Welcome to Curious Business
Every Friday, I post a small insight into running Curio City and/or Blue Hills Editorial Services. My most recent posts are directly below. You can also start with the first post, or use the subject labels to the right to home in on particular topics. Feel free to comment on anything that interests you.
Friday, October 26, 2012
Risk and Reward
Somebody asked what kind of price I could give him on 4,500 mini-briefcase business card holders. I get inquiries about bulk orders fairly regularly; 90% of them don’t pan out. But I’ve never had one this large. My first reaction was “Scam!” My second was “our vendor will never have that many.”
Lo and behold, the wholesaler had the stock. However, instead of giving me a genuine price break, they proposed signing me up for their “platinum” program ($175/year) to get a unit price that’s just 21 cents less than I usually pay. Now, $0.21 * 4,500 = $945, so it’s a $770 discount after their premium fee. While that’s better than nothing, the $0.17 unit price break gave me squat to pass along to the customer. I dinged my own margin to offer $0.49 below my lowest published bulk price – pretty weak for a customer who probably expected wholesale pricing.
I was relieved that he didn’t bite. Don’t get me wrong: I like big sales, and the dearth thereof is largely to blame for this year’s poor numbers. But this one was way off the charts. Buying the merchandise would have used up all of the credit on the Mastercard that I use for inventory and nearly all of the Amex credit line that I use for operating expenses, leaving nothing to finance Christmas. Of course, I could’ve paid down those cards immediately upon receiving the customer’s $38,000 deposit. But if anything had gone wrong (“Scam!”) it would have killed the company.
An extra $38,000 would be like adding five bonus months to the year, including an extra Christmas. A real entrepreneur probably would have pursued this opportunity for all it was worth despite the risk. I am not much of an entrepreneur. I would never bet the company on one dice roll.