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Don’t Play the Commodities
With Your Business
If you think I’m talking about going to the
Chicago Stock Exchange and doing a little trading for pork
bellies, think again. I’m not talking about playing the
commodity market here, but you might want to think twice about
doing that too. Any commodity trader can tell you some
horror stories that will make your hair fall out.
Not surprisingly, that also happens to
businesses who based their success on commodities. If you are in
a business that depends on the success of crops then you know
the trials and tribulations already. Instead, I direct
these comments to those of you who are either considering a new
business, a network opportunity distributorship, or expanding to
other lines within an existing business.
When you base a business on a commodity, you
put your success almost entirely in the hands of someone or
something else. Sometimes it’s the weather, sometimes it’s
other natural disasters, sometimes it’s market speculators,
sometimes it’s just plain greed. Unless you control the
crop yourself, you don’t really have control of your success.
And even if you are the one who grows the crop, you are still
susceptible to weather, insects etc. Let me give you some
real examples.
A nice couple I know joined a network
marketing company that basically sold coffee. Actually the
coffee had other ingredients in it such as mushrooms to give the
desired effect to the end user. My friends were quite high
on the company and product for about the first nine months.
Their sales were good, and recruitment seemed to be going well.
Then a hurricane combined with some serious flooding in Brazil
caused the coffee market to go down the tubes in a hurry.
Coffee which was selling for $4 a pound suddenly went to $14 a
pound on the open market. Needless to say, my friend’s
coffee based product got very expensive in a hurry. Can
you guess what happened?
Sales started down at a record pace.
Recruitment went south as fast as the product sales. And
there was nothing the couple, or the company for that matter,
could do about it. No sales for the next four months
pretty much put my friends up that proverbial creek without a
mushroom to paddle with. They are out of the coffee
business now.
Certainly coffee is not the only victim of
commodity based business. A gent I know went into a
business that sold a berry drink. The product made some
rather remarkable claims as to what it could do for your health.
It really didn’t matter however, since within two years there
was a massive failure of the berry crop. The berry extract
didn’t just get expensive, it become completely unavailable on
the market. The company, realizing their dire predicament
tried switching to another berry which they claimed had the same
great anti-oxidant properties as the original berry, but it
didn’t work. They had spent so much time and money
promoting the original berry, that customers could not be
convinced that another berry would stack up. So,
down-down-down went the sales.
Yet a third friend opened a tire store and
took on a brand of tires that had a great deal of real rubber
still used in it. It made for a great selling point,
especially when you rode on real rubber tires and experienced
the remarkably smooth ride that real rubber gives. That
is, until some cagy character decided to try and corner the
rubber market. All the options were bought up and the
fellow sat on his rubber crop for nearly 10 months. Other
tire companies expanded their artificial rubber tire lines, but
my friend had no ability to do so. He was basically bouncing
around trying to find some tires to sell. He found them,
but at prices that made it almost impossible to compete with the
other tire stores. I guess you have noticed that almost
all tires are made from synthetics today.
Now in both the coffee and the berry drink
cases, the companies survived, but they lost thousands of
distributors during their shortages. These are people who
had paid money for a distributorship and worked very hard for a
good period of time to promote their business and build
downlines. And still, through no fault of their own, their
own private distributorships failed or suffered greatly.
The tire man was simply a victim of someone else’s greed.
I think the lesson is very clear here.
If you don’t have an iron-clad guarantee of delivery of a crop,
then basing your future on a commodity is basically playing
Russian Roulette with your career or business. Why do that
when you don’t have to?
Products that can be manufactured or made
from natural resources don’t fail. No hurricane is going
to make all the limestone suddenly disappear off the face of the
earth. An earthquake will not affect the availability of
iron ore or mineral deposits. Even if manufacturing is
disrupted, it is normally covered by other manufacturing
companies in other parts of the world rather quickly, so
shortages, if any, are few.
In the history of product sales,
non-commodities have also had their up and downs, but almost
never based on natural disasters.
I am certainly not telling anyone to avoid
the coffee business or extracts of bananas. After all,
look at what it has done for Starbucks. But I am saying
that if you are considering a business or looking into products
to represent, then look at that product very carefully. Do
a little due diligence and read up on the history of the product
and delivery. You may find that selling mushrooms could
keep you in the dark in more ways than one. |
