The Key To Building A Successful Distribution Business
So, I crank up the silicon chips this morning and check out who’s walking the aisles of the blog and, low and behold, I find someone scrounging about for information relating to building a business plan for plastics distribution… now, I’m cranked! This is exciting – someone out there is looking to help people connect with plastic as a solution to their problems. That’s powerful stuff… at least in my head and for those 40 souls working beside me. That’s what we do. What we’re good at. And, having climbed from the bottom rung of Ontario’s fierce competition for $100M in plastic sheet, rod, & tube to the top I think we’ve earned the privilege of sharing some thoughts on the topic.
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Previously, I’ve talked about the economics of plastics distribution – a very generalized approach to entering the business and generating profits. The business plan for achieving such is far more complicated because the strategy is so simple – find a market segment that has yet to capitalize on the benefits of plastic sheet, rod, tube and/or film, create a desire to consume plastic, and then satisfy that need at a profit.
This is a powerful statement if you get its meaning. Most major markets have a plastics distribution infrastructure in place so, to compete, one might start by stealing business away from someone else – which is a viable and proven strategy. However, suppliers aren’t going to back you if all you’re doing is share-shifting, that is, selling the same amount of stuff to the same people just through a different channel. Your supplier has the same mission as you – growth (sell MORE stuff than what’s currently being sold). If you’re in the business already then you know exactly what I’m talking about, here. Any supplier will have a meeting with you but are they willing to protect you going in on a big order that they’d get any ways from another distributor?
So, where do you start? Acquire the best industrial database you can find. Then, hire the best data minor you can find. What you’re looking to accomplish is segmenting your marketplace into as many applications as possible – and this is going to take time and work. Then, you’re going to cross reference materials to applications and sort it by margin opportunity. Example: I can sell a sheet of acrylic to a display maker for a $1 and make $0.05. Or, I can sell a $1 worth of Meldin to an aerospace contractor for a $1 and make $0.20. That sounds pretty exciting… but, is there enough of a Meldin market to pay off the wife for letting you fantasize about becoming a plastics distribution mogul?
Now, with list in hand, you have to knock on doors and convince perfect strangers that you’re a credible player in the game and this is where customer and supplier relationships play a big part – they’re your credibility when you have none. Plastics distribution is a 3 way dance – customer, distributor, manufacturer. Any of the big boys in the business will tell you that their success is a direct result of great relationships up and down the food chain. At strategic moments in their growth both the customer and the supplier protected their interests to win a major battle that kept them in the war. Your customer needs to know you’re behind them when they’re fighting competition on their front. Your supplier needs to know that not only can you steal the ball from the competition but that you can complete the touch down.
There has to be trust on all sides especially when you don’t have the personal capital to finance the inventory, technical or production component of a career-breaking deal and you need your suppliers, or other customers, to back you. Do you have the juice to make it all come together? It’s all about trust. Trust IS the cornerstone of any distribution business.
So, as you start following the business school templates plugging in facts, figures, and forecasts, remember to engineer a system that produces trust – because without, it just ain’t going to work out like ya thought.