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inafishbowl.com

5th September 2010 | Posted by Hakim Group

If you’ve not seen inafishbowl.com (brainchild of Entrepreneur Toby Reid) then check it out!

Basically, the way it works is that three businesses are chosen to be placed “inafishbowl” for everyone else to scrutinise for a number of months as they “swim” through the obstacles in their various growing businesses.

The entrepreneurs running the business post their challenges/dilemmas on the site and then there are plenty of sector experts who regularly visit the site to post comment or advise on the various business dilemmas. Here is my post on Marcella’s growing business supplying Mexican food to the retailers:

http://inafishbowl.com/imran-hakim/managing-business-risk.html

Managing Business Risk

Marcela’s dilemma is very common one in the food business! She has achieved a listing in a major supermarket chain but the minimum production runs are large and the terms and conditions she has to sign seem daunting.

You often hear that turnover is vanity, profit is sanity…..never more so than with a small business. Increased volume allows you to not only increase turnover but negotiate your suppliers down on price. And whilst this can be quite an allure for a fledgling business, it often leaves you in an extremely vulnerable situation with your customer. With greater scale you get increased risk.

Understanding Your Terms and Conditions

Most of the big players understand the attraction they enjoy from small business and so manage a lot of the stock risk out of their own business through the terms and conditions they make you sign. The risk then falls on your shoulders as a small business in terms of returned product, reverse logistics, early invoice settlement discount, price promotions etc….all of it ends up being funded through the suppliers margin which is already a lot less than that which you would enjoy from a smaller, niche outlet.

It is very easy to overlook these risks in the excitement of getting your product onto the shelf of a major retailer. I’ve seen many businesses simply sign and return the standard T’s and C’s that a customer sends them (which are usually extremely aggressive) without negotiating.

They are often intimidated by the size of their customer, but there is often a fair amount of concession that the retailer can give you if you argue your case, especially if they want your product that much. Sweeteners such as a limited period exclusivity or a particular SKU that isn’t being sold elsewhere can help you negotiate better terms…..and remember if you don’t ask you won’t get!