Biting the Hand that Feeds

[Tim Bateson]

I have a great customer who primarily sells Crystal awards. They drop ship cases to me, I engrave and then they pickup.
Now most of these are for local events and businesses that I have considered going after myself - higher profit margin. In the greater Cincinnati area - Nearly every doctor's office, dozens and dozens of businesses and every Home-a-roma/Citi-rama home (past 3 years) has my engraved products, but none of them have my logo on them.
I've grown enough that I've had to get my wife involved in the business. More people, more income needed. So do I bite the hand that feeds me by going after this same business, or just take the easy work and look elsewhere? I'm inclined to look elsewhere, my wife thinks it's all fair game.

[Joe Pelonio]

I'd suggest going after the same kind of business but a little further out. Once the "great customer" finds out that even one of his customers is going direct to you, he is likely to drop you like a hot potato, and then you will lose that revenue stream. On the other hand, he may eventually decide to buy his own laser, and you'll lose his business anyway, so flip a coin.

[Rodne Gold]

Depends on your moral compass... I think its reprehensible to use an ongoing and good wholesale customer's client list to poach his business. I don't think its an issue if that wholesale customer has screwed you over or abandoned you and changed suppliers..

[Jiten Patel]

I personally wouldn't do it. I agree with Jo that going further out may be an option, but how would you feel if your customer got a laser and cut you out. Everybody needs to eat and there is plenty of room for everyone.

Maybe think about adding something to their existing product line which involves minimal work, but adds value to their product. They do the leg work, you increase your income.

[Michael Hunter]

If you are getting a fair return on what you do for them, then it makes lots of sense to keep to the status quo.
As an insurance against loosing this business, keeping a detailed record of the end customers would be wise though.

If your customer is putting in serious sales effort to get this awards business, can you match it?
If the customer has established themselves as the "obvious" place to get awards, then it could take several years to re-educate the end customers and during this time you have less business for a lot more effort.

I have been in a similar situation - my customer ended up buying their own laser.
Having seen the effort needed to get the sales (weeks of negotiations, endless chasing up on names, logos etc., re-doing work when the end customer changed their minds) it did not make sense for me to try to take over.

[Mike Null]

Don't even think about it! Period.

Re-read what Rodney has to say.

Coincidentally, one of my wholesale customers ($19,000 in 2011) and I had this conversation yesterday. One of their materials suppliers is poaching their customers and we discussed the ramifications of such behavior. I was telling her how quickly that would be posted on another engraver's forum that I belong to. Their reputation would be trashed instantly. I have made literally thousands of items for this customer and not one carries my name or logo--why should it--I'm not the supplier to the end user.

[Tim Bateson]

All valid points and is the same as my leaning... The "boss" won't be as easy to sway. She's like a hungry lioness that is ready to pounce on unsuspecting prey, but she'll stand down if I insist. I guess this is the 1st business disagreement we face as a Husband/Wife team. Being a sole proprietor was sooo much easier. lol

[Walt Langhans]

@ Tim

It's great to hear the business has picked up for you and that you have brought your wife into the business. Here is something for you to consider. Why not let your wife come up with some new avenues for the two of you to make more money (aside from poaching from your wholesaler)? Women look at things different then men do and see things that we don't. Since she's been working with you I assume she knows what you can and can't do with a laser, so ask her if there is some avenue of the business that she thinks the two of you can get into that you aren't doing. I'm sure she'll be able to come up with a few suggestions, and since it will be new to the business there won't be any previous relationships that could get damaged and then you can go after this new business as aggressively as she wants. I'm sure this would create a win win for the business as well as the marriage :)

[Mike Null]

And how much margin improvement do you realize when you start adding up the sales calls and the use of your money to buy inventory.

Do you realize that your customer has probably spent years developing these customers. They trust him and for sure they are buying a lot more than crystal from him.

I predict by the time your wife makes the third phone call or in person visit to his customers you will get a phone call from him asking just what you think you are doing. He will then make calls to all his customers and then start looking for a new engraver.

Add'l:

this week I'm working on a name tag order for a customer who will re-sell them. I've made them before for him and when he first came into the shop he explained his business and asked what all things we did. I showed him around my basement shop and he spotted some particular plaques. I explained that I outsourced those and he asked if he could bid on them. I said, if you make them in St. Louis at least I could save freight. So I gave him a sample so he could make a quote then return it.

The next day I get a call from my supplier asking what is going on--he just got a call from somebody in St. Louis wanting a quote on my product. I explained that somebody else asked if they could bid on the job but that it was to be done in St. Louis. Well, about ten seconds later I was on the phone with my customer asking just what was going on. He was dumbfounded as he gave my sample to a local shop and they were the ones who called my supplier. WEll, I didn't spare any words letting him know what I thought of it and told him to just forget the quote.

Word gets around fast.

[Scott Shepherd]

From a slightly different angle, we do wholesale work for people all the time. Some of those wholesale customers have seen our samples in our lobby and gone to our customers. Some of taken our customers away from us. Guess who doesn't get wholesale work done from us any longer. If you cross the "trust" line, then I will no longer help you. I'm not in business to help you take my customers.

Sorry, but your wife is wrong in this case. That's the holy grail of no no's. You NEVER do that. EVER.

[Martin Boekers]

Tim, a couple things...remember this is a public forum and if your client wants to google your name this forum will come up.

Next why even think about it? If you want to increase sales and hire someone, you would have to pay them right? Consider this client
as one of your "sales force" ;)

[Scott Challoner]

Walt makes a good point. Women make somewhere around 80% of all purchasing decisions. It's good to have that perspective.
And Tim, as others have said, this is the gist of the whoelsale relationship. You don't charge as much as retail, but you don't have as much work. Instead of zero sales calls, you would now need to make dozens. Instead of one invoice, you would need to make out dozens. That all takes time. Time is money. Not to mention the bad karma too. Good to see you're busy though. :)

[David Fairfield]

I'm with Jit and Rodne. I guess I'd want to know why you don't have your company name on your product somewhere inconspicious?

Dave

[Jerome Stanek]

Also how do they pay do you have to wait for your money and if their customer doesn't pay do you still get your money

[Rodne Gold]

My wholesale clients would have a fit if I stuck my label on their product. How he gets paid is irrelevant IMO.. would be a poor excuse to justify going behind their backs unless they REALLY stiffed him.

[Gary Hair]

Never, Never, Never!

[David Fairfield]

I put my company name on stuff that's subcontracted out to me if I think it might bring me some business that I want. I do ask first, so its ethical, and it never has been a problem.

Dave

[Scott Moore2]

I act as both a wholesaler and a retailer, so my business faces this. It's a common scenario actually.

The answer is to not go after your wholesaler's clients. Go after new business. However, if people find you naturally, and the business is worth it, then you need to take it. Any middleman needs to understand there are times when this will happen, but they need to know that you respect their services as a middleman and won't try and take their business once they've established it.

If the middleman offers services and client interfacing, and is good at what they do, they'll garner enough loyalty that most clients won't try and go around them.

Tiered pricing is a good way to keep clients from coming to you directly. Only offer wholesale pricing to your middleman. End clients should have no financial incentive to come to you directly. The only time they should be coming to you directly is if service was bad enough that they need to find you directly. As for the lost revenue, they're probably saving you money by doing the client relation part. It doesn't take much client handholding before you need to hire more people.

[Jerome Stanek]

When I was lining up material the one supplier that I talked to wanted to know if I was competing with one of my clients and I had to have the client call and say that it was for one of their customers that they had contact me directly to do the job as there was not enough money for them to sub it out to me.

[Bill Cunningham]

What Rodney said...I have several wholesale customers that I make or engrave things for. Most of their customers are local to me as well, but there is a line in business that you never cross. If you do, it will come back to bite you in the end.. It's all about ethics..

[pete hagan]

Don't mess with karma!