What Business Are You Really In?
Meanwhile, I kept trying to think like a real estate person. I asked myself what I'd do if I had a brand-new office building in a cold market. How would I attract tenants?
For one thing, I might offer rent concessions. If tenants signed a five-year lease, I might give them six months free. Or suppose a prospective tenant had a year left on its lease in another building. I might pay off the lease or offer the tenant a year's free rent in my place. And what if the tenant had good credit but was short on cash? I might agree to build out the space and increase the rent to cover the cost of the build-out.
Those were all tactics I could use in the records-storage business, I realized. I could treat the removal fees like build-out costs, for example. If a customer wanted to switch to us, I might work out a deal whereby we'd cover the removal fees at the other storage company and make it up later by charging higher rates per box.
We started applying those techniques, and the business grew like crazy. Our competitors went wild. They told customers, "Brodsky's nuts. He can't survive. He won't be around in two years."
My response was to bring the customers to my warehouse. I'd say, "You're probably wondering how we can offer you lower prices than anyone else." They'd nod. "Well, look at the height of our ceilings," I'd say. "We get more than 150,000 boxes per 10,000 square feet. Our competitors get 40,000 or 50,000. Our warehouse holds three or four times as much as theirs. So I'm really overcharging you."
The customers would laugh and ask for a price break. I'd laugh and say, "No, that's what we have to charge -- because we provide so many other services ...." Then I'd go on from there.
Thinking differently about our business turned out to be the key to our success. Just like Fred, the fish distributor, we thrived because we figured out what business we were really in. Less than 10 years later we have one of the largest independent records-storage companies on the East Coast.
Of course, success brings its own problems. In recent years many of our competitors have adopted the same approach -- building bigger warehouses, paying removal fees up front. Now we're all in the real estate business together, and you know what that means.
Maybe it's time to find another business.
Norm Brodsky is a veteran entrepreneur whose six businesses include an Inc. 100 company and a three-time Inc. 500 company. This column was coauthored by Bo Burlingham. Previous Street Smarts columns are available online at www.inc.com/keyword/streetsmarts.
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