Before you hire an outside party to distribute your product, think twice — they might be unnecessarily costing your business an arm and a leg. That’s the lesson Max Kater, CEO of Murchison-Hume, learned on this week’s episode of CNBC’s “The Profit.” Over the past few years, Kater had been using a convoluted process to get her fleet of upscale, nontoxic cleaning products — ranging from glass cleaners to dish soaps — from the factory floor to consumers’ hands. The business had been creating the product in Skokie, Illinois and then sending the product to a third-party logistics center in Dallas, Texas. This distance was costing the business an extra 50 cents per unit. Even though this amount seems insignificant; in the wholesale business it will add up. “Murchison-Hume, like any wholesaler, sells to retailers at twice its cost, meaning that the 50 cents turns into $1 by the time it gets to the retailer,” Lemonis explained. The retailer then marks up the product, so that $1 becomes $2 in the eyes of a customer. As a result, the price of Murchison-Hume’s product becomes $9. A price that will cause customers to pass on the product. To solve the problem, Lemonis suggested Kater work with a partner that manufactures, packages and distributes products all under one roof, streamlining the process and saving Kater an extra 50 cents on the cost of goods sold. This change creates a 22% savings to the customer which means a more affordable product. It’s important in business to not just price your product, but to properly price your product. It’s important to understand logistics and figure out how to improve processes. Ultimately it’s about how to properly manage working capital and more importantly manage human capital.
There’s a reason we are comfortable sacrificing it all to make our businesses a reality: We assume we’ll get a break tomorrow. To paraphrase Orphan Annie, tomorrow is always a day away–but meanwhile we could end up being useless to the very people we say we are sacrificing everything for. Consultant Alan Weiss calls this the Oxygen Mask Principle. If you’re in an emergency situation on an airplane, you are told to put your oxygen mask on first before assisting a less competent companion. He breaks it down in his podcast, The Way I See It:
You can’t help the client or your family, you can’t do pro bono work, you can’t help others in the profession, you can’t help anyone unless you yourself are comfortable. You need a healthy selfishness.
Rest is extremely important. If the human body was intended to work 24-7, then you wouldn’t see people with health issues or in some cases, die from exhaustion. Personally, I’ve taken on the habit of engaging in work 6 days a week, but I also take one day of rest. Rest for me may be going to church, sleeping, or doing some form of relaxing. I encourage you to make sure that you take the time to rest so that you can recharge and be more effective. Mr. Brown’s tactics to putting on his Oxygen Mask is to build in minimum viable days, create blank spaces in his schedule, and say “no” early and
often. Honoring the principle of rest will allow you to enjoy life more, and you’ll find that you’re still productive even with the rest.
If you’re in need of a financial checkup you can reach me in the contact me section.
For this week, I’ve included The Profit Principles with Marcus Lemonis from CNBC Prime YouTube channel.
“If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.” Proverbs
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