The importance of profit margins - Shipping Wars

Shipping Wars is a reality tvshow that follows freelance transporters in America, who bid to win shipments to deliver across the states. So if you have an odd sized item - a boat, a phonebox, a massive theatre prop, you post your details with a shipping company, who then let freelance delivery people bid to win the job. There are people who own massive haulage trucks, as well as smaller vans competing for the work.

I watched an episode, and was reminded of such a crucial business lesson, that many people can forget about.

Two men are bidding against each other for the chance to win a job. One man is pretty experienced at this role, and one is newer to the industry. They continue bidding, lowering the price. The rookie shipper, wants to win the job, and drops the total by a large drop. The more experienced shipper laughs to himself, knowing that once the truck has had petrol, the wood has been bought to crate it safely etc, that the rookie will actually be running at a loss.

The rookie 'won' the job, but ended up losing money, as well as the 5 days of driving.

This is such a core business principle that we all have to remind ourselves of over and over. It may be easy to sell your item at £3, but if it ends up costing you £3.20 to get it to each customer you may as well just sit and throw 20pences out of your window.