If you drive down Canyon View Drive in Santa Clara UT on a Saturday afternoon you might find Nathan and Logan selling bread on the corner across from the elementary school.

I’ve purchased a few loaves of bread since moving to Santa Clara last year, but today I decided to stop and chat with the bakers for a few minutes before purchasing three loaves of delicious wheat bread. Here’s what I learned:

1. Nathan and Logan are in the 8th grade. They are best friends.

2. They make the bread themselves each Saturday morning.

3. They always make 32 loaves and sell them for $5 each.

4. Wheat is the most popular seller. But they also make white and cinnamon swirl on occasion.

5. The money they earn goes into a savings account for college.

6. They start selling around 10 am and stay on the corner until all 32 loaves are sold.

7. Why did they choose this location? “Because there are two stop signs. When people stop they see our sign.”

These budding entrepreneurs have given a lot of thought to their weekend business. I told them that one Saturday I drove by their table and had planned to purchase bread on my way home. But they were gone when I returned. “We usually sell out of bread by 2pm, sometimes sooner”, said Daniel.

I bid them farewell and told them both how much I enjoyed their bread and admired their business sense. When I pulled away, I saw two customers walking to their table and another car had pulled over. Today’s bread won’t last much longer.

Comic Book Heaven from E.J. McLeavey-Fisher on Vimeo.

Competing primarily on price isn’t a very fun way to run a business.

Unless you’re Walmart. But even then you don’t want to supply pickles to the behemoth.

Just over a year ago I worked for a company that competed solely on price. New employees were hired and given a few dollars above minimum wage. Each year benefits were reduced and more restrictions were placed on promotions. We may not be the best at what we did, but no way would anyone undercut our price!

It was a vicious cycle. A race to the bottom.

The work was technical in nature and not always easy to explain to those who were most in need of our services. Imagine going into a Best Buy and searching for a printer. The number of models and features are overwhelming to many buyers. In that state of confusion, many will select the “safe” option which tends to be the least expensive. I’ll bet the thinking goes something like “If I make a mistake, at least it won’t be an expensive one.”

We were the Walmart of our industry: big and cheap. Our prices were so low that we often had to explain how we stayed in business charging below-market rates. A number of customers assumed our low rates reflected subpar technical skills and took their business elsewhere.

Seth Godin refers to this as the tyranny of low price.

It’s been just the opposite at my current employer, Puget Systems.

Instead of competing on price we compete on quality and service. Our goal, starting from the owner on down, is to build the best quality PC we can. Sometimes that means intentionally choosing not to compete at every price point. Take the sub $750 desktop and laptop, products heavily advertised by Dell and HP, for example. We don’t offer a model in the price range, not because we can’t but because doing so would lead to a number of compromises in quality we aren’t willing to make.

What I’ve learned is that companies that compete solely on price seldom give their customers reason to look at anything but the bottom line. Companies such as Walmart, Amazon and even Costco can offer a low price and still survive but only if they grow so large that the massive quantities sold to make up for the low margins.

What separates your product or service from the competition besides price?

When my business partner and I began Ox Consulting, we made a list of services we could potentially offer our customers. I was surprised at how many type of projects we could bid on. When starting out, it’s natural to cast your net far and wide. The market appears large and the more diverse projects we could take on, the more money we’d earn.

But this is not the correct approach. At least it wasn’t for us.

When it came time to list our services on our website, we decided to scale back our offerings and revisit our list. After a number of conversations, we crossed off every service except three. Those remaining had three things in common:

1. We loved to do them

2. We knew we could do our best work on them

3. We could complete them quickly

As a start-up, it initially seemed counter-intuitive to limit the number of service we offered. But we both felt strongly that this was the best approach. No need to bite off more than we could chew. Plus, we could always expand our services, but we knew scaling back and leaving money on the table would be difficult. So why not start by only accepting those projects we really enjoyed doing? Isn’t this at least one of the reasons we decided to branch off on our own? Of course it was.

So what what began sounding counter-intuitive become anything but.

Instead of taking on on projects outside of our self-imposed constraints, we focused on what we did well which, in turn, improved those skills even more so. It also makes saying, “No thank you” that much easier.

A week doesn’t go by where I field a call from someone asking us to bid on a large project that doesn’t fit any of the three characteristics I listed.  If we didn’t have these constraints in place, we’d eventually accept a project that’s outside of our skillset, would take six months to complete, and wouldn’t be worth the larger check.

The customer also wins, because I’m able to refer them to someone who is a much better fit than Ox is. I haven’t had a single person unhappy with me when I tell them their project sounds interesting, but falls outside the size or type of project we do best. What I’ve found is that I earn their trust by sending them to someone who is a better fit. And if they have a project that does fit Ox, they usually return knowing that we’ll knock it out of the park for them.

It has taken a few years working together to determine our sweet spot in terms of type and size of projects. But we both agreed on those topics before we began working together, and I’m convinced it’s saved us from accepting at least three poison projects. That may not sound like much, but even a single project that drags on for months can extinguish every ounce of excitement and momentum small businesses thrive on.

Do you impose constraints on the service and products you offer? Or do you feel that limits your ability to respond to market conditions and ever changing customer needs?

I’d recently interviewed a young man and wanted to add him to my team. Before doing so I had to get the CEO to agree to a salary and benefits package that would entice the candidate to leave his current job.

We bantered back and forth. I brought up the candidates experience and skills which would allow him to manage accounts from day one. The CEO did not have an issue with the salary I proposed, but he was concerned it might cause issues within the group.

Both of us held firm to our positions. We both raised our voices, but not in a pejorative manner. We were both passionate about the company. I wanted the best person for my team, while the CEO wanted what was best for not just my team but the entire company.

When I’d just started to wonder if I was pushing the issue too far, the CEO made a proposal we both could live with. I shook his hand and told him I’d rewrite the job offer and have it ready for him to sign by end of day.

As I turned around to leave, he said, “I just want you to know that I’m OK with this level of debate.”

“So am I”, I replied.

That was six years ago, and I still regularly reflect on that exchange. What the CEO told me by his last remark and actions was that he was open to new ideas. That he was confident enough to hear others out and respect their opinions. It also taught me that not all debates must end with one winner and one loser.

I came to appreciate that boss even more when my next manager was the polar opposite. He was closed to any idea that didn’t originate with him, and he didn’t want to hear when he was leading the company off a cliff.

My current business partner is similar to my former CEO. We can debate a technical issues for hours, even raising our voices to the point where we have to take a break and return to the issue. He’s helped me see a topic from angles I’d never considered. He’s also allowed me to back off a opinion I’d asserted before more information came to light.

The relationships I enjoy most are those where my own beliefs and assumptions are questioned. Where I’m pushed in uncomfortable directions, yet come away with a new idea. That’s when I recognize the most growth.

I visited my neighborhood Super Cuts last week because Luca wanted her hair trimmed before the start of school. I decided to put my name in as well.

Within a few minutes, a young woman called my name. After asking how I’d like my hair cut, she began telling me about one of her employees who was giving her problems.

She explained that, as the manager, she was expected to train each of her stylists on the Super Cuts way of cutting hair. This employee, who has been cutting hair for many years, refused to practice the preferred methods and wasn’t likely to pass the annual exam given to all stylists. “She’s not expected to use them on each client, but she needs to use them most of the time.”

I asked why it was so important to follow the standards set by Super Cuts and was told that it helped bring continuity among stylists. Since most customers were walk-ins, it was important for them to expect a level of consistency regardless of the stylist. “It’s the most efficient way to cut most hair styles”, she explained.

And then she said something that struck a chord. “Customers don’t expect to wait more than 15 minutes. I can’t afford to have one stylist taking an hour to cut a child’s hair by not following the standards while the rest of crew is able to perform the same cut in 15. When that happens, nobody is happy.”

This makes sense, and I’ve been considering similar ideas since starting my business. Before we took on our first client, my partner and I decided what type of work we enjoyed the most. We both prefer to work on small projects that we can complete in no more than two weeks time. We’d also rather work with a one or two person shop instead of a waiting months for a large company to open a PO. As a small business, even taking on one client, whose needs do not match our talents, can set us back months. As my stylist said, when that happens, nobody is happy.

Large companies also love meetings. And meetings breed more meetings. No thank you.

But completing a website in less than two weeks means following a process a we know well and not veering off the path into extensive customization. Occasionally, clients request features that could double or triple the length of the project. It’s not easy to leave money on the table, but we’ve stuck to our guns and only taken on work we are good at and that we can turn quickly. My visit to Super Cuts reaffirmed my commitment to small and repeatable projects.

I suppose that makes us more Super Cuts than Le Salon Paul Morey.

Sometimes you learn a business lesson in the most unlikely of places.