of what we can rightfully charge.
I just listened to a brilliant book that has made me take a closer look at or business model, $100M Offers: How To Make Offers So Good People Feel Stupid Saying No, by Alex Hormozi.
The thesis of the book is that to have an hugely profitable business—not just an ok business—you need to sell a product or service with such incredible value that customers would be stupid to not pay for it, even if the price was so high they would have to stretch themselves to afford it. You have to sell something in a category of one, so nobody else can commoditize it and push down the price.
Alex’s first significant businesses were several gyms he started. He figured out how differentiate his gyms from typical ones that scraped by, charging measly $20 per month membership fees. He realized a great deal of people join gyms to lose weight. So rather than worry about the price of membership fees, he needed to solve the problem of getting customers to lose weight. He created a solution to sell customers, not a gym membership.
Eating right is one of the most important factors to losing weight, so Hormozi set out to solve that problem. He looked at all the obstacles to eating a weight loss diet. First, he needed to know what customers should eat based on their own individual needs. Then customers had to buy healthy, affordable food that tasted good. Then they had to find time to cook the healthy food. They also had to have a plan for what to eat if they went out to a restaurant. He came up with a solution to every obstacle customers deal with when trying to lose weight, so it became stupid to say no to the program, even if the price seemed ridiculously high.
Hormozi became so successful running gyms, he started a new business that helped gym owners run their own profitable businesses, called Gym Launch. In 2018, he was charging $16,000 for 16 weeks of coaching and tools for gym owners to use his program. For the owners it was a no brainer because that $16,000 gave them a good chance to make more than 10 times that in a year.
Hormozi’s business philosophy makes me think about our used machinery business, Graff-Pinkert.
Graff-Pinkert has a nice specialization with multi-spindles that many other dealers don’t have, which sometimes gives us a competitive advantage—if the market is good. But still, often sales come down to price. If another dealer has a similar machine or a value proposition with a lower cost, we will either have to lower our price and lose our margin or we will lose the sale all together.
I wonder how Alex Hormozi would approach the machining sector.
Perhaps instead of selling a machine tool, Hormozi might sell a service to help a manufacturer get a great deal for a turnkey machine tool that came with a warrantee and training provided. Then he would probably provide coaching or strategies to acquire good staff to run the machines. Also, he would provide coaching and strategies to help clients find the most lucrative customers and reliable suppliers. Then he would provide more coaching to negotiate great deals with customers and suppliers. I’m sure there are a ton of other obstacles machining companies are dealing with that he would solve. How much money would a service package like this be worth to a machining company startup?
How does Hormozi’s business approach apply to selling high volumes of screw machine parts? Is there a way to make an automotive part less of a commodity? Is there something a screw machine shop could offer a customer that was so desirable and different from the competition that it would be stupid to say no to crazy high price?
I would love to know how Hormozi would look at that puzzle.
Question: What does your company offer to clients that nobody else does?
7 Comments
We are a small company that rebuilds cnc machines and light custom automation. With our cnc machines (mostly mills, lathes, plasma cutters) we attempt to provide a complete solution that includes CAD-CAM and CNC software and essential tooling like vises and basic toolholders (even if we have to buy it new). We are also willing to work with the customer to configure and train if they have a specific task in mind. About half our customers know what they want and if they think we are offering a good deal they will buy it. The other half really appreciate ANY help we can offer and it usually results in the sale, or even a referral down the road.
Not knowing screw machines very well I have wondered if Graff-Pinkert has an opportunity to offer an affordable alternative for the kind of repetitive & accurate high volume work these machines can do to customers who are more used to small and one-off runs of turned parts on CNC and manual lathes? Your market becomes then a broader range of machine shops looking to step up volume rather than companies already specializing in the use of screw machines who know how to pick a deal until your margin hits bone.
Also, your company’s big competitive advantages in screw machine knowledge and tooling and parts could probably be leveraged to offer a higher value turn-key solution. Building a turn-key or customized package that includes the right tooling and in-house or onsite training might pencil out a more profitable deal where the sum cost of machine+tooling+training&support time is a greater value to the customer than the sum of these costs to your company, resulting in a stronger total profit margin.
Thanks for commenting Steven.
Sounds like you are giving a good effort to put your company in a category of 1.
You have some interesting suggestions that we have tried successfully and not successfully over the years.
My negative feedback is that it’s very hard to sell machines to people who don’t have those types and have never used them before. We still do try though. Sometimes we are successful.
We also turnkey some jobs. But that can be super hard to do, and still you are in a race to the bottom with other rebuilders. In our experience, the rebuilding process often prices you out of opportunities because you have to charge SO MUCH to cover your parts and labor costs. And you are still going against other rebuilders who are willing to work thin.
What Alex Hormozi does is offer services that are life changing, that are so good that nobody can do it. Rebuilding, turn keying, training, those are great, but it still doesn’t put you in a category of 1. That said it seems like you are up to some very innovative stuff!
Question: What does your company offer to clients that nobody else does?
Credible, concierge service delivering reliable and relevant information, resources, advocacy and networking opportunities- that help our members intelligently manage risk- so that they and their employees can adapt and thrive.
(sorry for the run on sentence)
Good answer.
We (particularly my dad) love run on sentences!😂
We offer the best USA made “Concentric Corporation” ball caps. This is true, but kidding aside, and according to our customers as I certainly have a strong bias, the best “Transactional Quality” in our industry.
Transactional Quality. Interesting.
My business card says “Solving customers problems since 1979”. That is the first goal and focus, the money follows afterward.