Saw a neat business model today at work that I thought I would share. Maybe some of you can apply it to a different industry. Maybe I've just been living under a rock and this is going on all over the place? :huh2:
Anyway: The company that I work for sells an engineered product. Essentially this means that every order is custom and engineered to fit. Each unit is then serial numbered and shipped to the customer.
Typically the customers that we sell this product to puts our product onto their system and then sells the entire system to the end user.
Much like a car, when one part is worn out they replace that part and not the whole entire system. Historically the end user would call up a few distributors, the OEM that made the system, and then us directly for a quote of a new unit based on the serial number.
Our industry is a bit behind the times when it comes to using the internet and is just starting to catch on. Most people were used to faxing in requests for quotes or calling people.
However; now things are starting to change. Instead of calling up the big guys, the end users are starting to post what they need on job bidding boards that are visible to most (some require a small fee).
In the past there were only a few big companies that were known distributors of products like ours. I am talking about major corporations with massive amounts of inventory and other overhead.
Today I received a request from 5 or 6 of the typical big players, and then one oddball guy that I had never heard of.
I decided to call him up and get some company info (usually we require different payment terms for people we haven't done business with).
Being entrepreneurial minded, I started asking him more about his company and how they operate.
This is what I thought was awesome!!!
He is prat of a team of 2 that works out of their home offices (completely different and much more cost effective than these other major corps with massive overhead).
One guy searches the bidding boards all day long and pulls out all of the jobs they think they can quote on. He then goes out for quotes to all the suppliers (all the other guys like me). The other guy works with the end user and the supplier to arrange freight and any other information that needs to happen after the order is placed.
The other distributors have to mark-up our product quite a bit to cover their costs because of their massive amounts of overhead.
These guys can mark it up for half as much and still make plenty of money. They can also provide the best pricing to the end user, winning more and more bids on these types of projects..
99.9% of the time we ship the product straight from our facility to the end user. These guys in their home office never even see the product (drop shipping). By ordering based on a serial number they are 99.9% sure that the product will be identical and the end user will be happy.
For any technical questions they either act as an intermediary, or send the end user directly to us.
Essentially all they are doing is shuffling papers and collect big bucks. The cheapest unit we sell is ~$20,000. A typical order for us is $200,000-$300,000!
We have several other competitors and hundred of complimentary products. (for example our unit also needs a motor that is sold by someone else to turn, often times even more expensive than our piece).
Just thought it was a pretty neat way to do the same thing with much less and still make a good buck.
Hope this helps SOMEONE!
Anyway: The company that I work for sells an engineered product. Essentially this means that every order is custom and engineered to fit. Each unit is then serial numbered and shipped to the customer.
Typically the customers that we sell this product to puts our product onto their system and then sells the entire system to the end user.
Much like a car, when one part is worn out they replace that part and not the whole entire system. Historically the end user would call up a few distributors, the OEM that made the system, and then us directly for a quote of a new unit based on the serial number.
Our industry is a bit behind the times when it comes to using the internet and is just starting to catch on. Most people were used to faxing in requests for quotes or calling people.
However; now things are starting to change. Instead of calling up the big guys, the end users are starting to post what they need on job bidding boards that are visible to most (some require a small fee).
In the past there were only a few big companies that were known distributors of products like ours. I am talking about major corporations with massive amounts of inventory and other overhead.
Today I received a request from 5 or 6 of the typical big players, and then one oddball guy that I had never heard of.
I decided to call him up and get some company info (usually we require different payment terms for people we haven't done business with).
Being entrepreneurial minded, I started asking him more about his company and how they operate.
This is what I thought was awesome!!!
He is prat of a team of 2 that works out of their home offices (completely different and much more cost effective than these other major corps with massive overhead).
One guy searches the bidding boards all day long and pulls out all of the jobs they think they can quote on. He then goes out for quotes to all the suppliers (all the other guys like me). The other guy works with the end user and the supplier to arrange freight and any other information that needs to happen after the order is placed.
The other distributors have to mark-up our product quite a bit to cover their costs because of their massive amounts of overhead.
These guys can mark it up for half as much and still make plenty of money. They can also provide the best pricing to the end user, winning more and more bids on these types of projects..
99.9% of the time we ship the product straight from our facility to the end user. These guys in their home office never even see the product (drop shipping). By ordering based on a serial number they are 99.9% sure that the product will be identical and the end user will be happy.
For any technical questions they either act as an intermediary, or send the end user directly to us.
Essentially all they are doing is shuffling papers and collect big bucks. The cheapest unit we sell is ~$20,000. A typical order for us is $200,000-$300,000!
We have several other competitors and hundred of complimentary products. (for example our unit also needs a motor that is sold by someone else to turn, often times even more expensive than our piece).
Just thought it was a pretty neat way to do the same thing with much less and still make a good buck.
Hope this helps SOMEONE!
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