Shorten the Chain
Is it possible to cut out the middleman?
I was working with one of my secular clients. He’s highly principled.
Money is not his main thing. He’s successful by all worldly measures. And he wants to look after his fellow human beings. I think he’ll join us soon. Pray this happens.
He thinks a lot about his business. He knows how to work on his business rather than in it!
Here’s the thing.
In his business there are more than a typical number of steps along the sales and supply process.
Let’s say the usual thing is for a manufacturer, a wholesaler, and a retailer. I know that’s an oversimplification – but work with me. It more or less sounds right, doesn’t it?
In his world it’s a bit more unusual. By the time he can sell his line of products, there is an original manufacturer, an overseas shipper, an agent or a kind of aggregator, a consultant or specification level, a supplier/warehouse level, another shipper, a designer, then a sales and demo team – all handled at different stages by different players. After all that, finally my client gets to add value and make a sale.
Every level of this process takes a penny.
Fortunately it’s a high margin segment. But the problem is that it’s tending towards commoditization. The margin is being squeezed.
What’s my client doing about this?
We discussed it. How can he reach up and down this chain to bring “in-house” the next level of the chain on either side of him?
That’s a challenge.
To test this out he selected one of his smaller customers, a customer who is a bit under the radar due to size.
He offered to that customer that he would take the supply challenges and price fickleness off their hands. How?
Below him, he promised to guarantee their supply and hedge their price.
Above him, he created much good will by buying up (and committing to) a year’s worth of supply (an actual amount plus a forward contract commitment).
Which business above and below him would not appreciate what just happened?
Now, there is a lot of detail I’m leaving out because I don’t want to identify the client or his business. I hope I’ve left you enough information to challenge your thinking. It won’t be easy.
In your business can you cut out a step here and there – maybe one above you and below you, to increase your margin, simplify the process, delight your customer, and improve service?
My client is gaining a few points of margin, improving financial performance, speeding up the sales cycle, and impressing his customers.
Go for it.
- If you have a wood shop and you make items, maybe you could add design services and secure wood supplies from a wholesaler rather than a retailer?
- If you make religious products, maybe you can become the supplier of components rather than a consumer of them?
- If you are a bookkeeper, maybe you can add tax, or business planning, or financial analysis, or prepare internal reports for your customer?
- If you are a family or a parish or a monastery why not produce your own food and preserve it in a group kitchen model, and sell the surplus or distribute it to the poor?
I know you get it!
Go for it.
God bless you, your family, and your works. You can be Catholic and successful in business. Believe it.
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