{"id":8356,"date":"2012-02-24T17:16:25","date_gmt":"2012-02-24T17:16:25","guid":{"rendered":"https:\/\/www.diaryofanadi.co.uk\/?p=8356"},"modified":"2012-02-24T17:16:25","modified_gmt":"2012-02-24T17:16:25","slug":"so-price-cutting-is-cutting-your-own-throat","status":"publish","type":"post","link":"https:\/\/diaryofanadi.co.uk\/?p=8356","title":{"rendered":"So, Price Cutting IS Cutting Your Own Throat"},"content":{"rendered":"

This story came through yesterday<\/a>. I nearly missed it, because it isn\u2019t obviously related to driving or driving instruction \u2013 until you think about what it is saying.<\/p>\n

It says that retail figures released by the Office for National Statistics confirm that discounting is the only factor driving sales at the moment, and consumers are reluctant to spend. It warns of another difficult year.<\/p>\n

It doesn\u2019t take a genius to work out that business overheads are covered by income from \"Price-cutting\"sales, with the difference being business profit. It\u2019s fairly obvious that if income from sales falls then so does profit \u2013 and it\u2019s even more obvious that if the profit is negative, you\u2019re going to go out of business very quickly.<\/p>\n

Well, I say it\u2019s obvious\u2026 but it\u2019s clearly not as obvious as it should be to many driving instructors out there.<\/p>\n

Even in my neck of the woods, where the typical hourly rate is \u00a323 or \u00a324 an hour, the number of cars you see with stupid prices plastered all over them is unbelievable. The British Retail Consortium in that link is certainly not wrong.<\/p>\n

How do these instructors think they are ever going to be able to charge a sensible price again without losing work? After all, all these special offers are designed to fill empty diaries \u201cuntil it picks up\u201d. It\u2019s debatable whether they actually do that in any case, but the more work you get the greater your overheads (fuel) become, and if you charge stupid prices you quickly run into trouble with your profits. Let\u2019s look at an example.<\/p>\n

Imagine an instructor charging \u00a322 an hour, but with very little work \u2013 say, 10 hours a week. His car costs him \u00a3100, and the fuel for those 10 hours about \u00a370. His income is \u00a3220, and his expenditure \u00a3170. His profit (wages) is therefore \u00a350.<\/p>\n

If that same instructor does a silly offer of \u201c10 lessons for \u00a399\u201d and drops his price to \u00a316 (like one I\u2019ve seen recently), then if his diary suddenly rockets to 40 hours a week (which is highly unlikely<\/strong>) his profit will be somewhere in the region of \u00a3250.<\/p>\n

If his diary only goes up to 20 hours \u2013 which is MUCH more likely<\/strong> \u2013 his profit will be in the region of \u00a330. So by cutting his prices he is doing twice as much work for 40% less profit!<\/p>\n

Even at 30 hours of work \u2013 the most many instructors can expect even under the best circumstances \u2013 his profit will only rise to around \u00a3160 for a tripling of the workload to a level where most people would simply conk out with exhaustion \u2013 particularly if they are new ADIs!<\/p>\n

Of course, with such low profits you\u2019ll inevitably want to cut your costs, and the one that drives profit most of all is the cost of fuel \u2013 which has already risen by 40% in the last three years, with the possibility of another 15% this year. So your attempts to not drive much on lessons will have pupils queuing up for the exit.<\/p>\n

The price-cutters simply can\u2019t see the damage they\u2019re doing to themselves and others.<\/p>\n

To make matters worse, they do it in the firm belief that when things pick up they can charge a sensible hourly rate again. But if you snagged your pupils with stupid prices, how are you ever going to expect to keep them if you hike prices by 40% again? It isn\u2019t going to happen.<\/p>\n

Price-cutting is simply business suicide.<\/p>\n","protected":false},"excerpt":{"rendered":"

This story came through yesterday. I nearly missed it, because it isn\u2019t obviously related to driving or driving instruction \u2013 until you think about what it is saying. It says that retail figures released by the Office for National Statistics confirm that discounting is the only factor driving sales at the moment, and consumers are […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[80,87],"tags":[],"class_list":["post-8356","post","type-post","status-publish","format-standard","hentry","category-adi-related","category-news"],"aioseo_notices":[],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/diaryofanadi.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/8356","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/diaryofanadi.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/diaryofanadi.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/diaryofanadi.co.uk\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/diaryofanadi.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8356"}],"version-history":[{"count":0,"href":"https:\/\/diaryofanadi.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/8356\/revisions"}],"wp:attachment":[{"href":"https:\/\/diaryofanadi.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8356"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/diaryofanadi.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8356"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/diaryofanadi.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8356"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}