I know some bigger companies have various divisions that supply each other making profit that never made much sense to me in the past and I do now see the business logic.
This week the packaging business I am involved with is supplying my warehouse business with braded tape and all the other packaging materials required. This was an obvious move as you are then making profit from your own business whilst keeping the costs the same or making a small saving.
My family has been asking me to do this for some time already but I have been using the warehouse as bait to attract other clients for the packaging business. It is far easier to lure a prospective client not knowing there is an ulterior motive in play. This was never the intended plan originally and just so happens to have evolved and worked out this way as we were never certain whether we would continue with packaging in Johannesburg.
Once they are supplying your business they are more attentive and will listen to any proposal you may have. I have already secured two clients this way for my packaging business and if needed will use this method again if I am struggling landing a certain account. Some times you have to think out the box and I admit this is one of those cases. These days you have to try every trick in the book and both parties do benefit from this as they have me supplying them packaging items at a cheaper rate making more profit. Suppliers became clients and it is a simple and effective way to grow the packaging business.
Our warehouse does not use loads of packaging material like other places do, but it is still a very decent account and I am the one paying the bills. I was discussing this with my packaging business partner this morning as we are about to push for business more aggressively than what we have been doing.
For the first time we will be storing the various packaging items in the warehouse which will be free storage and not something you you would normally find so you have to take advantage of the free part. When the packaging business is doing well then it can pay the warehouse business a service fee and help subsidize the monthly costs. This makes perfect financial sense that the companies help support each other and who knows where this may lead in the future.
We currently receive a number of enquiries weekly from Johannesburg businesses and have not been in the position to move forward with them until now. I would say it was more from my side as I don't like to take on any new projects until I am totally ready. I have enough on my plate each week without having to worry about pushing another business.
After the Portugal trip this all changed and now I have no choice but to increase the work load if I am going to make that all happen. The plan is quite simple and that is to grow the packaging business quickly and then hire someone to run this with myself overseeing the important parts. In the past I would do this all myself and realise now I need to share the load and not be so pig headed.