Do Business Well

Many companies find that after their first few years they hit a sales plateau. Up to a certain volume, business comes easy. Then there comes a time when it seems as if the next sales dollar is very elusive. Ironically, the sales ceiling usually hits just at the point where profits start.

A variation of this dilemma is the seasonal sales phenomenon. I know of one motorcycle parts distributor who made huge profits eight months out of the year, only to lose almost all of it in the winter months.

These are only two among many frustrating situations faced bythe new enterprise struggling to create a stable sales level abovebreak-even. See if any of the following sound familiar:

• Your business is dependent on certain types of weather.
• In a recession, you’re the first to feel it, and the last to see it go.
• Foreign currency fluctuations can turn your black ink red.
• Your product line is greatly affected by cycles in popularity.
• Your company’s success is closely tied to another’s.

There is a common solution for most of these ills. Develop a new territory that will help provide balance in your business. In some cases this can be accomplished by specifically seeking a line of business that will have a cycle opposite that of your core activity. In others, you can create a more stable sales curve by moving into a territory that has limitless potential. A few ideas on how to accomplish this follow:

Mass Market

If you’re currently a manufacturer, packager, wholesaler, or importer of consumer products, and you are selling only to independent retailers, you might consider offering your product to the major mass retailers. This would include department stores, discounters, warehouse stores, grocery and drug chains, convenience stores, and any other retailer that has a large number of locations.

The good news about selling mass marketers is the volum_ethey move and the fact that they generally pay their bills well. The bad news can be pretty bad. Many of the top retailers will work you over real good for low prices, long terms to pay, freight allowances, advertising money, and every other discount imaginable.

Once you land a major account, you can become quite dependent on them if their volume becomes 25 percent or more of your total. Whether or not you let this happen, the buyer with such a big “pencil” (ability to write big orders) will likely exert pressure on you for a high level of service. You’ll need to be prepared to ship on a dime, even if the account gives you no projections. Even if you are given projections, the first blip in the economy may cause them to reduce or even cancel purchase orders.

Here are some guidelines for working this territory:

1. Establish a solid base of business with independent retailers or wholesalers before you try the mass market.
2. Don’t allow any one account to represent more than 20 percent of your business. The exception would be if you could sustain the loss of that business and still be profitable.
3. If you follow rules one and two, you won’t be so desperate for this business that you fall into the trap of giving the product away or offering super-long terms. In most instances, you should be able to sell your product for the same price and terms to a major retailer’s warehouse as you would to a wholesaler.
4. Change the product and the packaging from that which you sell through your dealer market. When possible, offer the dealer market a few more features so that your dealer will be able to combat the price advantage of the mass marketer.
5. To find excellent sales reps for the market, call the buyer for the customer you want to sell. Ask this buyer for his recommendation of a sales rep.
6. Watch all aspects of bookkeeping like a hawk. The volume you are doing will mean a large volume of bookkeeping. Invoices will be lost. There will be claims that shipments are short. Buyers may show terms on the purchase order that are better than thoseyou offered in hopes that you will “cave in” and accept them withoutargument.
7. Collect from these accounts even more aggressively thanthe independents. When you call the accounting department of a major retailer, you’re talking to a clerk, not the owner or buyer. You won’t risk losing the business because you ask for your check whenit is due.
8. Keep your eye on the newspaper regarding these customers. Call your rep frequently to inquire after the financial condition of these majors. You can afford to lose a few thousand dollars from the bankruptcy of one or two dealers. Can you recover from the loss of $150,000 when the next discount chain goes broke?

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