The Gates Are Closed

“So if we purchase 40 cartons, you can give us 15% discount?” I asked John, the sales rep.
“Yes, that’s right,” John said.
“Can you write the quote on paper, John?”
“Sure,” he said, writing it on his business card. Which seemed a bit informal to me, but John looked confident, so maybe it was common practice.

It was a good day when our supplier decided to give us a massive discount. We had been talking to a customer about a bulk purchase of rubber gloves. They were happy with our services, so it was just a matter of prices.

We were confident we could win the contract. And off we went to negotiate, armed with great discounts from our beloved supplier.

We got the deal. That’s the good news.

The bad news was, John, didn’t honour the agreement. A quote written on the business card was not good enough for him to acknowledge. John said it was out of his hand. He said something about top management didn’t want the smaller distributor to wreck the market.

We couldn’t get the products at the prices promised to us.

It was a massive blow.

A good day turned into bad weeks, and then months.

In the meantime, our customer got the products from someone else. At least they seemed happy. We still had a good relationship, so hope was not lost yet.

There was only one other supplier in our state that distributed this particular product. They did not bother to return our call though, such rudeness and arrogance. We figured out in the end that they were the one who secretly supplied those rubber gloves through another distributor.

No worries, maybe not our luck. Our lucky break would come eventually.

***

“Fred, this is John,” a voice from the other end said.
“Hi John, how have you been?” I said, wondering what he wanted this time.
“Look, I know we haven’t been good to you,” he said.
“Ok.”
“But I’ve been talking to top management.”
“Yes, I’m listening.”
“And we all agreed to support you.”
“Regarding?”
“You know, the rubber gloves, the one we quoted last time.”
“Oh you mean the unofficial, dishonoured, quote? Is that the one?”
“Yes, that’s the one.”
“Why the change of heart?”
“There’s been a change in strategy, and they want to work with smaller distributors now.”
“I see.”
“So, are you in?”
“I’ll think about it.”

My mind was full of all past rage and disappointment. The time when John dishonoured the quote was still fresh. And the time when our $2,000 profit went down the drain. It left a unique mark because I was looking to use the money as a deposit for a new family car. We didn’t end up purchasing the car of course.

I spoke to my wife about it. We had our usual kitchen bench board meeting.

She said we should be more careful this time. I agreed to it, considering how bad they burnt us last time. We decided to accept the offer, provided they put it on formal company letterhead. In addition to that, but we also demanded better pricing for initial stocks.

John honoured the quote this time.

We talked to our customer and got a new deal with them to supply the rubber gloves. They put in their bulk order, and then another one, and another one. It was like a dream come true. We never thought things would work out well eventually.

Interestingly, we didn’t end up purchasing a new family car. We just felt the time was not right yet. Maybe past trauma was still too fresh.

We did feel that our luck had turned though.

***

“Andrew, can you talk to Tyres West?” I asked our sales rep.
“Sure, what do you want me to talk to them about?” Andrew replied.
“Well, they owed us $12,000, and it’s overdue for more than 60 days now.”
“Ok, that doesn’t sound too good, have you called them?”
“Yes, of course, and the answer was always the same: we are going to pay soon.”
“That sounds a bit worrying.”
“Can you go tomorrow?”
“Yes.”

Tyres West was the customer who purchased those rubber gloves from us. They were usually very good with payment. The past few months, however, were a bit worrying. I had hope that things would be ok though.

The following day, Andrew went to visit Tyres West to talk about the debt.

“Fred, you would not believe it,” he said.
“What?” I replied.
“The gates are closed.”
“What do you mean?”
“I mean, the gates are closed, in Tyres West.”
“What?”
“There is no one here.”
“What, are you sure?”
“Yes, very sure, I even jumped the fence.”
“You what?”
“The warehouse is empty, no equipment, nothing.”
“What …”

Tyres West closed down. No one knew what happened. The day before I was just on a call with their accounts lady. She even expected Andrew to come and discuss the debt.

We figured out later on that Tyres West closed down overnight. And even more surprising was that we read on paper about how the company had ties with the bikie gangs. It seemed like they were not as clean as they looked.

We lost a lot of money.

What an unlucky day.

***

At home, we had another emergency kitchen bench meeting. We wrote down our expenses and tried to figure out how severe the damage was. It was bad. We were glad that we didn’t purchase that family car. Let’s say, someone up there restrained us from putting that deposit.

Our kitchen meeting concluded with us slashing certain expenses. So no more eating outs and end of year holiday was downgraded from Bali to free activities in the city. We were confident we could ride this storm.

My mind went back to the day when John dishonoured his quote. I was so furious that I sent a formal complaint to his boss. That complaint seemed to go to a deaf ear though.

It seemed such an unlucky day. But now that I thought about it again, maybe it wasn’t so unlucky at all.

Perhaps it was our real lucky day.

We didn’t realise it yet.

 

“It’s amazing how you can look back at your life and feel like you’re the luckiest and the unluckiest person in the world at the same time.”

Know Your Numbers

People ask me what the first thing to do when a business is in trouble. The obvious answer is “Cash Flow”. Cash is king – everyone knows that (almost everyone). So unless cash position is healthy everything else will fall apart. Fix the cash, stop the bleeding, then panic disappears and calmness ensues.

What the not so obvious answer is this: “know your numbers”

Before we try to fix cash flow it is imperative that we know the numbers. Everything from sales figure, profit & loss, cost of goods, cost of operations, hidden expenses, and so on. If we are to have a chance to get to the bottom of the pit we need to keep digging .. and keep digging.

Some people are happy enough to get “an idea” of where things are – trusting their gut feeling and intuition. There is nothing wrong with gut feeling and intuition. Those are important to make a quick decision. But when the time comes to make a more involved and analytical decision such as “where to cut cost that does not affect the core business” – intuition can be misleading.

Knowing your numbers can be heart-breaking. Most business owners in trouble might avoid this because they know the numbers are bad. They couldn’t face reality. Some convince themselves into denial – hoping and praying that everything will turn around tomorrow, or the next day, or the next day.

The problem is of course, the longer they wait the worse it will get. If you cannot do anything with the business then at least do something else. The point is, you have to do something. And all of these start with knowing your numbers.

Knowing your numbers will not kill you, not knowing your numbers will.

A lot of things in a business are out of our control. We can only do so much, try to anticipate, be pro-active, and response to the best of our ability. Everything else is not our problems because we couldn’t control them anyway.

So don’t feel bad or afraid, we are only humans. In other words, don’t be too hard on yourselves. Know your numbers and improve, or exit and do something new.