Size isn’t everything

Sometimes we think we have hit the jackpot.  We land a huge order or contract with a new customer.  Seems like a great opportunity.  Often that’s exactly what it is.  However sometimes big isn’t beautiful.

For instance, what if:

  • this big order has been fiercely contested – and comes with a small margin
  • it disrupts your whole operation – giving you problems in fulfilling your existing orders for your current customers
  • there are penalty clauses for late delivery – which will wipe out any margin
  • there are some things that you didn’t – maybe couldn’t – anticipate. Much higher transport costs, problems with your existing machinery which struggles to cope with large batches
  • you suddenly win some unexpected new orders from your existing customers, which now – because of this giant order – you will struggle to service

 

Think carefully before you quote for a giant order.  Think through the implications and make sure that if you win the job that you do make some money on it.  Otherwise you can end up as very busy fools – you reach the end of the year your turnover is up (thanks to the large order) your profit is down (all those extra costs, discounts you gave to existing customers to compensate for late delivery) and several of your regular customers are now actively looking for new suppliers (“they have become unreliable, not interested in our business any more, only after the big orders”).

It’s the old saying “turnover is vanity, profit is sanity”.

High growth companies want high growth in profits – not just sales

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