Adding new lines to increase your bottom line

Flashback 2009

In the midst of the Great Recession of our time, I was out making my usual sales calls. When I came across several distributors who seemed to figure out how to overcome the recent economic downturn. All three had come up with the same different spins on the same plan.

Within a three day period if visited these customers and this is what ensued.
I asked the first customer “how is business?”
He replied “We are getting by.”
He continued “I added a new line of labels”.
“Labels?” I asked.

He went on to explain that he had a customer that was looking for labels. He found a source and now they are supplying labels.

I visited the second customer. He led me to a warehouse area and showed his new racks. I noticed a pallet of bags on the floor, and I asked about them. He told me it was kitty litter, and added that it was part of a Vendor Managed Inventory contract with a good customer. He had reviewed the entire range of customer needs, and every product purchased on a regular basis. Beyond products used in the main manufacturing business, he bid on all of the supplies, including the kitty litter used to absorb machine oil from their factory floor.

Last but not least, I visited the third customer. Still amazed at what I had previously seen, I asked this customer how business was. He responded “great”.
Seeing a pattern, I asked “let me guess, you’ve added a new line?”
“Not really” he replied, “but we are selling items we never thought we would sell.”
He went on to explain they just sold several thousand dollars worth of rims and tires to a military customer.
Completely off guard I said “What?!! …How do rims and tires fit into your product line?” His explanation opened my eyes to a whole new world of possibilities.

Thinking Outside the Lines

I discovered something that changed my thought process about the business. It is not product lines that drive a business; it is opportunity. It appears that most fastener distributors do not primarily handle fasteners; they sell a service that by chance, as well as design, involve sourcing and supplying fasteners. Their real line of business is meeting the needs of their customers in a cost-effective, profitable manner.  A business with a good infrastructure (software, systems, sales, purchasing) and a good customer, and selling the new products doesn’t put a burden on your current operations, such as requiring repackaging or having to stock large amounts of new inventory, then you can sell anything that can make you a profit.

The Winning Formula

In 2009, during the Great Recession, business was slow. Many companies had difficulty making payments when due. Everyone hustled for more sales volume to make up for the slow economy. A slow economy typically means fewer sales from existing customers, and to replace those lost sales one had to find new customers. In that environment, if a big prospect I had chased for two years suddenly offered an opportunity to quote on a large order, I’d respond with caution. I’d want to know why, and why then? I’d immediately wonder if their current supplier had placed them on credit hold. Were they truly looking for options to lower their costs? In either circumstance, and in that uncertain economy, only the foolish or the brave would consider taking the risks of engaging a new, large volume customer.

Now, let us consider this example of an existing customer. They pay their bills on time, and they are loyal customers. They need to purchase an item on a recurring basis. When viewed in a larger context, it is not a large dollar value item for them or their current supplier. To get this recurring item, this loyal customer has to pay freight, create a separate order, receive the goods, and process payment to the supplier. However, they could purchase this item from me and save by consolidating the process and reducing effort and expenses. If I offered a competitive price and comparable terms, then the loyal customer would clearly choose me over the existing supplier. In simple terms, I am not just in the fastener business; I offer a service that consists of meeting this reliable and proven customer’s needs. If I can do it at a competitive price, then I can make a profit.

A Real Life Test

I have a perfect example of this method in my career. At a point in the past, I sold specialty fasteners to a customer located on the other side of the country. This customer required all shipments prepaid from the suppliers. My shipments were usually $2,500 plus, so I didn’t have a minimum price issue. However, their wood dowel supplier complained when the customer’s order fell below his minimum order level. The customer asked if I would take over the business and provide about five sizes of wood dowel pins.

Opportunity Met Preparedness

I researched the products, the complaining competitor, and a list of quality suppliers. The key was getting good information from the customer on the required volume and target pricing. I negotiated a very profitable arrangement with the customer and a supplier. Best of all, I was usually shipping pallet rate shipments, so the additional weight to my customer didn’t cost me a dime. I am a stickler for a sound business processes, and I created a narrative for acquiring new products and lines. Below is a concise description of how I did it.

Opening New Lines

The base is a reliable customer willing to provide the necessary information. To qualify customers, conduct a survey or informal poll of your customers; determine the items, if any, which cause current supply problems. The customers that have issues or complaints with current suppliers are prime candidates. One should research the existing supplier as if a competitor. The basic steps include a back-link check of the competitor’s site. This reveals the trade association memberships, affiliations, trade magazines, advertising placements, and trade shows.
Note: in the case of niche markets, one should determine if companies throughout the industry use the troublesome items. If so, then other customers’ of the existing supplier will probably have similar problems. There may be many potential new customers.

Survey other customers in that niche and find their sources of supply. Check the applicable standards and regulating agencies or groups for the product. Contact those sources and identify the key suppliers, and any available manufacturer’s updates or product training materials. Qualify and rank the list of suppliers based on one’s role in the transaction and the customer’s requirements. One must consider all factors affecting the arrangements including price, quality, lead time, inventory, logistics, technical support, and sales training. Once one completes the supply side survey, use the customer’s information on purchase volume and price points and work the market. Negotiate a flexible, long-term purchase agreement with the supplier and a solid sales contract with the customer.

Make It Yours

Settling the terms is not the end point, and it is more of a new beginning; now, one must own the deal, put it into a long-term posture. Begin by getting a list in spreadsheet form of the supplier’s complete line-up of products. Specifically request to include part numbers, cross reference part numbers, product descriptions, box quantities, weights and, if available, pricing. From this spreadsheet, create a new supplier list by adding one’s part number system to the sheet, and upload it into one’s system.

Technical Support

Develop technical support and training. A good way is to arrange an on-site lunch-and-learn to train your key employees. Ask for a product promotion media kit, manufacturer’s updates, and digital assets that feature the products. One should request available visual aids and training materials for warehouse and sales functions as well.

Add New Lines Now!

There is a bounty waiting to be taken and enjoyed. Using this simple, service-based approach, businesses can add many products to their lines. Businesses can add new products and product lines by expanding business with existing customers, or researching and finding new customers with reachable needs. After reading this description, I imagine many readers have ideas springing into thought of potential additions. The question may be what to do first. Should it be lifting hardware, knobs, sub-assemblies, chain, or packaging? Perhaps the real question is: what are you waiting for? Go out and grow your business!

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    About Robert Lopez

    I am passionate about our industry and bringing people together to create mutually beneficial relationships. I believe helping other people succeed is a recipe for my own success.

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