“So, what if you lost it all tomorrow,” I asked my luncheon host while dining in luxury at a private suite at the Duquesne Club. “What if you had to start all over?”

“Well, I guess I’d then just have to do it all again,” was his response, “I know this … I sure wouldn’t be afraid to try.”

The above words were spoken by my luncheon host, Mr. Lou Astorino, just a few days ago. Lou started Astorino and Associates some 40-plus years ago, and today his company stands tallest (my words, not his) among western Pennsylvania’s most prestigious architectural design firms.

Among Astorino’s local projects: PNC park, the new Children’s Hospital, The Trimont, and PNC’s “Firstside” check processing center on the old B&O site. Astorino has also done work in some of the great cities of the world, including the Chapel of the Holy Spirit at the Vatican.

Lou is a self-effacing gentleman. A product of the streets of Brookline; his mother lived in the same house he was raised in, right up until the time of her death just two years ago.

“She was a prototypical Italian mother”, Lou told me, and “She would bring my breakfast right here to my (downtown) office each and every morning. She took the bus from Brookline.”

What drives an entrepreneur such as Astorino? He could easily have ‘cashed out’ more than a decade ago. After all, his current backlog of work is over a billion dollars. He presently employs 200 people and he “over cares” about each and every one of them.

I asked him, “Lou, in all of those 40 years, has even one employee or associate ever come up to you and said, ‘Thanks for all that you do for me and my family, and there’s something that I really want you to know. You are doing one helluva job with this company!’”

 Ask any entrepreneur this question and he’ll smile a good while before responding. He’ll quietly contemplate the fact that, no… no one has ever thanked him or her. But then he’ll likely figure that no employee would ever stop to think that he should offer such praise. As Rod Stewart once said, “It just ain’t natural.”

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In my last article, I visited the age-old problem of costing; namely how and why companies incorrectly assess their products and services.  Usually, it's because they neglect to consider all of the less-obvious activities that relate to the manufacture and/or provision of a good or service.

But let's assume now that such (costing) problems are now under control. That each and every activity has now been captured, costed, and properly allocated to the unit price of a delivered product or service. From here, business should be simple, right?

Wrong.

Because it is from here that most of our profitability problems actually begin. Why? Because all too frequently - we give the business away!

Think about it. You have gone through all of the steps of:

1. Finding a suspect
2. Turning that suspect into a prospect
3. Convincing that prospect to consider your product/service, and
4. Providing him or her with a contract that will guarantee you get paid once you have fulfilled your end of the bargain.

You have gone through all of this - weeks, months, perhaps even years have gone by while you are accomplishing all of the above. And then, you turn around and cut the price!

Why do you cut the price (and therefore, any hope of making a profit on the deal)?

There are lots of reasons why this is done, but all of them related back to one and only one disease known as "disciplinitis." In other words, the inability to hold the line, the 'price line', because of scare tactics from the buyer.

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I remember back around 1977 or 1978 (man, I’m starting to sound like my good friend Jack Roseman!) I put a call into my then-business partner/controller that went something like this:

Me: Rick, it’s Ron and I have both good and bad news.

Rick: Well, give me the good news first.

Me: OK, remember that payroll we didn’t know how we were going to make? Well, we’re probably good for at least three, and maybe four payrolls now because I just closed the Edwards, Leap Sauer account.

Rick: Well that’s terrific! So what could possibly be the bad news?

Me: The bad news is that this deal will probably bankrupt us because I practically gave it away.

Does any of this sound familiar to you, dear fellow entrepreneur?

It should, because according to a couple of private studies that I recently found on the Internet, “under pricing” or “selling below cost” is THE Number One reason why businesses fail in their first three years of existence. Some call this “under capitalization.” I call it, “lack of knowledge about one’s costs” and/or, “order-filling, rather than actual selling.” Let’s look at these two ‘cousins.’

First off, “Do you really know your ‘delivered’ costs?”

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Once upon a time, I made a rather significant investment in a start-up that was fashioned by a couple of near-40 year old, first-time entrepreneurs.
 
Nice guys, with a nice idea that I really cannot tell you without compromising their anonymity.
 
When we first began talking about the investment we were all on the same wavelength. We were all convinced that this was an idea with universal applicability  (inside its niche, of course), and that seemingly had no competition.
 
Furthermore, their early findings told me that we could indeed have a significant first-mover advantage in our marketplace. This was partially due to the fact that the inventor of the product had filed for patent protection, and at least one very prominent buyer had strongly indicated their willingness to sign a contract.
 
So, I remember thinking, “A potential home run. All we need do now is implement this first (and highly-referenceable) site while beginning an aggressive sales and marketing program en route to an insurmountable market share.”
 
“No big deal”, I remember thinking, “This has certainly been done before.”

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My Duquesne kids are just finishing up a project for an independent business here in the area. At the risk of exposing the “client” (don’t worry Dean Miciak - no money changed hands), let’s just say that they are a type of restaurant/entertainment facility called “Joe’s Place.”

Joe’s Place opened for business some time ago - but they are still a good distance from regular profits. Joe is a friend and so we worked out a deal whereby Joe and his key partners would provide relevant background data and my students would conduct professional market research.

The kids worked hard and eventually they created and then presented their research which found holes in the owner’s methodologies.  Lots of them. Which lead me to think, how can there be so many misfires when Joe and his team had first spent money and time planning everything before opening their doors?

So I asked if I could look at the business/marketing plan they had written prior to actually starting-up. They complied, and once these data were in my possession, I immediately went to the research sections related to Market, Product, and Competitive Research. I just had to learn what they were thinking when they formulated their Product Concept and Positioning Statements.

Time and some very ambitious research ultimately revealed the following verisimilitudes:

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