Day 38: How I Make Double Margins

Yesterday I gave you permission to CHANGE… well as long as you’re not a politician.

Friday I was explaining how in 1985, the year ‘Back to the Future’ came out… a product that costs $100 was approximately $50 product and $50 distribution.

It’s no longer anything like that. 

The movie sent Doc and Marty into the year 2015… so we’re 4 years past the make-believe year.

Umm…

Speaking of feeling old, it’s my birthday today. You’re probably thinking what the hell are you doing up at 1am in the morning writing an email on your birthday??

And if you are… you’d have something in common with my wife.

Anyhoo…

Your ONE THING today is an over simplification but basically when working with your clients there are three levels of business they can operate at.

1. Retail
2. Wholesale (also call this the middle man)
3. Manufacturing

My background is in licensing / franchising so let’s use that as an example and here are examples of the three levels. 

1. Franchisee (An individual McDonalds restaurant – Retail level)
2. Master Franchisee (Owns a territory of McDonalds restaurants – Wholesale level)
3. Franchisor (Ray Kroc back in the day – Manufacturer level)

And if we use real estate, here they are:

1. Realtor (Retail)
2. Broker (Wholesale – has a team of realtors)
3. RE/MAX (Manufacturer)

When a recession hits the retail level gets hit FIRST.

As in the lowly realtor gets punched squarely in the mouth when the economy takes a turn.   

Wholesaler comes second.

Amongst many other fees the realtor is paying “desk fees” to the “wholesaler” (broker) for an office and they don’t discount them because housing sales are down (and the realtor isn’t a business person and doesn’t think to negotiate their fees) so they don’t feel it as quickly.

The manufacturer is usually last (3^rd) to feel the effects of a downturn and often go unaffected entirely. RE/MAX are doing just fine in good and bad times.

Moral of the story is that, when possible, and it’s not always possible, you want to help your clients get away from retail and closer to wholesale or manufacturing.

And if they can’t at least ‘knowledge is power’.

Kinda.

And manufacturing likely takes some money to set up and also some brains to CREATE.

Unfortunately, people are usually short on both.

Here’s an example of double dipping.

When I owned a hockey retail shop we made our own hockey gear out of China (don’t listen to what I said on Friday HAHA) and made double margins.

I cut out the middle man (wholesaler).

Great MATH.

Successful business is simply successful MATH.

Costco has its own labels like Kirkland and they ‘double dip’ on those goods. 

Walmart has ‘Sam’s Choice’.

Question: what level is your client operating at and is there room for them to strategically move up a level and not upset the applecart?

What I mean by ‘upset the applecart’… if you have a retail store and you get goods like t-shirts and shoes from a local wholesaler and let’s assume they’re Nike.

They show up one day and you’re selling your own label?

They won’t take kindly to that and might cut your supply off cause they know you’re going to use their brand to get foot traffic and then sell against it. 

With no Nike in the shop… you can become super uncool very quickly and lose your foot traffic.

Not good.

Therefore, this needs to be done with STRATEGY in mind and knowing all the risks.

Tomorrow I’m going to explain where the internet fits into this 3 level equation.

It’ll shock you.

Zzzzzzzzzzzzzzzzzz………………………

I might sleep right through my birthday so if you don’t hear from me tomorrow… I got the greatest gift of all time for my birthday.

Sleep.

Obsessed with your business coaching success,

King Karl

PS. For about the sixth time in this post… it’s my birthday. The other day I told everyone to direct message people on their birthday so improve organic search of their profile.

It’s 1am and I already have 32 direct messages.

Apparently, someone is listening.

PPS. My wife and I had a rough week to say the least.

I told her to “Embrace your mistakes.”

She hugged me!

?!?!?!?!?!

If you know of someone that would enjoy/needs my info… plz forward it so they can get, for a limited time, complimentary subscription here:

https://thesixfigurecoach.com/subscribe/

Missed a day? Catch up here.