Faking it

One of the latest crazes doing the rounds is that of group buying.

The way it works is that some intermediary, typically some sort of website or service, organises a discount deal with a supplier of products – maybe a restaurant meal or some other goods – and in theory, the consumers visit the intermediary’s website and buy the product/deal with the agreed discount, and they then visit the supplier and take delivery of their purchase.

The problem with these deals though is that the intermediaries, in trying to get the best deal possible, are often forcing the suppliers to provide their goods and services at prices that are unsustainable.

While the suppliers are seeing cashflow, the reality is that their actual expenses are exceeding the income that’s being generated, and the end result is that there’s a negative cashflow into their business.

Or from it, truth be told.

Another problem is that business owners may be forced into offering services that they might not be able to provide. We’ve become aware of a photographic services supplier who, through the discount deals being offered through their intermediary, could not possibly fulfill all of their promised deals within a year, even if they were shooting 14 hour days and seven day weeks.

So, if you run a business and you’re approached by people offering you this sort of a deal, by all means look seriously at it, but don’t be blinded by just the promises of the cashflow. Make sure that the model presented is both sustainable within your business, as well as being achievable by you in a practical sense.