Competitive Advantage or Not?

I work with a software company that designs state of the art software for the retail and commercial flooring industries.  The software handles all aspects of a flooring business including estimates and proposals, sales order and invoicing, inventory and accounts payable, installation crew scheduling, and of course accounting.  All of this software also works seamlessly on your iPad or iPhone.  So any business owner who invests in this software will be light years ahead of his competition who is struggling to manage his business with multiple systems and spreadsheets.

 I was discussing this software with a business owner who has spent 40 years in the flooring industry.  I reiterated how much better off his business would be once this software is installed.  Instead of agreeing with me, he offered a different perspective which kind of shocked me at first.

 He said, “Tim, I wish everyone in our industry would use this system.  I run into competitors all the time that don’t understand their costs and put in bids on projects that are way under their costs.  If everyone in the industry understood their costs, the whole industry would be more profitable.”

This scenario can really be applied to any industry.  Some business owners understand the difference between short term positive cash flows and real long term net income.  I run into business owners all the time that think they have a great company because they have a million dollars in the bank.  Of course they owe their suppliers $1.5 million.  Businesses that take in cash without realizing their true costs are lowering the profit bar for all others in the industry.

So if you have any competitors that don’t understand their costs, send them my way…

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