Suppliers are essential to almost every business. Without raw materials to make what you sell or manufacturers to provide what you resell, you will have a tough time growing. There are also many supplies and services your business consumes as part of general overhead, from paper clips to Internet access.
Suppliers and vendors-the terms are used interchangeably here-can do much more than merely supply you with the materials and services you need to do business. They can also be important sources of information, helping you evaluate the potential of new products, track competitors’ actions and identify promising opportunities. Vendors can turn into partners, helping you cut costs, improve product designs and even fund new marketing efforts. If you don’t make selecting good suppliers and vendors a part of your growth plan, you’re likely to regret it.
Evaluating Your Supplier
Suppliers can be divided into four general categories. They are:
- Manufacturers. Most retailers buy through company salespeople or independent representatives who handle the wares of several different companies. Prices from these sources are usually lowest unless the retailer’s location makes shipping freight costly.
- Distributors. Also known as wholesalers, brokers or jobbers, distributors buy in quantity from several manufacturers and warehouse the goods for sale to retailers. Although their prices are higher than a manufacturer’s, they can supply retailers with small orders from a variety of manufacturers. (Some manufacturers refuse to fill small orders.) A lower freight bill and quick delivery time from a nearby distributor often compensates for the higher per-item cost.
- Independent craftspeople. Exclusive distribution of unique creations is frequently offered by independent craftspeople who sell through reps or at trade shows.
- Import sources. Many retailers buy foreign goods from a domestic importer, who operates much like a domestic wholesaler. Or, depending on your familiarity with overseas sources, you may want to travel abroad to buy goods.
What Makes a Good Supplier?
A lot of growing companies focus on one trait of their suppliers: price. And price certainly is important when you are selecting suppliers to accompany you as you begin growing your business. But there’s more to a supplier than an invoice-and more to the cost of doing business with a supplier than the amount on a purchase order. Remember, too, that suppliers are in business to make money. If you go to the mat with them on every bill, ask them to shave prices on everything they sell to you, or fail to pay your bills promptly, don’t be surprised if they stop calling.
After price, reliability is probably the key factor to look for in suppliers. Good suppliers will ship the right number of items, as promised, on time so that they arrive in good shape. Sometimes you can get the best reliability from a large supplier. These companies have the resources to devote to backup systems and sources so that, if something goes wrong, they can still live up to their responsibilities to you. However, don’t neglect small suppliers.
If you’re a large customer of a small company, you’ll get more attention and possibly better service and reliability than if you are a small customer of a large supplier. You should also consider splitting your orders among two smaller firms. This can provide you with a backup as well as a high profile.
Stability is another key indicator. You’ll want to sign up with vendors who have been in business a long time and have done so without changing businesses every few years. A company that has long-tenured senior executives is another good sign, and a solid reputation with other customers is a promising indicator that a company is stable. When it comes to your own experience, look for telltale signs of vendor trouble, such as shipments that arrive earlier than you requested them-this can be a sign of a supplier that is short on orders and needs to accelerate cash receipts.
Don’t forget location. Merchandise ordered from a distant supplier can take a long time to get to you and generate added freight charges quickly. Find out how long a shipment will take to arrive at your loading dock. If you are likely to need something fast, a distant supplier could present a real problem. Also, determine supplier freight policies before you order. If you order a certain quantity, for instance, you may get free shipping. You may be able to combine two or more orders into one and save on freight. Even better, find a comparable supplier closer to home to preserve cost savings and ordering flexibility.
Finally, there’s a grab bag of traits that could generally be termed competency. You’ll want suppliers who can offer the latest, most advanced products and services. They’ll need to have well-trained employees to sell and service their goods. They should be able to offer you a variety of attractive financial terms on purchases. And they should have a realistic attitude toward you, their customer, so that they’re willing and eager to work with you to grow both your businesses.
Changing Your Supplier Relationships?
You may not need to find new suppliers to get a new deal. You can usually get discounts, obtain improved service and receive other features you need by making a request of your current suppliers-although it may not be as simple as merely asking. Here are some of the options and negotiating strategies for turning mediocre suppliers into top-shelf ones.
- Getting discounts. If you walk into a department store and purchase a pair of shoes, you’ll pay the same price any other shopper would. But business-to-business commerce is more complicated. Businesses that sell to other businesses commonly have a whole range of quoted charges, offering discounts of 50 percent or more depending on the quantity purchased, the terms, the length of the relationship, and other considerations. You may be able to comfortably conform to some of these requirements, qualifying you for a lower price. To find out, ask about discounts and what is necessary to earn them. You may be able to get anything from an interest-free loan in the form of trade credit to a substantial discount for paying early.
- Improving service. It is the rare businessperson who knows exactly what is happening in all parts of his company at all times or what is going on with all his customers. You probably don’t, and you shouldn’t assume your suppliers do, either. If you have a service-related problem with a supplier, bring it to someone’s attention. If you don’t get satisfaction, move up the chain of command until you get what you want or are as high in management as you can get. Odds are, someone will be concerned and possess enough authority to remedy the situation. Only if you ask for better service and don’t get it should you sever the relationship.
- A better relationship. Not every customer wants to buddy up to suppliers, so the fact that your suppliers aren’t offering to work closely with you to improve quality, reduce defects and cut costs doesn’t necessarily mean they don’t want to. They may be under the impression that you are the reluctant one. So if you want a tighter working relationship with suppliers, let them know. You may also drop a hint that those who don’t want to work with you may see some of their orders being diverted to those who are more agreeable. Either way, you’ll know whether it’s your supplier’s reluctance, or their perception of your reluctance, that’s getting in the way.
Making a Change?
Having fewer suppliers is usually better than having many vendors. Reducing the number of suppliers you deal with cuts the administrative costs of working with many. Closer relationships with fewer suppliers allow you to work together to control costs. Getting rid of troublesome vendors can quickly increase the efficiency of your purchasing and administrative staffs. So how do you decide when to change vendors? Here are keys areas to consider:
- Unreliability. When a vendor’s shipments start arriving consistently late, incomplete, damaged or otherwise incorrectly, it’s time to consider looking for a new one. Every company has problems from time to time, however, so check into the matter before dumping your vendor. Vendors can experience temporary difficulties as a result of implementing a new product line, shipping procedure or training program. If you stick with a vendor through a rugged interval, you may be glad you did. They might be more willing to see you through a future cash flow crunch.
- Lack of cost competitiveness. Sometimes vendors fail to change with their industries. When your vendor’s rivals start coming in with bids for comparable goods that are lower than your existing supplier’s, you need to investigate. Point out the issue to your existing supplier and ask for an explanation. If you don’t like what you hear, it may be time to consider taking some of those offers from competing suppliers.
- Insularity. Some suppliers will let you visit their plants, talk to their workers, quiz their managers, obtain and interview references, and even examine their financial statements. These are the kinds of suppliers you should seek out. The more you know about your suppliers, the better you can evaluate whether you should continue to do business with them. If they shut you out, perhaps you should cut them off.
- Extra-sale costs. The number at the bottom of the invoice is only the beginning of the cost of dealing with suppliers. You have to lay out money beforehand to draw up specifications, issue request for proposals, evaluate them, check references, and otherwise qualify your suppliers. You have to place the order, negotiate the terms, inspect the goods when they arrive, and deal with any shortages, damage or other errors. Finally, you may have to train workers to use the newly arrived goods or purchase more equipment and material to make use of them. While some of these costs are inevitable, some are traceable to individual suppliers. If too many costs are being tacked onto the sale prices, check out some other suppliers.
Business Model Design – Picking The Business Model That Works For You
You have the need to make money. That’s where a business model design comes in.
So, you’ve picked your lane. You’ve decided what you want to do and why you want to do it. You’ve picked something you’re good at. You’re convinced the world needs and values it. You now need to decide how to make money. That’s where business model design comes in.
There are plenty of business model options for the same idea. For example, let’s say your idea is to offer historic tours of Cape Town. You could either do it yourself or hire professional guides to do it. Or you could use mobile technology to provide DIY walking tours. You could charge per tour or you could charge a membership fee. There are so many options. How do you pick the model that works for you?
The Lean Canvas is a great tool for entrepreneurs who are faced with this question. Adapted from The Business Model Canvas, it provides a simple, one page framework for brainstorming possible business models, prioritising where to start, and tracking ongoing learning. It walks the entrepreneur through the business model process logically and ensures the key elements of a successful business are considered.
The Lean Canvas
My co-founders and I have used the Canvas extensively at Simply – for designing our business model, and for communicating it to partners and investors. The only thing you know with certainty when you start a business is that it’s not going to turn out as you expect it to. The Canvas evolves as you go – it was, and continues to be, a very useful guide in our journey.
We figured there was an opportunity to do something disruptive in the SA life insurance space. It was clear to us that lots of people were either not covered or getting a rough deal. Guided by the Canvas, we defined our first Customer Segment as adult South Africans, aged between 25 and 45 and earning between R5k and R30k monthly.
We then identified the 3 big Problems – specific to that segment – that needed solving:
- Most of the people in our segment have some form of funeral cover, but very few have life or disability cover.
- The cover they do have is often expensive relative to the benefits provided (i.e. a very small % of the premium goes towards the risk costs).
- There is no simple, intuitive way to buy good value life, disability and funeral cover online.
Next came the Value Proposition. We believed we could use technology, digital marketing and human-centred product design to deliver simple, online life, disability and funeral insurance at a great price. We felt we could be for life insurance in South Africa what Takealot has been for retail. We thought the world was moving far faster than incumbents realised; that millennials were ready to buy life insurance online; that we could build for the digital world and be in the right place at the right time.
Related: 4 Types Of Business Models
And the rest flowed from there. I don’t have the time or the space to walk you through the other elements of the Canvas here, but you can probably fill in the blanks. Suffice to say, the process was invaluable and enabled us to build our business around a clearly considered business model. It’s early days, but the signs are good – we’re making a positive impact, having fun and keeping our investors happy.
So, how should you go about sketching your own Lean Canvas? The team at www.leanstack.com and suggest the following approach:
- Sketch a canvas in one sitting. While a business plan can take weeks or months to write, your initial canvas should be sketched quickly.
- It’s okay to leave sections blank. Rather than trying to research or debate the “right” answers, put something down quickly or leave it blank and come back to it later.
- Think in the present. Business plans try too hard to predict the future which is impossible. Instead, write your canvas with a ‘getting things done’ attitude.
- Use a customer-centric approach. You may need to sketch one Canvas per customer segment. Start with the Customer Segment and go in sequence.
In summary, the Canvas has brought clarity and a common language to our business model design process. It’s enabled us to agree upon and communicate our business model effectively – both internally and externally. It’s also allowed us to tune and adjust our model as our story has unfolded – an inevitability for entrepreneurs. I highly recommend the Lean Canvas as a tool for designing your business model. Give it a try – I think you’ll like it.
Alan Knott-Craig’s Answers On Selling Internationally And Researching Your Idea
There is no ‘one size fits all’ secret to start-up success. But there is a recipe that can be followed. It starts with being willing to go the extra mile: To know more about your business, customers and their needs than anyone else.
What is the secret to success? — Anonymous
Success is not about winning. It’s about not losing. In other words, being successful is not about increasing the odds of winning. It’s about reducing the odds of losing. There is one simple way to reduce the probability of failure. Go the extra mile.
In everything you do, do a little more than expected. Need to prepare a proposal? Format it, add page numbers, spellcheck, PDF. Need to instal a router? Arrive early. Finish early. Dress neatly. Smile. Need to refund a customer? Be polite. Don’t delay. Apologise. Follow up. Need to provide 5MBs? Provide 10MBs. Need to be at work at 6am? Be at work at 5.30am.
Go the extra mile. Over-deliver. Blow away everyone in every little thing you do. If you do that, from the littlest things to the biggest things, you will have the lowest odds of failure.
In other words, you will not lose. As an entrepreneur, not losing is winning. Go the extra mile. It’s less crowded.
I’m a virtual business on Johannesburg’s East Rand and I want to expand my target market to the US. I unfortunately don’t have any international network that I can tap into.
I’m investigating Fiverr, Reddit and Upwork as potential avenues of work and market research tools. I have also made contact with an international VA agency. What else do you recommend I do to break into the international market? — Jade
Selling internationally is no different to selling locally. It’s all about growing your network, sweating your network, and putting yourself out there.
Everything you’re doing is right. Chase all potential channels to market. Tell family and friends. Ask clients for references or leads. Don’t forget the magic of Google AdWords. And a LinkedIn Premium subscription.
Make it easy for your potential customer to find you. If you’re going to use an agency, remember this: Make the agency rich. Don’t begrudge your ‘sales arm’ making money off your sweat. The more money the agency makes, the more business it will send your way.
I’m based in a small town where people are accustomed to what they know as opposed to adapting to something new. I’ve advertised in the newspaper, sent out fliers and have a Facebook page with over 500 likes. So far, the response to my tutoring service business has been slow. How can I improve? — Stephanie
You’ve made a big assumption: That there is demand for paid-for tutoring. Generally speaking, you should sell your product before you start your business. Sell it, then build it. It’s safer.
But maybe you’re on the right track. In addition to paid-for marketing, consider channel partner and referral programmes. Go to your local high school, meet the maths teacher, offer a commission for every student she sends to you for tutoring. The maths teacher becomes a channel partner, allowing you to put up posters at the school, and referring clients.
Even better than channel partners is a referral programme: For every new client referred by a client, give the client a 10% discount, or a month free.
At the end of the day there is no shortcut to getting more customers. Start with one. Make her happy. Let her tell a friend. Tutor the friend. Rinse, repeat. Over time your service reputation will grow and word of mouth will bring customers to your door.
I have an idea to build a mobile platform to connect all informal artisans in SA to potential customers. Uber for artisans. Will you invest? — Neo
Great idea. Some questions: How do you displace the other informal platforms in SA, such as Gumtree? How do you de-risk your business before raising capital? Can you secure funding without selling equity?
Before you give theoretical answers, remember this: The questions are not theoretical. No one should back you unless you have the above solved in reality, not just in theory.
In other words, raising capital is only realistic once the risk is so low you almost don’t need to raise capital.
Listen to this
Alan’s audible book Be a Hero: Make Life an Adventure is now available on amazon.com and Audible.com
Read by Alan himself, Be a Hero is a collection of stories on how to make your life an adventure by changing your mindset and tackling adversity.
Go to amazon.com or audible.com to download your copy. Be a Hero is also available in Kindle and paperback through Amazon.com.
Read ‘Be A Hero’ today
6 Tips For Transitioning From Idea To Operational Business
Forget Googling startup business stories. Instead, put your trust in the tried-and-true methods other entrepreneurs have used successfully.
It takes only a few Google searches to become overwhelmed by the abundance of information available about entrepreneurial start-ups: Many, many stories exist about how this or that start-up transitioned into a successful, established business. But, in many cases, you’ll be left trying to fill in the blanks or still searching for case studies relevant to your industry or business model.
In fact, there’s only one reliable way to take your business to the next level: And that involves putting your trust in tried-and-true methods that other entrepreneurs have used to make the leap.
Focus on productivity – not activity
It’s all too easy to get caught up in a flurry of urgent tasks that demand your attention. Unfortunately, that can take your focus away from what matters most. So, avoid the busyness trap and ask yourself what you need to focus on today, or over the next two weeks, the next month, 90 days – even the next year or five years. Plan ahead so you know exactly what your next steps are.
Related: Admin Hacks For Entrepreneurs
Leadership expert and coach Leah Wultschik has noted in a blog post that when leaders engage in all manner of busyness – emails, meeting requests and so on – employees feel pressured to follow suit. At that point, the never-ending focus to get things done can result in decreased creativity. You’ll be constantly in a reactionary state, leaving you unable to make strategic decisions.
Hire the best talent possible
You are whom you hang around with. Wouldn’t you rather be around world-class workers who bring valuable ideas to the table than to try to squeeze what you can out of second-rate employees?
Aislinn Malszecki, who oversees content strategy and community at MaRS, suggests the following steps to attract the best talent possible:
- Avoid reactionary hiring: Founders often find themselves desperately in need of help and may hire without looking for fit and the right skill set.
- Create a buzz for your company: Utilize your reputation and personal network to attract the right kind of people to your business.
- Tap into your network: In addition to posting jobs on your website and LinkedIn, leverage your network as well as the networks of your employees to find like-minded candidates.
Building your team is not a matter to be taken lightly. Surrounding yourself with the right people can mean the difference between breaking through and remaining stagnant as a business. Work with people who inspire you.
Partner with an agency
The opportunity cost of doing everything yourself can add up fast. So, work with an agency. The up-front cost of outsourced work will ultimately be less expensive than trying to do it all yourself.
Patrick Woods, director of customer success at Keen IO, notes certain challenges of working with an agency. To overcome these hurdles, he suggests:
- Build a relationship with the agency: Set aside time to get to know the people you’ll be working with. Determine fit as well as expectations.
- Communicate: Since startups tend to move fast, communicate regularly and clearly with the agency to ensure you’re on the same page.
- Understand what the agency can do for you: Clarify its staffers’ core strengths and competencies. Determine what tasks you’d like them to take over, and which you’re looking to handle in-house.
Beware of negativity
Negativity can poison the waters of your entire company. Before long, you may find your whole team expressing doubt or disbelief. Conversely, being confident will instill a sense of confidence in your employees. They’ll also follow you more willingly.
Best-selling author and keynote speaker Jon Gordon has pointed out that negativity can affect the morale, performance, and productivity of your team. Negativity can also lead to decreased energy and increased stress.
When it comes to creating a positive work environment, the responsibility lies with the leader. You need to set the tone for your team, to draw the best out of them.
When you’re first getting started, and you’re excited about your business, you’re willing to do whatever it takes to get it up and running. Unfortunately, those 16-hour days will take their toll on you, and if you keep up that pace, you will burn out. Learn to rely on your team while growing your business.
James Schramko of SuperFastBusiness is an advocate for getting more rest and sleep. This flies in the face of what many aggressive entrepreneurs are saying today, but Schramko points out that proper rest can help you boost your performance. The costs of losing sleep can be significant, and include: Depression, a weaker immune system, memory issues, obesity and more.
The costs of burnout can be especially high if you render yourself incapable of working for a prolonged period of time. Consider the costs before letting yourself get to that point.
You can’t do it all. No one has more than 24 hours in his or her day, and we’re all busy. Beware of saying “yes” to everything, as you will eventually find it impossible to follow through on it all. If something doesn’t make you excited, don’t do it.
Derek Sivers, founder of CD Baby, has said he lives by the “Hell, yeah!” or “no” philosophy. He explains that saying no to most things leaves room in your life for the few things that get you truly excited. If you find yourself wavering between a “yes” and a “no,” he suggests choosing “no.” Only say “yes” to opportunities that you can’t pass up.
Transitioning from startup to established business can take time. So, don’t rush the process unnecessarily. When all the right pieces are in place, you’ll be able to shift smoothly from one stage to another. If you try to force the issue, you may end up with more problems than you bargained for.
If you have any doubts, go back to the basics. Take some time to determine what your priorities are. Start pruning any tasks or activities that don’t contribute to your ultimate success. If you have too much on your plate, ask for help or delegate. And above all, avoid taking on too much.
This article was originally posted here on Entrepreneur.com.
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