How To Successfully Run A Commodity Based Business
What I mean by that is, I reconciled with myself that my expectations weren't realistic. It was quite an education, and a real exercise in restraint and discipline. It was essential to change the way you conducted your business, because if you didn't have an understanding(many coffee companies did not) and an overall strategy to protect your business, you would find yourself and all of your employees in the unemployment line. This was essential if you wanted to not only stay in business but to thrive. It was and still very much is, a very challenging vocation. You better love it, otherwise it will eat you alive!
Now what percentage of each do you buy? Why would you buy options and not just all physical coffees and futures? Why wouldn't you just buy the coffee outright for the year, or at least fix the pricing? Great questions, every one. The problem is there is no exact formula, it will vary with what kind of business you are running. The formula can be similar and the philosophy too, but no 2 commodity based businesses do this exactly the same.
Why? I have found it greatly depends on the owner, and his stomach for risk, as well as his need to consistently turn a profit. There are some other factors I have seen, but for the length this post is now running at, I have decided to not cover some other reasons. It would simply take too long and I have a solid schedule with topics I would like to address in this blog moving forward. I certainly hope you see my point here.
I consider myself, extremely lucky to have learned "on the job", because when I purchased the company I knew, every facet of the business, backwards and forwards. I couldn't see someone, say coming from the service industry or say the retail business stepping into a commodity based manufacturer and making an immediate positive impact. Not unless they had some kind of trading experience and an overall knowledge of understanding complex accounting concepts, along with some sort of production background. These are all "must have" skills right out of the gate.
Along with that, then you can add in, product development, quality control, logistics, human resources, Sales, marketing, etc, etc....
So, those of you that have a commodity based manufacturing business, I hope you have found this article informative. I know there will be reader's wondering why I didn't get more specific and tell them the exact steps, but that wouldn't be very prudent on my part. Firstly, I just got through pointing out that every commodity based business is different. I just couldn't, nail down your exact "winning" strategy. Secondly, this is in large part what I do to provide for my living. I consult and do some public speaking on topics I have covered here in this blog. I do go into a bit more detail speaking about this, but marginally.#freebusinessadvice
I have given you a template above and a strategy to formulate a business plan, that will ensure you are very successful. I strongly recommend that you adopt all of the options I have discussed above to ensure you are never completely stuck on the "wrong" side of the market either physically, or through managing your trading accounts. One of the big keys here is to never be backed into a corner where you are forced to ship product that you know will be very low margin, break even or even in some cases at a loss in order to fill your customers needs. That my friends, is a certain formula for disaster.
I realize this can be overwhelming. That is why people like myself exist in businesses that deal in commodities. You always could use a different perspective, or someone you know you can count on to teach you the proper way to structure the way you go about your business. In the long run, it pays for itself 100 times over. I certainly know that I was in the business for over 10 years, and still needed assistance from broker's and some key financial advisor's in the manufacturing field to fully understand how to almost eliminate your risks. Now I saw almost, because although mistakes can be fixed, some you make in this business can only be improved, not fixed. It is still so much more palatable than the alternative which is to bury yourself with low priced supply contracts and not guaranteeing that you capture the best margin possible for the products or products you are making.
So, that's the end of this rather long blog post. Believe me when I tell you, it could be 5,000 words longer and I still wouldn't be able to cover everything necessary. That is why people that are experts in this specific field are invaluable, and I might also point out, there aren't that many professionals with this kind of knowledge. Having said that, I would welcome the opportunity to assist any business that is struggling or in need of assistance with regard to manufacturing commodity based products. One more thing I would like to mention. There are some larger company's that have the luxury of having trader's, CPA's, cost accounting experts, inventory specialists, marketing departments and so on. However, the majority of the businesses I am talking about are small to medium sized without that luxury. That's where I can help. I not only help in the strategy, planning, costing and lean manufacturing processes, I show you how to operate with the lowest possible payroll overhead that is humanly possible.#commoditytips
I really do hope you found some interesting facts, concepts and advice within this post. I also wish you all the success going forward. If you have any specific advice you would like me to address, or answer a specific question you may have bout this topic, please feel free to email me at firstname.lastname@example.org. All I ask is that you nake sure you type the subject line: "Commodity Business Post". That way even if it somehow gets into my Spam folder I can retrieve it, open it, and respond. Thank you for reading, and I hope you share this blog with your friends and business contacts. More importantly I hope you will keep following this blog. I appreciate every one of you taking the time out to read it. Goodbye for now. Joe Leary - 778-774-7670 is my cell number. Please only call if you have a serious inquiry. Thanks again.