Major Business Dilemma - Who is right? Who is wrong?

Discussion in 'Growing and Managing a Business' started by businessguy60, Oct 21, 2014.

  1. businessguy60

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    Oct 21, 2014
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    Good day

    For about 2-3 months, my parents and I are having arguments regarding their business decision.
    I really need your opinion on this. Who is right, who is wrong.

    The problem.

    We run a family business (hardware) for about 15 years already in a small city. We do have some competition but only 1 major competition (competitor A) is really a threat at the moment. I think its safe to say that Competitor A and our business controls the largest market share in the province where we are located.
    Feeling the strong growth of our hardware, my dad decided to put up a branch in a small town (30 mins away from our main branch) 3 years ago.
    He hired this one guy (Mr. M) who oddly enough just resigned as a driver of Competitor A as his salesman.
    My dad doesnt really stay at that branch much so you can say that the new employee handles the majority of the retail sales in that branch.
    Fast forward to 2014, the new branch wasnt really performing well (you can blame this partly to my dad not supervising it well.
    There was some mismanagement and sometimes this led to overstocking... so that branch needed to pay more money to our suppliers than it was earning in a day.

    Anyway, since the business wasnt really earning. My mom (who manages the main branch) and my dad decided that they will close the 2nd branch at last. However, Mr. M (the employee of our 2nd branch) suggested that he will just buy the business from my parents and continue running it himself. My parents thought about it and agreed, as long as he will exclusively purchase his inventory from us instead of some other supplier.

    My parents seeing this as a situation where they can earn extra money from Mr. M's takeover without the hassle of actually running the 2nd branch felt delighted.

    This is where i come to the scene. Upon hearing that, I went mad as I dont trust Mr. M and i believe my parents shouldnt be creating a possible competitor in the future. I know Mr. M agreed that he will not get his hardware supplies that he will sell in his new business from other suppliers and get it exclusively from us but I dont trust him. Whats stopping him from asking other potential suppliers who may have a lower price from what we can offer?
    We also suspect him of taking some money on the cash register when my dad is not in the 2nd branch supervising him when we still havent sold him the business yet (may explain the poor sales of the business when it was under my dads ownership). Also, as soon as the hardware was transferred to Mr.M, we had heard stories that he already acts like a big shot and spends a lot of his new found money from his new business in home improvements and other things even when he is just basically starting out in this venture to impress his friends and neighbors signalling that he is no longer an employee and now a business owner.

    I also observed that my mom teaches and guides Mr. M on how the hardware business works, the ins and outs. the nuts and bolts. everything he needs to know..
    as my mom is kinda naive and believes Mr. M will honor this business arrangement til the end of time.
    My parents even helps Mr.M to get a stock that is not available in his branch if a customer comes looking for it and we have it in our main branch.

    My mom is really glad that as of now, Mr. M pays my mom cheques for every stock he gets on time.
    (My parents now act as Mr.M's exclusive supplier)

    They assured me that they will make a "contract" so that Mr. M will remain a loyal wholesale customer to us and not switch to any other supplier.
    But i seem to observe that they are not prioritizing that.

    I always keep telling my parents that the money earned from Mr.M is just good for the short term and will be bad for the long term as one day, his business might
    get big and even rival as already. Who knows....Mr.M's business may become a major competitor to us in 5 years grab a slice of our existing market share since his business is just 30mins away from us.

    Pleas help me on this. I want to know if my parents are right on their decision.. even saying that selling to competition is okay.
    but my view is that this should not continue as this may be a problem in the future.

    Should we supply a potential competitor? Will the money earned from him now be worth it to the potential losses he might cause our business in the future?

    I dont agree on "breeding" competitions.

    Thank you
    #1 businessguy60, Oct 21, 2014
    Last edited: Oct 21, 2014
  2. ald1991

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    Jan 12, 2015
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    First of all, what reason(s) do you have to distrust Mr. M? Gut instinct is not a very viable reason when it comes to business. The same applies to assuming he is stealing money from the registers. If you can present valid incidences that drive you to distrust Mr. M, then I would collect them and present those concerns to your parents. What you have stated in this post does not sound like reasons you should be this concerned. It sounds like your parents have discussed the ramifications of selling the store to Mr. M and you should not be worrying as much as you are about this. Yes, it is always possible he will become competition and may find other suppliers down the road, but he may also become an excellent affiliate or partner to your parent's store.

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