Closing my business was the hardest professional decision of my life…but I wouldn’t change a thing.
Ok…maybe a few things. But every time I’m talking with an entrepreneur, small business owner or just someone over a pint about my previous company, they almost always ask something like ‘do you regret it’, or ‘That’s too bad – do you wish you hadn’t done it’. To which I always reply, ‘absolutely not’.
Overall, it was a great experience, I learned so much about running a small business for 8 years. Don’t get me wrong, time has given me a lot of perspective and I would not have responded that way for a few years after closing our doors.
The hardest part for me was laying off people that you hired to do a job and letting them go. Not because of their effort or lack of performance, but because the strategy you outlined isn’t working…it’s gut-wrenching. I tried to be transparent with our books, tried to add new things, change direction, work nights/weekends, etc. but in the end, we had to close, and it wasn’t because my team wasn’t doing everything I had asked of them. Our industry changed and our model no longer was sustainable. So, I spent a lot of time looking at what went wrong and have outlined 3 purchasing strategy mistakes I made...
- You need a cost savings strategy: Finding ways to drive down costs through purchasing, directly impacts your profit! I could spend an hour on this topic alone. But what many small businesses fail to realize, and I was in this camp as well, is that saving 10% on a purchase this year over what it cost you last year, directly goes to your bottom line in the form of profit. This means cost savings makes you more profitable and fits into the ‘work smarter not harder’ category. I recommend starting small and building off success month over month. The key to getting started is giving it the priority it deserves.
- Planning ahead is critical. Lack of planning is probably costing you thousands each year just in purchasing. As consumers, we now can go online and buy from Amazon for example and get product in 1-3 days. This is a B2C (Business-to-Consumer) mindset. But when running a business, you need to develop your B2B (Business-to-Business) mindset. The larger brewery in your state with 2 dedicated people for purchasing is not ordering on amazon every week and you need to learn to stop doing this as well. As a small business owner, you are constantly challenged to learn new skillsets in areas you probably find uninteresting. When you fail to plan, you end up spending on average 15%+ premium for access to ‘real-time’ inventory and 2-day deliveries. Amazon might be the right choice for a few things, but what you are paying for with Amazon is convenience and the perception of the lowest price. But when B2B, the goal is to by efficient. Efficient means taking the time to understand pricing comparison, partner relationships, quality, lead time, customer service, return policy and more.
- Replace bad partners, even if they are the cheapest. Good partners help you run your business, poor partners cost you time and money – period. You need to be talking to your partners about what you need and scoring them from time to time on how they are doing. The goal is to develop relationships with your good partners so that when times are lean or there are changes in the industry, you can review with them to find a way forward. But what’s even more challenging is you should find ways to evaluate and replace (sometimes improve) a relationship with poor partners. Lack of response time, errors, bad product, low quality, all should be assessed – a supplier who is doing all of these things wrong but you still think ‘has the lowest price’ – is costing your money in the long run. You need to do your due diligence to figure out the alternative and make the switch to a better partner.
Reviewing the ashes of my old business years ago is what brought me to starting the Federation. What I learned was that purchasing needs its own attention. With the right attention, education and strategy, purchasing can help drive profits and is as critical as a good accounting, legal, marketing or sales strategy. But 15 years ago, I didn’t get that, and I certainly didn’t know where to turn to ask questions Get out there and start working on those ‘unfun’ skillsets to running a business. Always up for a chat if you ever want to talk about purchasing/procurement. dan@beveragefederation.com
