2018 – Left Coast Scales

A Common Mistake in Sales

Having a new sales person, after never having one, is a learning experience. Hiring someone without knowledge of the industry has its own challenges. Learning the products and services that are sold, and the combinations of both, can be a long process.
A common process that we have, that many other industries don’t, is that we sell products marked up from the net price, and hence don’t have a true list price. To my surprise many people, whether technicians, salespeople, or administrators don’t understand how to correctly mark a product up.

There are two methods that can be used to get your list price. The Percentage Add On, and the Percentage Mark Up. Most people use some form of Percentage Add On to create their list price, however to truly control your profitability a Percentage Mark Up should be used instead.

To show the difference between these two methods I will give several examples.

I will be using the following values to determine the selling price:
A Part Purchased for: $500
The desired Profit: 25%
Where S = Sell price, P = Purchase Price, Y = Desired Profit

PERCENTAGE ADD ON FORMULA
S = P + (P x Y)
$625 = 500 + (500 x 25%) or 500 +125

PERCENTAGE MARK UP FORMULA
S = P ÷ ( 1 – Y )
$666.67 = 500 ÷ (1 – 25%) or 500 ÷ 0.75

An Add On just adds a percentage to a known value and is easy to do, but it doesn’t work backwards. Using the Percentage Add On example above I get a selling price of $625. But what happens when I try to take 25% back out of the $625 — $625 x 25%. I end up with a funny number that doesn’t match my add on, $156.25. With a Mark Up this doesn’t happen because you are actually increasing the purchase price by the selected percentage. Using the Mark Up example above I get a selling price of $666.67. I take out the 25% — $666.67 x 25% and get $166.67 the exact amount added to my purchase price.

As prices and percentages go up the difference between an Add On and a Mark Up increase substantially. For example Marking Up $100 by 40% will give a sell price of $166.67 where an Add On gives $140. Now try it with $3000: Mark Up = $5000 Add On = $4200.

Setting your list prices using a percentage Add On will cause problems if you ever try to discount. Examine the following chart to see the problems that can occur.

Note that the expected profit doesn’t match up in either chart. In the Add On Chart the expected profit is always smaller than the Add On minus the % Discount, whereas in the Mark Up Chart the expected profit is always larger than the Add On minus the % Discount. The reason for the discrepancy in the profit is due to where the numbers are being taken from. A 10% discount on a 50% Mark Up is not the same as a 40% Mark Up. The initial price is being increased by 50%, so when the 10% discount from the Marked Up price is taken, it is from the higher price, not the initial price that was Marked Up. 5% of $100 is $5, whereas 5% of $150 is $7.50.

Making money is why we are in business. Making it smart is better for us all.

Finding and Hiring the Right Person and a Plan to Keep Them.

In many small businesses the “Friends and Family Plan” is the most common hiring strategy. (Friends and Family hiring consists of bringing in people you have a relationship with, because you know them and they need a job, or have a skill you need, or you just like them. The biggest problem with this hiring technique comes when you need to fire them. Can your relationship survive?) Companies use this method until they reach a point where their friends and family can’t meet the skills or company needs, then they hire out.
My son entered to the scale industry by default. He didn’t want to be here, but had made some poor decisions with school, and voila, you’re a scale technician now. He was resentful, and didn’t want to work in the company, but needed the money. He started part time as the second man on a job when we needed unskilled labor. I tried to instruct him in the basics; it went in one ear and came out the other. When I fired one of my techs he assumed that he would be the natural replacement, since he had been working for me for so long. I had a long talk with him and explained that he would have to compete with others for the job, since he had shown so little interest. He had recently gotten engaged and was now looking at his future and had to make some hard decisions. He came to me and asked me to re-consider. He promised to buckle down and try. I decided to give him the chance. He was a changed person; he worked harder and was eager to learn. It was a night and day difference.
In the example above, my son shows what happens when you hire without a plan. When I gave him the chance to come on full time, I presented him with my plan and his path to get where and what he wanted. I hadn’t done this originally and, to my regret, wasted an opportunity to have him ready when I needed him. The blame was mine, not his.

Plans and Paths, what is the difference? For me, the plan is how I am going to find, hire and train the new technician. The path is how the technician moves forward in his skills.

Developing a plan for your employees that detail their opportunities helps keep them motivated, and motivated employees tend to be happy. Happy employees don’t quit and will put up with annoyances that are intolerable to an employee that isn’t. Reiterate the plan when you have your yearly reviews and update it as necessary asking the employee for their input. The key to retention is to have a stable workplace where the employees are happy. Surprisingly happy doesn’t always equate to more money. Sometimes it’s responsibility, other times it is stability. Get to know your employees and what makes them tick.

Finding the right person.
Hiring is a headache. With the down economy and so many people looking for a job, it seems that finding the right person for the job should be easy. The problems lie in sorting the wheat from the chaff. Put up a detailed ad describing exactly what you are looking for, and you will be inundated with people that you wouldn’t hire to wash your car, let alone represent you and your company. Hiring the wrong person can be extremely costly, in time, money and even the reputation of your company.

Hiring the right person requires its own plan. Get out a notepad and let’s break it down:

Define the perfect candidate for the job. Write out the skills he will need, the specific job requirements he will fill, and the personal characteristics you desire. Use this to create a report card that you will use to grade each applicant.
Define the job. Clearly outline the expectations for the position. Set the pay scale. Formalize your proposed incentive plan for the position.
Pre-screen your applicants. Go through the resumes and applications (the chaff). Don’t talk to anybody without pre-screening them and seeing if they meet on paper the qualifications and skills you wrote down in #1. Only then set up the interview. The interview is where you find the wheat.
Look for successful people. Find the person that has shown a desire to excel. Ask about awards they have received. Question them about how they measure success in themselves. Ask open ended questions about how they have succeeded in the past. Check their job history and references.
Don’t settle for good enough. In this economy there are stars out there waiting to be hired. Take the time you need to find the right candidate and make the right hire.
Look for stars elsewhere. Finding the right person sometimes means stealing him from the competition or even from another industry. In this economy it says a lot that these people are still working when others aren’t.

Be aware of what you can and can’t ask during a job interview. The following link is an excellent resource for do’s and don’ts.
https://www.admin.mtu.edu/hro/forms/whatyoucanandcantasklongversionmay05.pdf

After performing due diligence, and weeding through the applicants you have settled on the person you want to hire. Take the next step and make your offer.

How Do You Define Quality?

Having been in the scale industry for the last 27 years, I have recommended many different scales and systems for my customers. For many years I would help customers spec their needs as part of the service that my company provided. In order to quote the correct product, I often had to dig deep into the weeds to determine what the customer really needed even when they didn’t know themselves.

I had a food manufacturer ask me to quote him some scales for checking the pre-packaged weight of his product. After a site visit, and talking to production and Quality Control, I made several determinations:

The maximum product weight was 1.5kg and minimum was 500g.
The minimum required tolerance was +/- 0.5g.
The scales needed to be easy to clean.
The scales were subject to intermittent water spray.
The customer wasn’t connected to a data collection system, but wanted the ability to connect at a later date.

I quoted a 3kg wash down, stainless steel bench scale that read by 0.1g. After presenting the quote, I was contacted by the customer and told that my quoted price was too high. The purchasing manager had found the same scales on-line, for a third of the price I had quoted, and purchased them. I asked the purchasing manager where he was getting them from since he was paying 40% less than my cost for them. He wouldn’t tell me but he did have me install them.

Guess what? They weren’t the same scales I had quoted. The only thing that matched was the capacity and resolution. I had quoted an entire stainless scale and these were plastic with a small stainless pan. They weren’t water proof or even water resistant and they couldn’t connect to a data collection system.

This customer purchased eight scales, and by the end of the year had replaced all of them at least once and several twice. Water damage wasn’t covered under the manufacturer’s warranty.

At the beginning of the new fiscal year the Quality Control Department installed the new data collection software. All eight scales had to be replaced with the scales I had quoted originally.

I had quoted quality scales that matched the customer’s needs. After a year in use the customer was convinced that the scales they had purchased were junk. Honestly there was nothing wrong with the quality of the scales purchased. They had just purchased scales that didn’t meet their needs.

Quality can be a low cost import, but it has to meet your needs and requirements. If you don’t know what you need, and you bring in an expert to help define your needs and requirements, trust the expert. If you aren’t sure that the expert is correct, question them, and determine how and where they got their data. Most scale companies won’t charge you for this expert advice, but they do expect to have a strong chance of getting the order.

Quality also comes in the after sale service. If I had quoted the wrong scale in the example above and sold the customer the same scale they purchased. I would have honored the implied warranty. Not every scale company will do this, so know whom you are purchasing from.

Quality in a product is determined by you. Having your needs and expectations met on a product is dependent on the definition of your needs. Without a true definition of your expectations you will not be satisfied with what you are purchasing.

Booting Your Hopper

I was recently called out to a customers because their hopper scale kept filling after the filling auger was turned off. I performed a thorough inspection and couldn’t find anything mechanically wrong with the scale. I had the customer run through the batching process so that I could observe the problem from the customer’s perspective. I watched the indicator slowly fill the hopper and after the filling equipment turned off, the scale slowly and erratically added an additional 200 to 300 pounds to the batch. I then went out and watched the batching equipment fill the hopper. As I watched, I saw the boot on the left slowly start to suck in until it was displacing only half the volume it had when the batch started. Somehow or another the boot was being put under vacuum and the boot was pulling on the scale. When the batch was done the boot slowly relaxed and returned to normal. With the customer’s consent I put a pipe into the top of the boot to relieve the vacuum. We ran another batch and the problem went away. I told the customer to figure out where the vacuum was coming from and fix it, but the problem was fixed for now. Rubber boots can cause some weird and perplexing problems.

If you have a tank or hopper that is being filled with powder or something similar, you have seen boots. Boots can be made of many different materials from cotton fabric to silicone rubber. They often are the culprit in weighing issues on hoppers and tanks that had been working fine and all of a sudden aren’t. They are used when you have materials that need to be transferred into a hopper or tank but the material will cause a lot of dust or want to flow out of the filling aperture. Since hard piping to a scale is a no-no, boots were created to allow the scale to move freely but still confine the material being transferred.

All of the issues that will occur with boots come down to some kind of bind. Here are some of the problems that you will see:
1. Material builds up inside of the boot and bridges across the gap between the fill pipe and the pipe on the hopper.
2. The boot is installed without any give, or too tightly.
3. Material works its way between the receiving pipe and the boot.
4. The material sticks to the boot and hardens.
5. The boot stretches like a rubber band as the hopper fills and moves.
These issues all prevent the hopper from moving freely. Without free movement the scale will often not zero correctly or weigh non-linearly.

These problems can be very difficult to find and diagnose. A full inspection on tanks and hoppers is not complete without examining the boots and piping. When problems are found it is always best to have your customer clean, repair, or replace suspect piping and/or boots to prevent problems from developing.