The sales rep from a cable brand came in to see Quique on a Tuesday morning, machine coffee in hand, for his usual visit. They talked about the weather, about how the sector was flat, and at one point, without making anything of it, the rep let slip:
—With the latest increase, that reel of flexible cable is costing you 41-odd now, right? Good thing you're passing it on.
Quique nodded the way you nod at something you haven't fully taken in. When the rep left, he looked up the reel of cable in his system. He was selling it for 39.
It cost him 41-odd. He sold it for 39. Every reel that went out the door lost two euros, and he didn't know it.
Quique's company is an electrical supplies distributor on an industrial estate in Valladolid. It sells to fitters, to other shops, to electricians who pop in for what they're short of. Five thousand product lines, maybe more: cable, switches, boxes, conduit, small fittings. It buys from twenty suppliers and each one has its own price list.
The price lists that trickled in
Quique's selling prices were in his system, set some time ago, and barely moved. The purchase prices, what he pays his suppliers, moved constantly, but through another channel: each supplier sent its new price list whenever it saw fit. A PDF by email. An Excel attachment. A letter, from one or two still. "New price list effective from 1 February." Sometimes they gave notice; sometimes the increase was buried inside a list of four hundred lines where finding what had changed was impossible.
Nobody put those price lists together. They arrived, got a quick glance, went into an email folder, and work carried on. The selling price in the system; the cost in a PDF in the inbox. Between the two numbers is the margin, which is what the company lives on. And that margin moved without anyone looking, because the two numbers that make it up lived in two places that didn't talk to each other.
With five thousand lines and twenty suppliers raising prices every few months, it was only a matter of time before some product ended up selling for less than it cost. The cable was the one Quique caught by chance. It wasn't the only one.
What he asked for and what he needed
Quique called me with a nagging feeling. He asked for the first thing that came to mind: raise all selling prices by a percentage, a flat 5%, to be on the safe side. It's what a lot of people do, and it's a mistake on both sides: you make the products where you already earned well too expensive and price yourself out, and the ones running at a loss stay at a loss if the cost rose more than that.
What he needed wasn't to raise prices blindly. It was to see. To see, line by line, what each thing costs him today and what he sells it for, and therefore how much he makes or loses on each one. And for someone —something— to compare, when a supplier sent a new price list, against the previous one and tell him: "this has gone up, and at your current selling price these twelve lines have fallen below margin".
How it works, no smoke
What we built has no mystery to it, and that's its virtue. We take the suppliers' price lists as they arrive —the PDFs, the Excels— and pour them into one place, each with its date. The system reads each list, matches every line to the selling price Quique has in his system, and works out the margin on each product. Nothing more than that: putting the two numbers that already existed side by side.
When a new price list arrives, it compares it with the previous one from the same supplier. And it produces two things: what has gone up and by how much, and —the important part— which lines, at the current selling price, have fallen below the margin Quique considers healthy. That's a short list, the kind you review in five minutes, not a four-hundred-line PDF.
Two drawbacks have to be owned up to honestly, because it has them. First: each supplier names its products its own way, with its own code, and matching the supplier's line to the one in Quique's system is a piece of craftsmanship that had to be done up front, product by product, and that needs the odd touch-up now and then. It isn't magic; it's pairing up. Second: this doesn't decide the selling price for you. It doesn't know what your market will bear or what the shop across the road charges. It shows you the margin and warns you; you set the price, because you're the one who knows your customers. It's a mirror, not an oracle.
What changed
The first time we ran all the price lists through, thirty-odd lines came up that Quique was selling below cost. Thirty-something. Not because anyone was a fool, but because the cost had gone up quietly, in a PDF, months earlier, and the selling price had stayed where it was. Another batch he had on a margin so thin it barely mattered whether he sold them.
He fixed them in an afternoon. Some by raising them, some by talking to the supplier, one or two by dropping them because they didn't add up. And from then on, every new price list that comes in goes through the same filter: what has changed, what has fallen short. Quique checks it when the alert arrives, not when a rep mentions it in passing over coffee.
He didn't work out what he saved, because it's hard to work out what you stop losing. But he summed it up well:
—I thought I was making money on those lines. And I'd spent half a year giving them away.
The margin that moved in the dark
What was happening to Quique isn't unusual. It happens to almost any company that buys to resell: purchase and selling prices live in different places, change at different rates, and the margin —which is one subtracted from the other— goes unwatched because it isn't written down anywhere. It's split between a system and an email folder.
We didn't have to change systems or build anything big. We had to bring together two numbers the company already had and make them talk. So that every time a supplier raises a price, someone knows that same day and not half a year later.
Because a company can lose money for months doing everything right: buying well, selling plenty, without a single mistake by anyone. All it takes is for the number it costs and the number it charges to live apart, with no one subtracting them.
The margin isn't anywhere until you put it there
The purchase price lives in your supplier's price lists; the selling price, in your system. The margin is one subtracted from the other, but it isn't written down anywhere: that's why it can erode for months without anyone noticing. With twenty suppliers raising prices in a trickle, it's only a matter of time before you sell something below cost.
Bringing purchase price lists together with selling prices and working out the margin on each line turns that invisible subtraction into a short list: what has gone up and what has fallen below a healthy margin. It doesn't decide the price for you —that's yours— but it warns you the day a cost rises, not half a year later.
Do you know how much you really make on each product?
If you buy to resell and your purchase prices live in scattered price lists while your selling prices sit somewhere else, you can bring it all together and work out the real margin on each line, with alerts when a cost rises. We can look at it together.
Let's talk