Before you hire an outside party to distribute your product, think twice — they might be unnecessarily costing your business an arm and a leg.
That's the lesson Max Kater, CEO of Murchison-Hume, learned on this week's episode of CNBC's "The Profit."
Over the past few years, Kater had been using a convoluted process to get her fleet of upscale, nontoxic cleaning products — ranging from glass cleaners to dish soaps — from the factory floor to consumers' hands.
That's because her business, established in 2008 and currently based in Los Angeles, has been manufacturing its products in Skokie, Illinois, a suburb of Chicago, and then sending them to a third-party logistics center in Dallas. This nearly 1,000-mile trip to the Texas city has been costing Murchison-Hume an additional 50 cents per unit.
Though 50 cents may sound like nothing, it adds up.
"Murchison-Hume, like any wholesaler, sells to retailers at twice its cost, meaning that the 50 cents turns into $1 by the time it gets to the retailer," Lemonis explained. The retailer then marks up the product, so that $1 becomes $2 in the eyes of a customer.