When your pipe lining materials supplier doubles as a competing contractor, you’re at a disadvantage.
Recently, I ran across a pipe lining contractor who was set up by his supplier as a “sub-distributor” to his competitors. He received 15 percent to sell materials to the competition.
I asked him how he handles requests for a price to line pipe. He said he’d bid any job and didn’t see why he should hold back and protect the contractors he distributes materials to.
Personally, no matter what business I’ve been in, I have never bought from the guys competing for the same customers I was going after. Even when the competitor/supplier has the best intentions, there will come a time when you are talking to a prospect and your competitor/supplier will deliver a proposal to the same customer. It’s painful to watch, knowing the guy can undercut you on materials by 15 percent. Even if the competitor/supplier tells you he didn’t cut the price, there’s always the thought in the back of your head about what did he say that got him the job over you? If he didn’t cut price, did he tell them he sells to you? Did he tell them he’s the guy who trained you? Did this demonstrate that he may know more than you do?
A lot of companies try this “multilevel” marketing plan to build more customers with their product, but in the long run, many of these arrangements prove too much for competition within a market segment and eventually die out.
From the other perspective of the competitor/supplier, there is a reluctance to train new people to do what you are currently doing successfully. When you were the only one doing the work, all of your future customers came to you as a subcontractor and had you do the work. Now, not only have you lost the work, but you also gave up the majority of the profits earned on the job for a measly 15 percent of materials only. Moreover, you had to train the customer, and if a job goes badly, they’re likely going to be looking to you for relief.
Most often, companies stick with the contracting side over the supplier side. But people still follow the paths that have developed in the pipe lining industry over the years. The challenge is finding which works best for you and your core business, and concentrate on that. If it is supplier, then get out of the contracting business. If it is subcontractor, then go after that market segment. And if it’s contractor, grow your contracting business. Become a master of one of the paths and forget a jack-of-all-trades approach in which you don’t excel at any of the paths because of the lack of focus.
About the Author
John Heisler is the owner of Pipe Lining Supply and Quik-Lining Systems Inc. He has 20 years of experience in the CIPP lining industry and over 40 years in the underground construction industry.