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That's not the way I read it. Like you said, they must have agreed a per unit price. The mistake had to have been purely in volume. When they recognised the m

That's not the way I read it. Like you said, they must have agreed a per unit price. The mistake had to have been purely in volume. When they recognised the mixup with cases / bags, they wouldn't have pushed to deliver the actual expected volume had the unit pricing been a problem.

theptip 4y ago
They agreed a per-unit price. But they thought a unit was a bag, when it was actually a case of 6. So they thought they were getting 6x per bag. As someone that has gone through the process of trying go to build a business that sells to distributors, I cannot understand how you’d miss a 6x discrepancy in your price model. Your margins are slim, a 6x markup means you’re seeing more than 500% profit margin. (Probably by not having a price model, if I had to guess…)
- nebulous1 4y ago
  > They agreed a per-unit price. But they thought a unit was a bag, when it was actually a case of 6. So they thought they were getting 6x per bag. The problem with this interpretation is that it would mean that the entire second half of the story would realistically have to be a lie. Once they realized that they were getting 1/6th of what they thought, they would have to find a way to get out of the contract or go bust, which is the opposite of what they say happened. As such, it's too much of an accusation to make with essentially no evidence. There's definitely something odd about the unit pricing and unit ordering though.
  - theptip 4y ago
    I agree it's weird, but I don't think it's up for debate on interpretation, they quite clearly state it: > The food broker laughed and said “I wondered why you’ve been so upset and concerned. When they said ‘units’, that was cases. They’re right on target so far.” You can imagine how we felt in that moment, realizing that the person we hired to make this a smooth transition and to guide us and to tell us the things we don’t know failed to ever ask us if we were ready for a 36,000 bag order. I.e. they thought they were getting a 6000 bag order, not a 6000 case order. The error on pricing can only go one way; they can't have signed a deal where they charged <fair-per-bag-price> per unit and therefore don't break even at 1/6 the per-bag-price, since they would just walk away at that point instead of borrowing money to throw into a deal that they don't break even on. So they must still break even at 1/6 the price, which means the distributor priced it somewhat-fairly (at least not below-cost) per-bag, and they originally thought they were getting an insanely good per-bag-price that was 6x what they should have been getting per bag. Again, not questioning your working when you think the distributor is paying 6x what they should is a big red flag for me. You should notice a 2x discrepancy as margins are really thin in this kind of business, and your business plan needs to have a pretty good idea of the margins in order to determine if you can even break even. Edit to add: I suppose it's possible that they agreed a per-bag price, with "bag" and "unit" used in different places in the contract. On reflection I should reduce my certainty on the above.
    - fbdab103 4y ago
      Is it possible the original contract was something like $x/kg as a sort of open-ended contract with at least 6,000 units to be shipped?
      - adastra22 4y ago
        Almost certainly. They way it was explained, the distributor wasn’t sure what size order they were going to have. They were told just to prepare for 6,000 “units.”
- chasd00 4y ago
  maybe the understood the margin percentage and thought it was a mistake on the other side of the contract and so went along with it. Maybe they thought "hell yeah! they messed up the pricing and we're getting a massive profit on this".

theptip 4y ago

They agreed a per-unit price. But they thought a unit was a bag, when it was actually a case of 6. So they thought they were getting 6x per bag. As someone that has gone through the process of trying go to build a business that sells to distributors, I cannot understand how you’d miss a 6x discrepancy in your price model. Your margins are slim, a 6x markup means you’re seeing more than 500% profit margin. (Probably by not having a price model, if I had to guess…)

nebulous1 4y ago
> They agreed a per-unit price. But they thought a unit was a bag, when it was actually a case of 6. So they thought they were getting 6x per bag. The problem with this interpretation is that it would mean that the entire second half of the story would realistically have to be a lie. Once they realized that they were getting 1/6th of what they thought, they would have to find a way to get out of the contract or go bust, which is the opposite of what they say happened. As such, it's too much of an accusation to make with essentially no evidence. There's definitely something odd about the unit pricing and unit ordering though.
- theptip 4y ago
  I agree it's weird, but I don't think it's up for debate on interpretation, they quite clearly state it: > The food broker laughed and said “I wondered why you’ve been so upset and concerned. When they said ‘units’, that was cases. They’re right on target so far.” You can imagine how we felt in that moment, realizing that the person we hired to make this a smooth transition and to guide us and to tell us the things we don’t know failed to ever ask us if we were ready for a 36,000 bag order. I.e. they thought they were getting a 6000 bag order, not a 6000 case order. The error on pricing can only go one way; they can't have signed a deal where they charged <fair-per-bag-price> per unit and therefore don't break even at 1/6 the per-bag-price, since they would just walk away at that point instead of borrowing money to throw into a deal that they don't break even on. So they must still break even at 1/6 the price, which means the distributor priced it somewhat-fairly (at least not below-cost) per-bag, and they originally thought they were getting an insanely good per-bag-price that was 6x what they should have been getting per bag. Again, not questioning your working when you think the distributor is paying 6x what they should is a big red flag for me. You should notice a 2x discrepancy as margins are really thin in this kind of business, and your business plan needs to have a pretty good idea of the margins in order to determine if you can even break even. Edit to add: I suppose it's possible that they agreed a per-bag price, with "bag" and "unit" used in different places in the contract. On reflection I should reduce my certainty on the above.
  - fbdab103 4y ago
    Is it possible the original contract was something like $x/kg as a sort of open-ended contract with at least 6,000 units to be shipped?
    - adastra22 4y ago
      Almost certainly. They way it was explained, the distributor wasn’t sure what size order they were going to have. They were told just to prepare for 6,000 “units.”
chasd00 4y ago
maybe the understood the margin percentage and thought it was a mistake on the other side of the contract and so went along with it. Maybe they thought "hell yeah! they messed up the pricing and we're getting a massive profit on this".