Have you ever tried those little peanut butter filled pretzel snacks from Trader Joes? They’re really good. Currently Trader Joes is being sued by Maxim Marketing. Maxim claims they are the inventor of these pretzel snacks and developed them in the early 80′s. Maxim claimed they supplied Trader Joes with the delicious snack for 25 years, to a tune of $9 million in sales each year. Recently TJ (Trader Joes) cutout Maxim from the supply chain in favor of ConAgra Foods. Basically TJ cut out a middle man, Maxim. You can read a little more about the whole debacle on NPR.
I don’t know the particulars of what went on to make Trader Joes leave Maxim. Maybe the service was bad or the product quality decreased. Maybe, actually most certainly, there was more profit to be made from the move. And that’s what got me thinking. Why would Trader Joes break off a profitable relationship of 25 years? At that point, if you wanted more profit, wouldn’t you try and work something out with the supplier? Are people who make these decisions in corporations robots? Or maybe the structure of large corporations just separates you so far from your business and trader partners that you don’t see the impact of your cost cutting decisions?
Some Small Business Facts
Here’s a nice collection of data on small businesses compiled by the Small Business & Entrepreneurship Council - http://www.sbecouncil.org/about-us/facts-and-data/. There are a lot of interesting facts and figures in there, most notably to me:
- Firms with fewer than 100 workers employ 34.9 percent of private sector payrolls, and those with less than 20 workers employ 17.7 percent. – US Census Bureau.
- Census data report that 69 percent of new employer establishments born to new firms in 2000 survived at least 2 years, and 51 percent survived 5 or more years. – SBA Office of Advocacy.
- Bureau of Labor Statistics data on establishment age show that 49 percent of establishments survive 5 years or more; 34 percent survive 10 years or more; and 26 percent survive 15 years or more.
- There were 5.8 million employer firms in the U.S.Firms with less than 20 workers made up 89.7 percent of these businesses.Firms with fewer than 500 workers accounted for 99.7 percent of employer firms.
-US Census Bureau 2009 Data
What I’m trying to convey with the above data is that small business plays an important economic role in our economy. As a group, WE are relevant! It’s difficult to see and understand that in everyday life. I feel like we almost have no voice. We’re talked about as a subset, or an after-thought. Yet we toil in the background, doing the work of employing our neighbors, providing safe havens in our communities, and acting as little financial drivers of our local economies.
I don’t know if you know this but small business as a career is risky business. According to the data above, 50% of us will survive past 5 years. And surviving past 5 years is no ticket to paradise. Everyday I’m faced with risk. If I lose a large customer, my revenue will decrease dramatically, causing me to have to cut hours on people that are my friends (because at this point, they are more than employees). If a refrigerator breaks down in my market, that’s a huge expense that I’ll have to finance. Every thing that happens affects me personally good or bad. It’s a difficult environment to exist in.
Don’t get me wrong…I’m not complaining. I am trying to explain the challenges of my job and be true to it at the same time. This is the life I chose and I embrace it. I think all of us as small business owners do because you can’t help but to embrace it.
Where am I going with this?
Well let’s go back to the Trader Joes being sued news. My first thought is, “that really sucks”. If I applied this same situation to my business, that would mean another business of a similar, small size (like me) was my supplier for 25 years. And we did great financially together this past 25 years. I saw his kids grow up, he saw mine grow up. I’ve met his wife and know her by name. He knows my employees. And then one day some other supplier came in and offered his products at a 10% cheaper price than my current price with my current supplier.
Well what would I do in that situation? What would you do? I know exactly what I would do. I’d tell that new supplier very politely, “No, thank you”. I would not throw away that relationship for money. It’s not worth it. It’s not good business. When you do business with someone for a long time, especially another small business, you build a sort of social currency with them. This is assuming the relationship is good, both of you are doing your part meaning she provides satisfactory goods to you and you pay her on time for these goods.
This social currency gets paid in a variety of ways. They will refer a customer to you and vice versa. Say I run out of that product and need some delivered the next day, well I’ll just call my buddy up and hopefully they can do me a favor and bump up that delivery schedule. Maybe they need to unload product that they have too much of…well I’ll do them a favor by taking a bit more off their hands because I could probably put a sale on and move some of that product.
I haven’t been in business for 25 years yet. I hope to be in the game for that long. I have been in business long enough to build some nice partnerships with customers and vendors. In a lot of these cases, I wouldn’t trade these relationships for more money. In order to stay sustainable in my mind and soul, I need to believe that there is something worth more than money in what I am doing. And I think that by focusing on my community, my employees, vendors…by empowering these guys through economic incentives and all around good vibes, then maybe I’m creating something much more important than my financial well-being.
What do you think of any or all of this? Is money enough of an incentive for you to invest THE single largest time chunk of your life into?