I know this blog title may seem counter-intuitive, but please read on, and you will understand what I am presenting.
As small business owners, we are constantly and continuously adding up costs. We may look at the number of customers we have, calculate that we serve 10,000 people per year, for example, and quickly realize that if we could save $1 per customer we would have $10k more at the end of the year. That’s a nice amount of money, so now we try and figure out how we are going to create that $1.
The easy way, of course, would be to raise all prices by $1. This is not always a comfortable thing for us to do, however, since we may have recently raised prices, or we may already be the highest priced caterer in the market. Hence, we begin to look at other ways to find that $1.
Vendors & bids
Many times, the most natural place to look is where we are spending the most money, and this would likely be our vendors. Some of us have seen the value of putting our purchasing power to work by concentrating our buying with one or two large sources. Others may be, for various reasons, loyal to numerous smaller vendors. Regardless, we may decide to test the proverbial waters and put our product list out for bid.
This is where we can waste a lot of time. If we have a couple of large vendors, this process may necessitate multiple meetings with various salespeople before it is completed. We sometimes find ourselves dickering over five cents per pound or 20 cents per case.
Sometimes we may embrace the idea that we need to spread business out in the community and offer it to a number of smaller boutique vendors. If we choose this route, this could cause a load of paperwork as new vendors will want credit references, applications, and possibly contracts. All of this can take a lot of time.
Return on investment?
So let’s surmise that through weeks of careful and tough negotiation we have managed to, in theory, find that elusive $1 per person. We may have spent five hours updating our product list, five hours contacting present and potential vendors, 20 hours negotiating terms, and eight hours putting in all processes to set up deliveries, pay invoices, and inform our employees of these changes. We may have spent almost 40 or more hours making these changes. Now I know that you may be thinking that, “that’s a pretty good return-on-investment.”
But was it really? What else could you have done during this time? Do you think you could have gotten some valuable new customers, landed a large event, spent some time in the kitchen, established better relationships with your employees, or watched how your operation really works while making improvements to your processes?
The moral of this story is that there is money to be made in all aspects of your business. Don’t get too involved in the minutiae of any one slice of what you do daily. Yes, checking vendor prices is an important task, but the time you send trying to save a few cents per pound may cause you to lose sight of the many opportunities that present themselves daily.
Michael Rosman is a member of the Catersource Consulting Unit. If you would like information about these services or to schedule him for an on-site consultation at your location, please email Carl Sacks at [email protected]. His book, Lessons Learned From Our Mistakes – and other war stories from the catering battlefield is available through Amazon.
You can visit Michael’s website at www.TheCorporateCaterer.com, email [email protected], or call 781-641-3303.
