Partnerships and Someone Else’s Product

 

The biggest challenge of selling someone else’s product is…

I discussed earlier about being trapped and sometimes we see a private business opportunity as a way out of a financial trap.  An easy business opportunity is to sell someone else’s product.  

One of the reasons (but by far not the only)
why I’m motivated to write for myself has little to do with an innate desire to communicate to the rest of the world.. but I have to admit there is a certain cathartic element to having a platform and forum.. and a deadline, even if self imposed.   That element of this project has been a very pleasant surprise.  It’s because I’ve learned a very important lesson about business, and being in business for yourself.  One of the most important lessons in being in business for yourself that it is best if you own the product line.  

Due to the relentless push to drive costs out of the system, most business put the squeeze on salaries.  This is not uncommon and many many professional individual contributors have had to deal with the dreaded “pay freeze” or “no increases this year” mantra.  The dirty little secret is that the same is true of all the great “Business Opportunities” Which I believe is another reason why so many individuals have a hard time striking out on their own.  There are many different ways to easily go into business for yourself.  Franchise Operations, MLM, and retailing other products are some of the easiest ways to start.

Franchise operations require tremendous capital, and then when you get involved with them, they require huge amounts of effort to get off the ground floor.  I have experience with multiple franchise and it’s all the same way.  The franchise name recognition is where the real value is, and if you have a franchise with any serious name recognition then you are absolutely going to pay through the nose for it.  

I’m not going to discuss multi-level marketing organization like Mary Kay or primerica, in fact volumes have been written about them and so i’m not sure I’ll ever really write about them in depth.  I’ve been fortunate to stay away from those types of organizations over the years even though I’ve been privy to many .  

I’m talking about product lines like: Satellite TV, Travel Sales (more on this in a future post), Insurance, etc.. any product lines that are non-exclusive, allow you to name and organize your own business, and then resell them.  The biggest challenges for these business are that they are unsustainable for the long term because you are beholden to the corporate giant who will crush your business over time even if it doesn’t make sense to do it.

Let me explain..

A new product comes out.. Small dish satellite TV.  The company can’t fund a thousand outlets that it needs to reach John Q. American Consumer  so they go to retailers and develop a channel.  The people they sign up are called ‘partners’.   Generally those retailers specialize in the product category and a relationship is developed.  The company provides support services into the channel and the channel grows.  The intelligent, the hard working, those with a hint of risk tolerance hustle and make a good little business for themselves.  Unfortunately, the big corporate organization grows.. it hire’s it’s own PICs to figure out ways to drive profits.  Tweaks are made to the system. It eventually gets harder and harder to manage your business.  Sometimes it’s through some form of market disruption (online travel websites), sometimes through heinous business practices (charge backs in the satellite industry). But in the back end the corporate entity is doing everything they can to drive profits away from the channel and into the corporate organization.  

I’m not saying you can’t make great business as a travel retailer, a satellite dealer, a Mary Kay person or any other number of channel jobs.   What I’m saying is that  it doesn’t matter how big you get, when your business is built around someone else’s product your screwed.  I personally once witnessed the number one satellite retailer in the nation get their business yanked away from them because the satellite television provider didn’t like that the retailer in question was starting to work with the competitor.  I want to reiterate that we are discussing the number one retailer in the nation.. this entrepreneur had thousands of people working for him and there was enough profit in the business where they had their own private jet. It all got yanked away. Admittedly this retailer had very questionable business practices.. but they had those practices for years.. it was the fact that they started working with the competitor that started the string of events that ultimately killed their business.

Right now in the travel world the only retailers that are making it are those that focus on groups.. The big travel providers have already figured out how to own the channel for individual bookings.. what happens when they start figuring out affinity groups?  

So what’s the takeaway for this post.  If your sick of your corporate job and are looking at going into business yourself, be very careful.  Dont’ fall for the pitch of how you can make so much money selling someone else’s product.   Is there potentially allot of money to be made? Sometimes Yes…  Will you be able to build a sustainable business for the rest of your life?  Probably Not.

Partnerships are supposed to be equal, but to paraphrase George Orwell “All Partnerships are Equal, but some are more Equal than others”.