Dear Aunty B,
Three years ago I came up with the strategy to refine and sell some of the waste from our main products. We invested money building warehouses and equipment and knew that while it would lose a bit of money in the first year it would be successful.
The first few years we did not sell nearly as much as we expected. Also the price for the waste has fallen. My problem is this: we have a new CEO who wants to dump this new line of the business because he says no one wants to buy it at a price we can make a profit. He also wants to refocus the business on the main product lines.
But we have invested a lot of time and money in the plan so far and don’t want to walk away. In fact, we want to take to the bank a plan to build more warehouses and sell more waste. Higher volumes will bring in more money.
How do we convince the CEO not to walk away from the strategy?
CL,
Vic
Dear CL,
Hang on a sec. So the market doesn’t really want to buy your by-product – and certainly not at the price that is going to make you a profit – yet you want to try and sell more of it? And you want to borrow money to build more infrastructure? Why?
There is a simple truth that operates in the business marketplace. People won’t buy what they don’t want. You already have said that the by-product has not sold as much as you expected. The fact that the price has fallen means you need to rethink the strategy – not press ahead, borrow money and build more infrastructure.
And your assumption that selling higher volumes will bring in more money is wrong. It might bring in more revenue but will that make you a profit?
I understand the strategy is your baby. But strategies can be wrong. And maybe yours was wrong. Or it was right at the time and the marketplace has changed. It is back to the drawing board. You have not got a hope in hell of convincing your CEO to go with your plan without a serious rethink. Start with the marketplace. What do they want now? How do they want it? And what price will they pay? Do the business case and you might be surprised at the results.
Good luck!
Your Aunty B
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