Learning After Doing: Dog Fight

Business isn't necessarily a dog fight: one-on-one. But a dog fight that is a more traditional pack of wild animals fighting over the last scraps of meat left on a bone. Here is my take on how the dog fight tends to fall in the nature.

Mature Markets-Mature Customers: this seems to provide the best volume, or contribution margin because it is generally a known quantity and is mature because experience and growth have taken it to a peak that has been sustained. Usually, it is a market where everyone of the suppliers considers this a target, and if any, even one, is a new player, the market will be ugly because everyone will be a whore, selling out margin dollars for volume. The old guy needs to maintain this business to sustain equipment for other business; the new guy needs to get this business to justify the multi-million dollar investment just made.

Mature Markets-New Customers: this seems to be the riskiest, most time consuming, and least pay-out of all the customers. We'll see lots of write-ups in the trade magazines with the big splash the new customer made with their new line of items, but they haven't yet created shelf space or customer loyalty. All the press seems to add up to lots of attention from other suppliers, but volumes are low, and growth is slow and long-term. And chances are, if they get big enough to be a player, they'll bid out the business any way. Why waste the time here?

New Markets-Mature Customers: this is one of my favorite segments to play in. This means getting in with a current contender who is developing new lines or items, new business that it didn't play in before. Usually, this customer will have sufficient experience and "pull" to get their items stocked, brand recognition transferred quickly, and supply and delivery chains sufficient to handle the growth. By being the supplier of choice when the product is developed, you are the incumbent and have the best chance of maintaining the business at least into the first bid process. Why? Buyers are unwilling to mess with something unfamiliar that has good success so they leave it alone for a couple of cycles until enough time has lapsed to prove other supply sources. All that also means greater margins and better returns.

New Markets-New Customers: who knows? this is the segment that can be boom or bust, and typically bust. 50% of small businesses fail within the first year and 80% within the first five years. But some time should be given to these players. The most ideal is to provide them an off-the-shelf solution so your cost and risk in their startup is very minimal. But, they should see you as the sympathetic supporter helping them along. Then, for the 20% that are successful, and the 2% (guess) that hit it big, you are the long-term supplier that they will always turn to. Consider the McDonald's-Coke relationship. There is no contract, just "a common vision and a lot of trust."