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New business format.

Discussion in 'Business & Tax Advice' started by Jordy123, Feb 5, 2014.

  1. Jordy123

    Jordy123 Registered Member

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    After learning a hell of a lot here at BHW I have decided to change my business plan and I would love to have comments and criticism! Pick as many problems with it as you can! Don't hold back be mean haha.

    Right. I will explain a few details:
    The supplier is a Manufacture, so we are getting the best price.. Also the manufacture has LOCKED any new accounts so that means the competition is fixed.
    After doing research I found that people who buy direct from manufacture put at least 35% markup. So at the start we dropped to 25% and offered the same price to everyone aslong as they purchased a full box.

    That means companies who purchase from the manufacture are the distributor of that product so we can only sell to people who either, a) use the product and b) resell

    Now the problem with people reselling is that they need to put there markup on, so the price now comes from 35% to way over 150% due to the reseller only selling multiple units rather than boxes because if the consumer was to purchase boxes they would qualify to purchase from the distributor cutting out the middle man.

    I forgot to mention the product is Hose Clamps.

    Now a few of my customers are HOSE MANUFACTURES, mainly Car performance hoses (silicone) they are one of the biggest in the UK and I figured hey, they supply rally teams, garages, end users, clubs and many more! So I figured they already have the customer base but they are not selling many clips. Why? Because the teams etc was placing large enough orders to go straight to the distributor. Now for me to contact them teams and clubs etc etc and offer them look I can sell this to you at blah blah they won't look twice at me, mainly because they would only save like 5-10% and if they are placing orders of 300-500 thats only 15-50 saving, and of course you have the already built customer relationship between them and there current supplier.

    So I came up with this.

    Supplier--ME(5%markup)--Selected Companies--(25%-30%markup)--End user.

    So now selected companies with a large enough existing customer base can compete and turn there customers into more sales. Simple as that.

    The problems and solutions.
    -Less markup = less proffit ..... True but I have put a minimum order of £3000. So that £3000 would give £150. But that is orders I wouldn't be able to have if I didn't do this. Plus I put 25% on orders normally 300-500 and that is only £60-100. And with the increase in BULK sales the manufacture will notice the rise, and in the future should grand us lower prices so that 5% can become 10%...
    -How to find selected companies ..... Manufactures of products that REQUIRE hose clamps, so Hose manufactures is simple. Trade DIY stores, mainly the UK's largest stores supplying both trade and public.

    Input is welcome!
     
  2. lincolnave

    lincolnave Jr. VIP Jr. VIP Premium Member

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    The biggest hole in your business method, is it myopic view of your business.
    Problem, selling on "low price", will only work when you have the cheapest price and the margin will be admittedly small. Competing on price has been proven to be a marginal business method, at best, take a look at Walmart. Would YOU want to work there? Is that the type of business you want to build?


    Be better than the lowest price. Pay for and run a few contests(Give away Ipads), have people show off their engines (I.E. post on facebook or where ever.) with your hose clients' products. Don't make it about you (your clamps) boost the value of your clients' products. Be the funnest guy to buy hose clamps from and you can forget about being the cheapest.

    Build out your business plan to be about more than just price and you will find greater value and much more fun in your work.
     
  3. Jordy123

    Jordy123 Registered Member

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    Oh I totally agree with that you are saying, but the manufacture of the performance hose cannot compete against there current suppliers for example:

    [Performace Hose Manufacture]-->Sells hose to Ford RS rally team-->Rally team uses the hoses-->Rally team buys clamps from wholesaler because of the cheaper price(Im talking a clamp @ 1.00 beeing sold for 0.30)
    Now if I was to approach that rally team and say look I can do them cheaper than your current and also offer this and this I could go 5% cheaper but because 5% would only mean pennies per unit that would not warrant them to switch supplier especially as they have a customer relation with there supplier.

    But if it was this.
    [Performance hose manufacture]--->Sells hose to RS team--->Sells clamps to fill there garage stock (included clamps non-related to the hose they purchased)
    Now that would be idea because a) its sales I wouldn't be able to get, b) it gives the hose manufacture the extra edge over the competition, c) resulting in more sales

    Me and the hose manufacture will be working very close and run promotions etc etc and with the major increase in sales the hose clamp manufacture will see the increase and we can use that as a tool to get better prices in the future.

    Now this is just for that one industry and one hose manufacture.

    I intent the do some heavy SEO related the hose clamps etc etc, get top spot in google for terms for wholesale, bulk, trade etc etc.