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SURVIVE or THRIVE in the Locksmith Business!

SURVIVE or THRIVE in the Locksmith Business!

We live in a time with a lot of rapid cost changes on the high end, so I invited Chris and the LockFather to translate what that looks like in the locksmithing businesses.

 

PRICE INCREASES

PJ: I want to state the obvious here; have you seen your prices go up as far as all your costs over the past year or so?

Chris: Oh, yeah. Cost of living has gone up—milk, eggs, gas. Everything's gone up lately. On the locksmith side of things, oh, yeah. Manufacturers are changing prices. Everyone's making more money, you know?

PJ: Yeah. Absolutely.

Pete: Yeah. I mean, I don't know if they're making more money. It cost more. It's ridiculous.

PJ: I tell you, I mean, as someone who keeps getting letters from manufacturers with price updates. I mean, I've never seen anything like it in 18 years.

Chris: When we set a big bump at the beginning of this year, I believe, we had some manufacturers that had decent price increases.

PJ: Absolutely. I mean, I was always really used to like a three, maybe like an aggressive 5% a year, and then next thing you know, like 10-12 is normal.

Chris: It takes you back a little bit.

PJ: It does, right. And the other weird part is like, they don't want us to put too many orders in and advance like they kind of set it up to where you can get a little in, but you can't really like stock up, right?

Chris: Just to keep the water running, you know?

PJ: Yeah. And really, because there's nothing to stock up on, because -

Chris: Bottoms out on boat right now.

Locksmith costs are increasing

HOW TO COMMUNICATE WITH THE CUSTOMERS

PJ: Yeah. As I've said on boats. And so when this comes to your locksmithing businesses, we all have customers that we deal with and talk with on a normal basis, kind of like the backbone of our business. I'm guessing that prices have gone up in the past year?

Pete: More than once.

Chris: Oh, yeah, exactly. Yeah, more than once.

PJ: And I'm kind of curious on like, the approach that you both have taken in communicating with your customers in a way outside of just like the Oh, everything costs more, what do you expect, right? Like, that's not a good tone?

Chris: Little more professionalism?

PJ: Right. So I'm kind of curious, Chris, like, how have you been talking to your customers about it?

Chris: So I have many more clients who have scheduled work with me, so it's not so much an emergency. So there are not enough random people calling me, asking those questions, so when I get customers that call me, I've had to update them on pricing. Sometimes if it's a big enough account, I'll even go and send him an email, or I'll contact him and say, hey, just some information out there for you guys. You know, how's everyone doing? We're looking at five to 10 price increases based on this and this and this. And for the most part, they've all been pretty understanding because most of the businesses that deal with them also increase their prices. So in a roundabout way, we're all just letting each other know like, hey, we know it's obvious but you know,  we're informing each other, but you do get the people that call, and they want to lockout, they want to rekey, they want a car key. They say, Oh, well, you know, they charged me X amount last year. And that's hard to...just like you said; you don't want to have any animosity towards them say, you know, this is just how it is now. It's no. Unfortunately, things have changed in the last year, and prices have gone up, cost of business has gone up. Like your dad, if you own multiple locations, I'm sure the rent has to go up. Eventually, insurance goes up, and most people understand that. There's very little pushback on that.

PJ: Yeah, that's, those are some great points.

Pete: Yeah. Well, unfortunately, it does go up. And, like Chris was saying, the increase of just doing business has gone up and, you know, some customers say, Well, you sold me this lock for $20 so well now, lock, unfortunately, is $28 because they have this massive increase. $28, they get all bent. I said, believe me, I try to keep it as low as ten but remember, I must pay my bills, too.

Chris: Yeah.

Pete: And I understand where you're coming from, but I can't control it.

Prices Are Going Up

HAVING CUSTOMERS WALK AWAY

PJ: Yeah. Now, have you guys experienced any customers who decide that it's just too much and they're just going to figure out something different?

Chris: Oh, yeah.

PJ: You have?

Chris: Oh, yeah. We see a lot more in the automotive in the lockout stuff, not so much in the commercial and the hardware and in residential installs and stuff. It's going back a lot of times. You either get it, and I'm sure your dad's smarter with this term...get cheap, fast, or good. You don't get all three of them. You get to pick one, so it's to get customers like, hey, I'm locked out of my car. Okay, well, this is the cost. Oh, you know, I got done for half the amount last year; you can't want to compete with a price that used to be round for a guy that made me business anymore.

PJ: Sure.

Chris: So you have to really, you have to let that person go sometimes. Your time is valuable, and what you rate it is, you have to consider that.

PJ: Yeah. And has it been hard like on some of the calls, it's like, man, you know, I could use that call right now. That will be great, and that temptation to start negotiating?

Chris: Yeah, I got a student discount, you know? Yeah, yeah. Yes and no. But then again, when you start lowering the bar, you generally never stop dropping it, and if you haven't positioned the market where you... if your business is called cheap lockouts, and you're not the most affordable guy, you need to rethink your business model. That's a good point. The same way you can buy $1 Hamburger knows low to the place you buy $1 Hamburger from this one calorie for a buck. Yeah. So they're not coming to you for the value of your service, and then professionalism, the customer service coming for you take advantage of the price.

PJ: Yeah, that's a great point. So it's a great point.

Pete: Yeah. And, you know, as Chris says, cheap, medium or expensive? When you have multiple people who work there, taxes go up. I mean, pay your employees, everything goes up. So you have to adjust them constantly, and people get upset, but I'm in a position where I don't need every job anymore.

PJ: Yeah

Pete: But I still want every job.

PJ: Sure. Now, have you but if you with the price increases going on, like, have you noticed losing some regular customers, where they're like, I got a call around as you know.

Pete: No, I haven't yet.

PJ: You haven't? Okay,

Pete: To my knowledge.

PJ: Okay.

Pete: Because, you know, they understand, but, again, everybody only has so much money they can spend to do what they're trying to do. One big company said they could get the locks $100 cheaper through the mail. And I said, but no guarantee, we guarantee him you buy from us. We guarantee there's a warranty. Yeah, there's a warranty. And they go, Oh, I didn't think of that because we're not going to run out and do it for nothing. We're going to charge you if you supply them. But you get both of those, and I understand, but we explained that you get the service guarantee that will ensure they're working; there are problem calls that will come around.

DEALING WITH LOWER PROFITS

PJ: Absolutely. So you know, something that we've encountered that I'm curious. It's affected both of you is there have been so many price increases with so many different manufacturers that we deal with, like getting all of our prices updated and stuff like we've had to take some hits because everything was happening so fast. Then surcharges get put on and all of this other thing. Have you guys been able to keep up with it, or have you also noticed been like, oh, wow, like sales are kind of normal, but profits down a little bit because it's like this rapidly kinda...

Chris: Yeah, it was a very X, Y, and it quickly went the opposite direction. Depending on what you're doing, if you do commercial is already pretty healthy profit and commercial hardware, so if you're taking that 10% loss, 10-15, five, whatever it is, it's not killing you if the profits are still healthy. If you're going in and putting 10 bars in and you're losing $150-$200 on your profit line from that hardware upsell, it's not killing you. If you're doing residential where the profit lines are razor-thin, then yes, there's some more work that needs to be done, whether it's upselling or trying different things. Another way of hardware but yeah, and this last year, things have been well; it seems that most of us in this industry have done pretty well, in this last year right now. But it's been a lot. There have been many changes, and shipping costs have gone up, especially right there before the holiday season, so they have a big impact there. I'm sure you felt that.

PJ: Oh, yeah.

Chris: So it's been a lot of rapid changes and knowing how to either eat the loss with your clients, if it's worth it, or if it's worth it, raise the prices based on the situations all those things come into play.

PJ: Absolutely.

Pete: Yep.

PJ: Is that everything, Dad?

Pete: I noticed like on key blanks. They used to cost 80 cents. And now they're $1.80, and you go wow, that's you know, a buck. And you have to adjust your price. And even my people say, well, that's pretty expensive. I said, if we're going to stock it, we have to make a profit off of it. Can we have a lot of unusual keys more than most, and you know, you have to charge a lot more for those because you don't cut them every day. You cut them maybe twice a month or three times a month versus a Kwikset and a Schlage where you're cutting hundreds a day.

Chris: Yeah.

Pete: And you know, and my guys, I said, well, no, not key supposed to that. Didn't you get the text I gave everybody there's supposed to be little labels? A sticker saying that it's gone up and we change it in the computer. But you know, not everybody....all the guys out in the trucks, they quote the old prices, and they go, Oh, I didn't see it one up. I said, Well, you got to start checking before you start quoting.

PJ: Yeah.

Pete: Because some of it can be drastic when you're selling 100 locks and 300 keys, it makes a big difference, you know?

Chris: Absolutely.

Pete: Because of the value. Usually, I'll get a better discount right now, where you used to get a discount, and then I usually tried never to order unless I get free shipping.

Chris: Yeah

Pete: Because that just saved me everything.

PJ: Yeah. It's very accurate.

Pete: Right?

PJ: Yeah, it's, it's interesting out there. I mean, it's kind of like, I think all three of us have experienced the same thing. And I'm sure all of you who are watching and listening, have just experienced that's like a rush of like, rapidly changing, and you're like, Okay, how are we dealing with this and, you know, navigating those waters and, like, key blanks had been tough this past year to get

Chris: Yeah, it's been a lot.

PJ: It's been a lot. It's been, you know, we've had to reconfigure how many we buy at a time to extend out the hopeful supply once it arrives.

Chris: Those miscuts are finding some secondary lives. I will tell you that one

Pete: Yeah, exactly.

PJ: Yeah, absolutely. Yeah. And then the more rare keys, the nickel silver keys, I mean, there's just been, you know, it's one of those things I'm guessing from the manufacturing level, it's like, if it's a lower run key, they have to make sure they're profiting on it as well, and the raw material price is going up. It's -

Chris:  What used to be your affected by General, you know, cost living going up, you're looking at standard increase five, 10%, yearly, whatever it is, that's normal. Things cost more, gas costs, they cost more, but when you're hitting, you're getting it from both sides, you're in a rock and a hard place, the people that you're there supplying your business and the people that are paying, you are both feeling the squeeze.

PJ: Yeah.

Pete: And, you know, like, we sell to a lot of apartment buildings, new structure, construction, and they say, Okay, you give me unless you looked at your price, and then you get your bill, and you see there's an 18% upcharge. And you go, hey, I must redo that. I can't do that. I take that 18% hit.

PJ: Yeah.

Pete: And I don't make as much. But I try first to figure out now because I did like six apartment buildings I sold. And before prices, you know, they ask, and it's six months down the way and before the price never changed. And now you go, Holy cow. So making 10,000-

Chris: Yeah, buying hardware for a job six months down the road or anything. You're forecasting for that

PJ: Forecasting it. Yeah, that's, that's a tricky situation.

Pete: And it's the one company I deal with that can be tough sometimes. They do get irritated. And I said, Sorry, everything's going up, and they go okay, but the following quote I gave him was 18% higher.

PJ:  Absolutely. Great conversion to both Chris and the LockFather for talking about this. It's one of those exciting topics, and I think it's good for us to talk about it. And for everyone who is watching or listening, what's going on? How are we dealing with it? I would love to hear your thoughts and questions in the comments. Thank you, and we'll see you next time.

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