Like many businesses, your start-up might be selling a physical product. If it is, then it will need a supplier. This is an area of business which a lot of people completely ignore until they’re starting their own firms. Like any part of running a company, there’s a right way and a wrong way to interact with suppliers. To make things easier, here are some good points for your first contact with a supplier.
Kind of Supplier Relationships
First of all, be vigilant about the order sizes. Suppliers can really help their profit margins by trying to keep their orders large and expensive. This means that a lot of them will try to push customers into placing much larger orders than they actually need. If you’re pushed into this, then you’re only going to be hurting your business. Let’s take a firm like http://www.ace-group.eu/ for example. This kind of business will need to buy from a range of suppliers, but will make relatively few sales of their large, expensive products (air compressors). If you take a larger order when trying to sweeten your supplier relationship, make sure you can actually afford it in the long run!
Next, pay on time and as agreed. If this sounds obvious, then you probably don’t have much experience dealing with suppliers! Sure, all suppliers know that they’ll be paid eventually. However, certain factors in some industries mean that their customers can afford to put off payments. It’s not uncommon for a supplier to ship an order, and not receive any payment for it until two months later. If this is in the agreement, then fine. However, many supplier companies will work on extremely thin profit margins. If you’re meticulous with your payments, it certainly won’t go unappreciated! Keeping up a strict routine for making payments is one of the keys to a positive supplier relationship. You’ll get a lot of trust and respect, which will come in useful for negotiations further down the line. This brings me onto my last point…
Although you should try to be respectful and professional, don’t be afraid to negotiate. You may not think it, but negotiating with suppliers is pretty easy. Offer a deal that you’ll be happy with. If the supplier disagrees, then move on. Sometimes, it’s better to only threaten to move on. They might come rushing back with a better offer! The secret to this negotiation is knowing a lot about your industry. Liaise with many different suppliers, and find out some average prices. If you think you’re paying more than what your competitors are, then you’re tied up in the wrong deal!
Having good knowledge of the kind of supplier you’re dealing with goes a long way. You should be able to recognise bargains just as easily as rip-offs. There’s almost always room for negotiation with suppliers, but you have to actually try it!
There you have three key points for a good supplier relationship. In all your interactions, try to be cooperative without being a pushover. This will give you the best shot at a highly lucrative partnership.