VenturePORT Series - Vendors
Entrepreneurs sometimes overlook the importance of their suppliers to their eventual success. People trying to sell you often use the term partnerships when touting the relationship their company wants to have with yours, because in fact you will often depend upon outside suppliers whose performance can have a major impact on your customer satisfaction and profitability.
Your vendors often are critical because their products are services contribute to the overall mix of what you sell. Their ability or failure to deliver what you need when you need it at an acceptable cost often will have a lot to do with whether your customer feels satisfied or you make money.
Some people have the mistaken notion that the vendor is the supplier and has to do as he or she is told. You might think that because you pay the bills, they have to do what you want. In fact, each vendor, whether an individual or a big company, can only do what it is both capable and willing to do. Pressure a vendor to do something the vendor can't do, and you're setting yourself up for disappointment. Vendor relations truly are a partnership if you hope to get the best results. Circumstances don't always go the way you want them to in business; the key is, do people have the integrity, capability, and willingness to live up to their commitments?
Here are some guidelines for selecting and working with vendors.
Identifying Capabilities
You might think that the issue of selecting a vendor is simple. In fact, it can be quite complex and time-consuming, which explains why many entrepreneurs often make mistakes. Who has time at the launch of a company to conduct the necessary due diligence to make sure your vendors truly can and will deliver for you on a consistent basis, and at a cost and with payment terms you can handle.
As with selecting a doctor, a good place to start is to find out if what you require is in the vendor's normal line of business. If this is what they do day in and day out for other companies like yours, and it is clear from their Web site, their literature, their facilities, etc., that this is their specialty, then you already have good evidence that your requests will not require any fundamental change in the products or services they deliver. More importantly, it will ensure that they will have a sustained interest in providing that product or service.
Vendor selection is somewhat simpler when you are buying products, because you can usually touch and feel the product and give it a test, if necessary. With established companies, you often can search for product reviews and get expert opinion to determine which specific product or service will have a better or lesser chance of delivering as promised. When it comes to more specialized services, like copywriting, Web design, printing, software development, machine work, etc., you likely will have no objective evaluation criteria.
As with employees, the best way to find vendors is through referrals from people whom you trust who have used those vendors. You can also ask to see samples of their work, but you never know what went into producing whatever samples they show. You can also ask for references, but companies usually give references they can count on, which won't necessarily provide you a representative view. You can't even always rely on bad references; it's difficult to know what circumstances made one person unhappy with another company's services. Unless you know that person well, how do you know he or she didn't contribute to the problem? Perhaps now you can understand how difficult it can be to find good vendors.
In the end, the only way to judge a vendor is to use its products and services and do everything you can to provide clear, written specifications and requirements so that no one can claim that there were any misunderstandings as to what you expected. Vendors will make mistakes; the honest ones will stand by their work and do everything they can to satisfy you. The dishonest ones often become uncommunicative when problems occur, assign blame elsewhere, duck your attempts to rectify matters, and eventually become impossible to work with.
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Identifying the Willingness Level
Sometimes companies have the ability to meet your needs but feel half-hearted about taking the business. It might be because you're a start- up, you can't pay fast enough, they have bigger clients, or you are asking them to change the way they do business to meet very particular needs. In this case, the company might take your business, but in the end not really be able to handle it. You will encounter this in the technology business, or any field with skilled employees, who might take on your business when their other business has slowed down, only to put you aside when those larger clients become active again. The best way to maximize the willingness of a vendor to provide good service at the right price is to request the products and services that are core to their business and pay them as promptly as possible or reasonable — in many businesses 45 days is just fine. Most vendors prefer not to work with start-ups because they expect slow payments, and many know from experience that only one out of 20 succeeds.
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How to Work With Vendors
For many companies, the relationship with vendors has some similarities to marriage. There is a tremendous degree of inter-dependence — and therefore, some occasional problems and friction. When the marriage is good, they work it out. When not, they go their separate ways.
Specifications: The key to getting what you want from a vendor is to be very clear about what you want and expect. This gives the vendor the opportunity to tell you whether or not it can deliver, and what it proposes in return. The clearer you are about what you expect, the easier it is for the vendor to determine its ability to meet your needs. We generally recommend that your specifications be put in writing and cover every base of concern to you, especially issues related to the time line, the specific features offered, and the costs. Every type of product or service has multiple issues regarding specific requirements, delivery times, payment terms, and other expectations. The more you pin this down in writing, the less chance there is for misunderstandings later on.
Trust: Do business with someone long enough and problems will happen. What counts is the fundamental integrity and capability of the company to resolve the issue or issues. Can it or will it come through for you when the going gets tough? Unfortunately, you will often have to select a vendor before you have established the trust necessary to know that it will see you through a specific delivery or project , even if later you or the vendor need to make a change. Before you establish that trust, you have to walk a narrow line between giving the vendor the benefit of the doubt and establishing benchmarks to detect potential problems before they blow up in your face.
Communication: No one can please you unless they know what they want. You'd be surprised how many people really don't know. When people say things like, "I don't like it, but I don't know why. Why don't you come up with some other ideas," they have admitted their own lack of vision. This puts their vendors in a quandary, because they have little guidance on how to proceed. That's the value of the strategic planning process, and the use of business plans, for business development planning: They provide goals and measurable objectives you can use to help your vendors develop proposals and solutions that meet your needs. The more information you share with your vendors, the better they can provide solutions that meet your needs.
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How to Motivate Vendors
Nothing motivates a vendor more than prompt payment, something often difficult for entrepreneurs. So, if you can't pay promptly, at least pay within a reliable period they can count on, and never duck any calls requesting information on a payment. In fact, if you have to pay slowly, tell the client up front. Many people feel a sympathy for start-ups, even if they also have a sense of caution, so your proactive communication on money matters will go a long way toward gaining their patience and their trust.
Another powerful motivator is to provide clear direction and specifications, so that your vendor doesn't have to play a guessing game to please you.
Showing appreciation for getting through a tough situation not only will surprise your vendors, but energize them in the future when another opportunity comes up to show their commitment. So many companies overlook their vendors, you can gain a competitive edge by treating your vendors with a level of respect and professionalism that motivates them to go the extra mile to help you succeed. That might mean sending them a thank you or even a gift or lunch invitation — at your expense.
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