Whatever your business, you’re going to be reliant upon products and services supplied by others – from stationery and broadband to components and ingredients. Being deprived of even one of these could hit you hard – while paying too much will quickly eat into your profits. Here, two entrepreneurs take a look at how to get the most out of your suppliers…
Using your head: Andy Palfrey is the co-founder of consultancy firm, This Partners, established in 2010. Here, he shares his top tips for dealing optimally with your suppliers.
A friend recently offered: “Running your own business is great. Except for the customers. And the suppliers…”
Managing suppliers is often a challenge, with many businesses spending huge amounts of time and effort, and seemingly getting very little in return.
Thankfully, by moving from “spending time on suppliers” to “investing time with suppliers”, mutually valuable, long-term relationships can be successfully developed. Experience shows that simplicity, pragmatism and common sense are often more useful than slavishly following so-called “best practice”.
So how does one go about getting the best from suppliers?
Prioritise, prioritise, prioritise: understand and prioritise the needs of your business and engage potential suppliers in that order – most important first. Focus on identifying strategic, long-term suppliers for the goods and services that are most critical.
Use your head and heart: share your vision for your business and how you’d like potential suppliers to help – both now and in the future. Be frank about how you will evaluate potential suppliers and what they “must” and “should” do. Be honest, realistic and expect nothing less from them. If a potential supplier appears disinterested, walk away. Conversely, be similarly aware of suppliers that make promises that seem too good to be true. Keep applying the same approach throughout the relationship and, most importantly, always treat suppliers as you’d like to be treated: it’s nice to be nice!
Cheap doesn’t equal good: many suppliers work to incredibly tight margins – so think laterally. Don’t try to emulate Gordon Gekko and “beat up” suppliers to simply get a lower price: if they feel you are exploiting them, they are likely to reciprocate when you least expect it. Instead, focus on what would truly adds value to your business. Extended credit terms? Quicker delivery? Lower minimum order quantities?
Nurture the relationship: the most successful relationships are the ones where both customer and supplier recognise its value and jointly focus on growing it. Consider treating your suppliers as you would your customers: it sounds strange but can be an extremely effective way of creating truly symbiotic, long-term relationships. So, put simply, put down the boxing gloves and invite your suppliers for a cuppa: you’ll both be glad you did.
Melissa Marum is the owner of Songbird Skincare, a provider of natural soaps, scrubs, balms and other skincare products. She explains how as the owner of a very small business she doesn’t have the buying-power of some other players in the market – and explains how, with careful planning and a personal touch, you can still make the most out of your suppliers despite a lack of scale…
I set the business up in May last year and moved full-time in October. I had been thinking about it for quite some time; looking to set out on my own, become my own boss, work (initially) from home, doing something I enjoyed – and I’ve always been fascinated with creams, potions, anything you can buy in the chemists!
Setting prices involves, primarily, a lot of looking around at what similar products are on the market for and asking “would I pay that?” – but also, while these things cost me a reasonable amount to produce, I don’t want to rip people off.
I want to make a profit but I don’t want my products to be luxury items that people only buy once a year for their friends, and never for themselves. So I need to buy the ingredients as cheaply as possible and then add on my percentage in accordance with what I am comfortable with making. I source my ingredients from quite a number of different places. One is a trade-only craft supplier, from whom I get all my essential oils; for my packaging I have a wholesale account with another provider. When I was looking around at the beginning, it was just a question of getting online, opening a window for each supplier and comparing costs that way. It is important to do that comparison regularly too because prices change quite a bit in this business – for example, jojoba oil was pretty cheap earlier in the year and now it’s up at £30 per litre. It definitely helps to know a little about what the product is and where it’s coming from, so you can be informed about how prices might behave.
I haven’t yet had the opportunity to develop a relationship with any suppliers where I can negotiate significant discounts. It’s still early days for me. I’m still a little bit too small in that I can’t buy, say, 50 kilos of coconut oil, because I have nowhere to put everything and I’m not manufacturing enough yet to be able to shift it quickly enough. Once I get to the next step up, I think I’ll be in a better position to get discounts; at the moment I’m just buying a few kilos of everything. The craft season is about to start, though, so shortly I will be manufacturing a lot more – and there are a lot of savings to be had buying in bulk. The difference between buying five kilos and 30 kilos is very significant.
It really helps to have a calendar laid out, to know where you’ll be for the next few months so you can get a grip on the kind of things you’ll need. Soap, for example, takes six weeks to make, so we have started to make all the soap for Easter already.
We’re thinking about the summer craft fairs and what we’ll need for those. You really have to plan ahead otherwise you’re left with nothing to sell. Make sure you keep a decent spreadsheet with your stock count, and update it every time you order – if you miss one little thing you’ve got a problem. In my business, I can’t just go down to the shop and buy in specialist ingredients: if I run out I have to wait two weeks until I can manufacture again.
Every time I send an order I always send an email saying hello and asking how my suppliers are. It’s in their inbox and they will follow up my order faster if I’m on their minds. I also follow up orders over the phone. It makes sure I can be confident of things coming through on time, and also helps to build a relationship. I haven’t met any of my suppliers in person yet – they’re based all over the country, in Cornwall, Scotland, Sussex – so it’s important to use the methods available to keep in touch.
This article was first published in Your Business with James Caan in January 2012.