Optimize your business vendor relationships to grow profitably
After customers, it’s typically business vendor relationships that hold the key to the success of your business. That’s because unless you’re using only thin air to create the products and services that you sell, you need vendors to supply your basic needs. Among other things, healthy vendor relationships can give you the benefit of:
- Competitive prices
- Liberal payment terms
- Responsive and flexible service
- Superior quality goods
- Being ahead in line of other vendor customers for order fulfillment when supplies of a particular item are limited
- Referral business
- Market insights
When your business is new or not yet firmly established, getting some or all of those benefits can make the difference between quickly building a strong foundation for profitable growth, and a wobbly start. But you don’t need to bend over backwards to build strong business vendor relationships. That’s because vendors may have as much to gain from a good relationship as you do. After all, you value strong relationships with your own customers and do what you can to create them; it’s a matter of mutual interest.
Share Your Vision
The process of building rapport with vendors can begin with sharing your dreams and plans for your enterprise, particularly if there is something unique about it. Without revealing the recipe for your “secret sauce,” letting vendors know your basic game plan to grow and prosper can promote confidence and optimism that you will become an increasingly substantial customer worthy of attention.
On a more concrete level, pay your bills on time. Your suppliers aren’t in the lending business. You can’t assume they have a cash cache to fall back on if you’re late paying your invoices. And even if they have plenty of liquidity, what vendors need most is confidence that you will pay when you agreed to, so that they can manage their cash flow accordingly and not worry about being stiffed.
Manage Your Business Credit Score
Also, keep in mind that how promptly you pay your vendors is a big factor in your own business credit score. That’s important for your business for the same reason that your personal credit score matters: It influences your ability to borrow, and the interest rate you’ll be charged. You might need to borrow occasionally to maintain a good payment track record with vendors, but doing so could more than pay for itself.
Another step that your vendors will appreciate, just as you would if your own customers did for you, is to give them some referral business. Naturally, however, you wouldn’t want to encourage your direct competitors to use your vendors.
And just as you’d like to be your customers’ only source for whatever you sell, your vendors would like to be your sole source for their products. The more you buy from a supplier, the more benefits you might reasonably expect in return. However, depending upon the nature of your business, putting all of your supplier “eggs” in one basket could put you in a risky position. For example, if a sole supplier runs into problems and you’re left without a ready alternative source.
Tips to Optimize Business Vendor Relationships
Here are some additional steps you can take to create strong business vendor relationships:
1. Pick a single vendor relationship manager.
Chances are, when you’re just getting started, that person will be you. Regardless, the point is consistency, to facilitate relationship-building and maximize the efficiency of interactions.
2. Get on the same page with expectations.
It’s important to ensure that you and your vendors have the same understanding of what it means, for example, to respond “promptly” to a request or inquiry, preferred communication methods, and so on.
3. Learn and try to address your vendors’ needs.
Beyond matters like timely bill-payment, a vendor might, for example, prefer that you place your order at a particular time of the week, use a particular order entry system, have a preferred minimum order size, or many other preferences. These might not be hard-and-fast requirements, but preferences that, if honored, will make the vendor’s life easier and can be done at little or no cost to you.
4. Give vendors a heads up about expected changes in your supply requirements.
Vendors have inventory management challenges too. If you’re expecting a decline or increase in your typical order size, advance warning will make it easier on your vendor.
5. Make time for face-to-face interaction.
Although this may not be possible for vendors based far away (except possibly at trade shows), getting in front of a supplier, sharing a meal together, can go a long way towards building a strong business relationship. This is particularly true in an era in which electronic communications have even replaced periodic simple telephone conversations.
6. Recognize that to err is human.
We are all fallible. Sooner or later a vendor will botch an order, send you an inaccurate invoice or even a defective product. Jumping down a vendor’s throat when it happens can sabotage your efforts to have strong business vendor relationships. And if a pattern of mess-ups begins to emerge, the strength of your relationship might determine how quickly the problem can be addressed, and your vendor’s willingness to make amends.
7. Help the vendor to improve its performance.
We’re constantly bombarded with customer surveys, and typically ignore them for lack of time to fill them out. But just as you’d like constructive input from your customers, your vendors probably would also appreciate some feedback from you. And also like you, they appreciate both negative and positive feedback. This makes you a partner in the product or service quality improvement process, and strengthens your relationship.
There are no guarantees when it comes to vendor relationships. Sometimes you just have to put up with lousy ones, despite your best efforts to optimize them. But chances are good that you will succeed if you make a concerted effort. And when you do, you will have made a strong investment in your business and your long-term success.