This week I have a business meeting with a close friend so it is a social-business meeting where we can talk openly and try and find the sweet spot for the proposed deal. This deal is both doing us favors and I don't want it to be one sided and should be fair.
My friend has a pick and pack distribution business so in some ways he is a competitor except his business model is more geared for direct to customer. His ideal scenario is he does not deal with the online platforms delivering to their distribution centers which is an added cost and complication. His business model is simple and does not have the added stress of booking slots and time penalties if you are late.
Currently he has 4 or 5 clients he wants to off load to our business which offers a decent profit opportunity for our business. We are already delivering to the distribution centers so the extra work of booking slots is already taken care of through our normal day to day business we currently run.
This weekend I have been running through the figures through my head and trying to formulate a percentage I can offer him for the "gift". The brain never stops and even when you are mean to be relaxing you are busy processing your thoughts and you cannot switch off. A 50/50 split may be the fairest from his side, but from our side it is more like a 70/30 or 80/20 as we are doing the work. The 20 or 30% profit I would be proposing to him would allow him to free up that time spent on those clients and still make a profit. I would expect to meet somewhere in the middle so a target of a 75/25 split is most likely where this deal will end up.
I have known my friend for many years and this is not about shafting each other and finding a middle ground we are all comfortable to move forward with. The other bonus is we get to use all his app systems he has in place which knowing him will help our business immensely. On top of all of this is the one app is a group delivery system that calculates deliveries at trade rates.
Courier companies when you phone through for a price has retail rates and for those using the services being logistics companies there is trade rates so these companies can sell those services and also make profit on the delivery. We have never made profit on deliveries and has been all about the service so this is all new to us.
Just to give you an idea of the difference between retail courier prices and trade prices the local delivery fee is R92 for anywhere in Johannesburg and the trade price is R38. If you did 10 deliveries every day the difference adds up fast and at these prices there is no need to run vehicles which is a big saving. The staff driving the vehicles can remain in house and do pick and pack work instead so the extra clients does not necessarily mean more staff are required.
The adding of the new clients with the various extra app systems we could use should actually help reduce our over all costs at the same time increasing our turnover and profitability. This is more about working smarter and not necessarily harder even though the workload will increase. We shall see where this goes when we meet and who knows may not even want to earn a percentage from this yet we will insist he does because every deal must be fair.
