Case Study—Blue Heron Storage Corp

Negative Cost Selling—Blue Heron Storage Corp.

Introduction

Kirk Douglas in a 1951 Billy Wilder film, Ace in the Hole, was a washed-up, broke, former NYC newspaper reporter who happened one day to be ‘marooned’ in Albuquerque, New Mexico.

He walks into the office of the local newspaper and tries to get an interview with the Publisher and Owner. He says to the receptionist: “Tell him I can help him make 200 bucks a week.” Intrigued, the Publisher agrees to see Kirk. Douglas immediately starts to sell himself and, finally, the Publisher asks him: “What about that $200?”

Douglas replies: “I am a $250 a week reporter but you can have me for 50 bucks!” He gets the JOB at $60 a week.

If you want to be able to sell your product or service, you can learn a lot from this—negative cost selling is all about understanding your client’s or customer’s business almost as well as he or she does. You have to be able to show the client that by using your product or service they will either reduce costs or increase revenues or some combination of the two by more than the cost of your product or service.

Here is a simple case study for a local Ottawa storage company.

Case Study—Blue Heron Storage Corp., Ottawa, Ontario

This case study demonstrates how Facilities Managers can make better use of expensive office space using Blue Heron Storage Corp.

Step # 1
Identify how much of your existing space is (inefficiently) used to store files, furniture, office equipment and other little used materials. For this example, let us assume you found 8,000 square feet of 'stuff' scattered about your offices.

Step # 2
Determine how many engineers and other personnel can be accommodated in that space. In this example, we will assume 180 s.f. per employee (gross) for a total of 45 people.

Step # 3
Determine the marginal cost of new space as if you had to go out and find it on the open market. In Kanata, Ontario lease rates in 2007 are in the order of $18 per s.f. per annum net, net, net plus operating costs including municipal taxes and utilities of about $12 per s.f. per annum for a total of $30. Thus, the cost of new space (your opportunity cost, if you will) is $240,000 per annum. It's as if you had to build or buy or lease new space on the open market today.

Step # 4
Lease two storage buildings, each 2,200 s.f., from Blue Heron Storage for $2,200 per month gross all-in for each building!

Step # 5
Stack your materials efficiently with Blue Heron Storage so that you free up the maximum amount of your existing space and take the minimum amount of storage space.

Step # 6
Count your savings! Instead of opportunity costs for new facilities of $240,000 per year, you only pay $52,800. You save $187,200 for every 45 engineers and every 8,000 s.f. you free up. And you don't have to move, build or occupy new space.

Step # 7
The best place to look for new space is in your old space! Promote more synergies and greater efficiency. Save money too! Make room for live engineers not dead storage!