We’re making it up in volume


Dear Ken Keller,

Several years ago I signed a multi-year contract with a large company. In exchange for providing a certain item, at a set price, I would get a guaranteed volume each month for the life of the agreement.

The whole thing has gone south. We’ve kept up our end of the deal, providing quality and production availability, but the buyer has cut back on purchases for reasons they won’t share and our original price hasn’t kept up with rising costs, so we are losing some money on each unit sold.

Plus, the buyer has come back to us several times for additional price concessions, threatening to move the business to another supplier if we don’t give in.

The old joke is that we make it up in volume, but the reality is that this is a bad deal and it doesn’t look like it is getting any better anytime soon. What can I do?  — Al G.

Dear Al:

Based on what you have written, all of the guarantees are on your side of the agreement and the buyer doesn’t admit to any.

You did not say if you had a written agreement or not. If you do, and even if you do not, I would recommend you retain an attorney to see what your legal options are.

If you had an attorney draft this agreement for you, I would seek counsel from someone else. This is to provide some perspective that your original attorney might have lacked.

Sometimes owners believe that they are smarter than any attorney and so they draft and negotiate their own agreements. I’ve seen this happen with disastrous results. When the eyes are bigger than the stomach, a person often overeats without considering the consequences.

If this agreement means that your company has a concentration issue, meaning this single customer provides a large portion of your revenue and production capacity, losing money on each unit can quickly bring serious financial problems.

I think you are wise enough to know that while revenue is great, it only makes sense to have profitable revenue and in this case, you do not.

You need to sharpen your pencil and see how far back the purchasing commitments go with your suppliers for raw materials and any finished goods there might be, either in your facility or elsewhere. You do this exercise with the goal of getting out of this deal as quickly as you can without having excess inventory sitting idle and worthless on your warehouse floor.

Your goal should be to either renegotiate the deal to be more favorable or to get out of it as soon as you can. Set a date you want this to take place by and get to work.

Dear Ken Keller,

I don’t get the whole social media thing, but my employees do. It got so bad I blocked many sites from the company computers so my people would get their work done. Now I see that people spend their days (on the company time) texting and emailing and also, visiting these same social media sites I blocked. What can I do?  — Bob S.

 Dear Bob,

I know of one company that requires all employees to put their cell phones or iPads in a specific place when they come to work each day. The devices stay there except when the employee goes on an official break (when they are off the clock).

This is not the ideal situation because some employees are addicted to their phones and this has become a deal breaker, meaning, some employees choose to work in an environment with a less restrictive philosophy.

You need to decide what you really want from changing your policy, knowing that you may well end up working by yourself. Or working with people who don’t need to spend their work day on social media.

Ken Keller is a syndicated business columnist focused on the leadership needs of small and midsize closely held companies. Contact him at [email protected]. Keller’s column reflects his own views and not necessarily those of this media outlet.


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