One of the most valued attributes in the business world is loyalty. Loyalty from your staff, loyalty from your customers and loyalty from the people who keep the wheels of your business turning.
Despite this, things change and sometimes we outgrow the arrangements we have with vendors and suppliers.
How important is it to continuously re-evaluate the relationships we have in place? What are the benefits of renegotiating existing relationships?
In today’s blog, we’re discussing just how crucial it is to renegotiate vendor relationships as your business grows.
DON'T BE AFRAID TO SHOP AROUND
When it comes to vendors, don't be afraid to shop around and see what the market has to offer, especially if your business has seen growth in number units shipped, transactions placed or an increase in yearly revenue.
By leveraging these wins in negotiations, you have the ammo needed to renegotiate your entry level rates. This will be made even easier if you go out and acquire bids from three to four competitors that are all offering lower rates than your current vendor. By doing this research, you have essentially switched who holds the power in the situation. You’re able to offer ultimatums that consist of a rate reduction or you jump ship. Either way, you walk away with a cheaper rate.
If you just so happen to be looking to renegotiate with a company that is handling your electronic payments and transfers, this method is incredibly powerful. As your existing payments provider, they’re likely to give you a cheaper rate than any of the other companies because they are already holding on to your money.
It’s also important to remember that this form of research applies to any vendor, it doesn't matter if they deal in physical products or labor services. By going out and shopping for prices in a competitive market and forcing vendors to renegotiate under your terms, you're guaranteeing the best outcome for your business.
FIND A VENDOR THAT MATCHES YOUR VALUES
A lot of business owners fall into the trap of setting up their vendors, partners and suppliers quickly without properly vetting them.
Sure, when that deal was negotiated you got a great price, but, what else does the vendor do for you? I mean, that great price doesn't really mean much when your shipments are arriving late, the product is damaged and needs to be exchanged after sale or is just low-quality stock in general that isn't representative of your brand.
You got into business to provide a certain level of service, right? So, you should find a supplier that meets these standards, instead of settling for the best you have found, go out and find the best.
ESTABLISH VETTING PARAMETERS
By establishing standards that your company requires vendors to meet when interviewing potential choices, you are now setting the standards that are required to work with you, not vice versa.
Don't be afraid to ask the vendor questions, get to know their prices as well as their habits. Learn about their day-to-day operations and how their product or service is created, implemented and delivered. By asking these questions you are gaining an understanding of the operation they are running and how they conduct business, if the answer to these questions don’t fall in line with the values of your company, don't be afraid to walk away.
When it comes to vendor relationships, one of the worst things someone can do is be uninvolved in the process. Not only does it allow poor performance to go unchecked, it also gives the impression that the relationship isn’t valued. You should always have one eye on any vendor relationships, even if it means delegating one or two employees who report back to you.
DITCH DEAD WEIGHT
The pandemic exposed a lot of companies who weren’t prepared or agile enough to adapt to the new, fast-changing world.
While some things are unavoidable, a lot of businesses were left red-faced when supply chains collapsed and whole industries were brought to their knees. This raises an interesting point.
Even amongst all the chaos, reliability is key. If your supplier, vendor or service provider was able to make things work, they’ve proven themselves under arguably the toughest modern conditions. On the other hand, if they struggled or fell apart altogether, this may be signs of things to come.
DON'T JUST SEARCH FOR VALUES, FIND VALUE!
Even though, our companies are built off of our values, it's still a business, and in most cases, our moves are dictated by one thing, the all-mighty dollar. So, as important as it is to make sure that a potential vendors values are in alignment with our own, we must also remember that businesses are profit driven ventures that are designed to make money, so finding the vendor who provides the most value is very important when negotiating or renegotiating vendor deals.
Value doesn't always mean who's offering the best price either, often in these types of situations, value is based on good communication and problem solving. Go out and find a vendor who replies promptly from the beginning. Find a vendor who doesn't just treat you like another client.
What distinguishes a good vendor from a great vendor is their ability to escalate a problem and promptly find a solution that works for everyone. You want to find a vendor that is going to go above and beyond to ensure you have a pleasant experience, because at the end of the day, you are one of their clients.
Additionally, finding a vendor that's willing to go above and beyond can also mean easier negotiations in the future. For example, say you place an order for a product that ends up not performing well, a vendor who is willing to go the extra mile would be willing to renegotiate the product and send you something that will perform better instead.
This above and beyond concept also applies to pricing as well. If you have been in a long-term relationship with an exceptional vendor and you find that your business isn't performing as expected, they are more likely to work with you on finding a way to cut costs and make things more affordable.
By finding the true value in what your vendor can really do for you in terms of logistics, pricing and going above and beyond can pay dividends in the long run when it comes to increasing revenue and scaling your business into a profit generating machine.
It’s important to reassess our relationships annually in order to make sure you are gaining maximum value from the established relationship. Realistically, many business owners never scale to their true potential because they never go out and get better rates from their entry level opening rates. By going out and seeing what the best actually is, you can grow your business 10-fold.
If you’re looking for a vendor relationship specialist or expert consultant to help you determine your next move, the right advice is priceless. As business consultants and COOs, we work with entrepreneurs every day to set them up for success by identifying where their business is suffering. We help them pinpoint which processes to re-evaluate and adjust to grow their business. And best yet… We offer hassle-free, no obligation 30-minute discovery calls to see how we could help you. Just email us today.
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