Back to the on-screen lesson ·
An exclusion comes from capacity and promise, not from a judgment of worth; contribution per scarce hour shows what a poor fit costs; and a no is said so the customer has somewhere to go.
Paper packet. Every task here also exists on screen, where it is checked automatically; answers written on paper are not assessed by Nydus. When you are back at a device, enter your answers there.
You will state an exclusion from what the business can deliver rather than from a view of the customer, work out with contribution for each scarce hour what a poorly fitting job gives up, and put a decent refusal in order.
You can define a segment by a situation and a need. Choosing one segment to serve deliberately is also choosing, at least for now, not to build the offer around others. This lesson is about making that choice on purpose: measuring what a poorly fitting job really costs, and saying no to it in a way that is honest about the business and decent to the person asking.
| Term | What it means |
|---|---|
| Fit | A customer whose need the business can meet to its standard, with the time and equipment it has. |
| Exclusion | A stated kind of work or situation the business does not take on. |
| Scarce resource | The one the business runs out of first, often the owner's hours. |
| Contribution | Price less the costs a job brings with it. |
| Contribution per hour | Contribution divided by the hours of the scarce resource the job uses. |
| Referral | Pointing a declined customer to someone who does the work. |
An owner who says yes to every request does not end up with more customers served well. The work that fits the business competes for the same hours, the same van and the same oven as the work that does not, and the work that does not fit usually takes longer, goes wrong more often and earns less for each hour it uses.
Compare two jobs at Bright Home Cleaning. A usual clean is priced at 90 dollars, uses 10 dollars of supplies and takes 2 hours: 80 dollars of contribution, 40 an hour. An after-builders clean is priced at 170 dollars, uses 30 dollars of supplies and hired equipment and takes 5 hours: 140 dollars of contribution, 28 an hour. The big job looks like the better sale. Measured against the resource the business is short of — cleaners' hours — it is the worse one, and it risks the standard every other client is paying for.
$$\text{contribution per hour} = \frac{\text{price} - \text{costs the job brings}}{\text{hours it takes}}$$
Another way: table
Two jobs, measured the way that matters when hours are short.
| Job | Price | Costs it brings | Hours | Contribution | Per hour |
|---|---|---|---|---|---|
| Usual clean | 90 | 10 | 2 | 80 | 40 |
| After-builders clean | 170 | 30 | 5 | 140 | 28 |
Another way: steps
Find the scarce resource. It is whatever fills up first: the owner's hours, the bench, the oven, the van. If nothing is full, there is no cost to saying yes beyond the job's own costs, and the hourly comparison does not apply yet.
Work each job's contribution. Price less the costs the job brings with it: supplies, hire, parts, fees. Leave out costs paid whatever happens, such as rent.
Divide by the scarce hours. Contribution over the hours of the resource the job uses gives what an hour earns on that work.
Compare, and count what a yes gives up. When the resource is full, every hour the poor fit uses is an hour taken from better-earning work. Multiply those hours by what they would have earned and subtract what the poor fit earns: the difference is the cost of the yes.
Check the answer. The hourly figure must be smaller than the contribution whenever the job takes more than an hour. The cost of a yes is zero or less if the hours would otherwise sit idle. And the decision should survive a change of a few dollars in either price: if it flips, the jobs are close and other reasons, such as risk to the standard, should decide.
Dividing by hours is allowed because, when the resource is full, hours are what each job really consumes; a job that earns more in total but uses three times the hours crowds out three jobs. Comparing hourly figures is the same logic a farmer uses for land or a café for table time.
Counting the hours at what usual work earns is allowed only when that work is really waiting. A repair shop with a line out the door gives up real money for every hour; a quiet week gives up nothing, and the same job becomes a good one. The arithmetic follows the situation, so check the situation first.
The reason for an exclusion must come from the work: equipment the business does not have, a skill it has not got, a deadline it cannot meet, a promise it cannot keep. 'We are not equipped to replace e-bike batteries safely' is a boundary. 'People who haggle are cheapskates' is a judgment about a person, and it has no place in a policy: it is unkind, it is often wrong, and in the United States federal and state public-accommodation laws forbid refusing customers for who they are, such as their race or religion. Exactly which groups are protected varies by state, so check the rules for your own state.
Say no in an order that respects the person asking. Show you heard the request. Give the boundary, about the work. Point somewhere useful. Then, afterwards, write the request down: a no repeated often enough is evidence that a segment is growing, and the business may later decide to serve it properly.
A boundary stated once, in a conversation, has to be stated again for every customer. Written on the price board, the website or the order form, it saves both sides the time. 'We clean lived-in homes; we do not take after-builders cleans' turns a dozen awkward calls a month into none, and the customers who do call are the ones the business can serve well.
A written boundary also protects the staff. A new employee who has been told 'use your judgment' about which jobs to take will say yes to everything, because saying no to a customer feels like a risk. A written line gives them something to point to.
An exclusion is a decision about now, not forever. Keep a count of the requests it turns away. If after-builders cleans go from two requests a month to twelve, and the business could buy an extractor and train a crew, the same arithmetic might come out differently: a dedicated crew, priced for the work, could earn more an hour than a usual clean. The log of declined requests is the evidence for that decision, which is why the last step of a decent no is writing it down.
A small business usually keeps its exclusions in the owner's head, which works until the owner is away. A short written policy, one page at most, lets anyone answering the phone say the same thing. It needs three parts for each exclusion: the work that is not taken on, the reason in terms of the work, and where to send the customer instead.
Bright Home Cleaning's policy reads: 'We do not take after-builders cleans: they need extraction equipment we do not have. Refer to Clearview Contract Cleaning. We do not clean commercial kitchens: they need certified degreasing. Refer to the county's list of qualified contractors.' Two lines, and every caller gets a clear, decent answer.
Review the policy each quarter against the log of declined requests. If one kind of request has doubled, the policy may be costing the business a segment it could now serve; if a kind has disappeared, the line can go. A policy that is never reviewed slowly stops describing the business it was written for.
The hardest exclusion is the one that affects an existing customer. A long-standing client of Bright Home Cleaning asks for an after-builders clean of her new extension. Saying yes feels like loyalty; done badly, it risks the relationship it was meant to protect. The same rule applies as for a stranger: give the reason in terms of the work, offer somewhere to go, and make clear that the usual service carries on unchanged. 'We can't do builder's dust properly, but Clearview can, and we'll be back for your usual clean on Tuesday' keeps both the boundary and the customer.
A two-mechanic bike shop in Minneapolis had always taken any repair through the door: road bikes, children's bikes, electric bikes, the occasional motorized scooter. By spring the bench had a three-week waiting list, and regular commuters were going elsewhere because they could not wait.
The owner went through two months of tickets. Commuter tune-ups and flat repairs averaged 45 dollars of contribution for 1.5 bench hours, 30 an hour. Scooter and e-bike motor repairs averaged 110 dollars for 6 hours, about 18 an hour, and one in four came back with a problem. Every scooter job took six hours from commuters who would have earned the shop 180 dollars in that time.
The shop stopped taking motor work. A sign at the counter read 'We repair bikes, not motors: for e-bike and scooter motors, try the shop on Lake Street', and the staff were given the line to use. Within six weeks the waiting list for commuter repairs was down to four days, monthly contribution rose by about 1,400 dollars, and the comebacks that used to eat Saturday mornings stopped. The owner still logs motor requests; if they keep climbing, a trained mechanic with the right tools might one day make motor work pay.
Small-business advisers, including the counselors at the U.S. Small Business Administration's SCORE program, often tell owners that trying to serve everyone is one of the most common reasons a young business struggles. The arithmetic in this lesson is the reason: when the owner's hours are the limit, work that earns less for each hour quietly lowers the whole business's earnings, however good each individual sale looks.
Turning work away is turning money away. When a scarce resource is full, a poor fit displaces work that earns more for each hour.
The bigger job is the better job. Total contribution says nothing about the hours it took; per hour is what counts when hours are short.
An exclusion says the customer is not good enough. It says the business cannot do that work well; the customer deserves a clear answer and somewhere to go.
Leave the boundary vague so nobody is put off. A vague offer attracts the work that does not fit and disappoints the people it was for.
Find the usual clean's contribution: price 90, supplies 10.
$90 - 10 = 80$
Price less the costs the job brings.
Divide by its 2 hours.
$80 \div 2 = 40$
What an hour earns on usual work.
Find the after-builders clean's contribution: price 170, costs 30.
$170 - 30 = 140$
More in total.
Divide by its 5 hours.
$140 \div 5 = 28$
Less for every hour.
Find what the big job gives up in a full week.
$5 \times 40 - 140 = 60$
Sixty dollars less than the usual work the hours would have done.
Count the requests in the log.
$3 \text{ or } 4 \text{ a month}$
A pattern, not a single conversation.
Name what the work needs.
$\text{a charger analyser and training}$
Neither of which the shop has.
Note what the bench earns now.
$30 \text{ dollars an hour, with a line waiting}$
Every hour has a use.
Estimate a battery job: 3 hours contributing 60.
$60 \div 3 = 20 < 30$
Less per hour, and done badly at first.
Write the boundary.
$\text{We do not replace e-bike batteries}$
Stated plainly, about the work.
Keep somewhere to send people, and keep logging.
$\text{a specialist's name; the log}$
In case the requests keep growing.
Name the scarce resource.
$\text{one oven: 60 covers at a time}$
It fills up before anything else.
Compare the request with the limit.
$150 > 60$
The kitchen cannot cook it to its standard.
Write the line the owner says.
$\text{one oven, sixty at most; try the Mill Street caterer}$
A boundary about the kitchen, with somewhere to go.
Log the request.
$\text{large events: 9 requests this year}$
Evidence collects over time.
Price a second oven: 4,000 dollars.
$9 \times 900 = 8100$
Contribution the requests would have brought at 900 each.
Compare with the cost.
$8100 > 4000$
The boundary may move, because the log shows real demand.
Say what changes first.
$\text{the kitchen, then the policy}$
Until the oven is in, the honest answer stays no.
Name what the boundary is about.
$\text{the oven's capacity}$
Not the couple asking.
Compare the request with the capacity.
$150 > 60$
More than the kitchen can cook to its standard.
Write the line the owner could say.
Bright Home Cleaning is asked to clean a house straight after a builder has finished, which would take about $3$ hours of heavy dust work with an industrial extractor it does not own. Which reason for declining is a sound exclusion?
Complete the worked solution: a usual job is priced at $160$ dollars, brings $16$ dollars of costs and takes $2$ hours. A large job is priced at $285$ dollars, brings $35$ dollars of costs and takes $5$ hours. Find each job's contribution per hour, and how much more the usual job earns for each hour.
Find the usual job's contribution per hour.
$(\text{price} - \text{costs}) \div \text{two hours} =$ u
What an hour earns on the usual work.
Find the large job's contribution per hour.
$(\text{price} - \text{costs}) \div \text{five hours} =$ l
What an hour earns on the large job.
Find the difference per hour.
$(\text{usual}) - (\text{large}) =$ d
What every hour moved to the large job gives up.
Say when the difference matters.
$\text{when hours are the scarce resource}$
With idle hours, the large job only adds.
Neighborhood Kitchen's owner drafted a note for staff about which catering orders to decline. Mark every sentence that states a limit of the business rather than a judgment of the customer.
This task has no paper form; do it on a device.
A customer asks Northside Repairs to replace the battery in an electric bike, work the shop has decided not to take on. Put the owner's reply in order.
Number the steps in order (write the number in the box):
Bright Home Cleaning compares a usual clean with an after-builders clean. The usual clean is priced at $80$ dollars, uses $10$ dollars of supplies and takes $2$ hours; the after-builders clean is $140$ dollars, uses $30$ dollars of supplies and hire, and takes $5$ hours. Fill in the contribution of each job and what each hour of it earns, in dollars.
| Contribution, dollars | Per hour, dollars | |
|---|---|---|
| Usual clean | ||
| After-builders clean |
A Colorado landscaping crew is booked solid with lawn and bed maintenance that earns $60$ dollars of contribution for each crew hour. A homeowner offers a one-off retaining-wall job that would take $13$ crew hours and contribute $347$ dollars. How many dollars of contribution would taking it give up this week?
Answer:
A small bakery gets about $8$ requests a week for gluten-free birthday cakes. It bakes everything in one kitchen where flour is in the air all day. Which line should it put on its order form?
Lesson test: one question per skill, one attempt each, no hints. Your answers are checked when you submit.
Northside Repairs' usual jobs earn $30$ dollars of contribution for each hour of bench time, and there is always a line of them. An unusual appliance repair would take $3$ hours of bench time and contribute $79$ dollars. How many dollars of contribution would taking it give up?
Answer:
You can say no to work that does not fit, give a reason about the work rather than the person, and show in dollars why it can be the better decision. Tell someone why the bigger job can earn less. Next: the job a customer is really trying to get done.
18. Your turn: Neighborhood Kitchen and the 150-person wedding, step 3
$\text{sixty at most; the Mill Street caterer does large events}$
Honest about the kitchen, with somewhere to go.