Instead of Selling to Mr. Tightwad, Invest in Him
You know that situation. One of your clients is putting the screws to you. They want you to cut your cost by another 10%, and they don’t care how you do it. So my advice to you: Lose the sale and if they’re a publicly traded company, invest in them.
That’s right. I don’t care if the customer is Wal-Mart, Pepsi or Subway. If you currently have razor thin profit margins with the client and they’re about to get smaller, you should drop them as a client and invest your money in their company.
What, you scream. Drop my largest customer? And then invest in them?
Surely Rock has rocks in the head, you declare.
Well do the math.
If you’re only making below-market margins off a sale and spending countless dollars to provide the infrastructure, you’re close to losing to inflation. If you have to cut costs more, you’re in the red.
Why not take that cash and invest in your tightwad customer? My guess is that if they’re that aggressive, they’re probably making money – lots of it.
But what about your business? Won’t your operation crash with such a significant chunk of your sales revenue gone?
I hate to tell you this, but your operation is going to crash if you keep squeezing water from a stone. Sooner or later, Mr. Tightwad is going to ruin your company by cutting your margins way too thin. So here are my suggestions:
- Focus on profit, not volume.Cut your losses and drop this customer. Review your books and find the most profitable customers or the hottest new areas for you to target, and go after it with a vengeance. Take all the resources you would have spent on the tightwad and redirect them to your advantage. This will be very painful in the short run, but it’s the only way you’ll be sustainable.
- Invest in the tightwad, but only in the short term. I wasn’t kidding about investing in the tightwad, but I do not look at it as a good long-term investment. Any solid business person knows their suppliers need a reasonable profit margin to stay in business. Mr. Tightwad is going to jeopardize their own operation and quality standards if they only target the lowest of the low.
The moral of this story is that chasing the buck only works if you get your fair share of the dollar when you catch it. Is Mr. Tightwad worth the trouble if you don’t?
(Photo by Gobierno Federal)
To read about mistakes to avoid when selling your printing business, download, Rock LaManna’s “12 Code Red Seller Mistakes.”
Rock LaManna provides executive coaching for printing owners looking to grow their printing business, merge with a synergistic partner, make a strategic acquisition, or create a succession plan.