Why Now Is The Perfect Time To Evaluate Your Vendors
In the post-pandemic world one thing small businesses are still having to deal with is supply issues. And it raises a real issue that many business owners don’t think about until they are ready to sell their business.
What many business owners don’t know is that potential buyers will be very interested in your relationships and deals with your vendors.
Buyers will want to know if you have a contract in place with suppliers, how easy it is to find additional vendors, if you’re getting the best deal, if it’s a deal they will continue to get after you leave the business, and much more. When you stop to think about it, it makes sense, but too often businesses don’t stop to think about their vendors. Until there is a problem.
In our Value Realized Coaching program, we work with business owners on recognizing the pros and cons of their vendor relationships. But the pandemic brought this issue to the forefront for many small business owners. It made many businesses realize that the status quo can be disrupted rather quickly and when that happens you must be ready to react.
Small businesses often have great relationships with their vendors and because of that the status quo is an easy trap to fall into. It tends to fall into the line of thinking of “if it’s not broke, don’t fix it.” The problem is that when something does go wrong, such as what we are seeing with the pandemic and shortages, it’s harder to make decisions because you’re not prepared.
This week, we’re challenging business owners to take a step back and consider your vendors. Even if you’re not planning on selling your business soon and even if you don’t have shortages right now, you never know when you may need to make vendor changes. Many of our coaching clients find ways to improve their vendor relationships as we go through the process. It’s an activity that shouldn’t just be done now but should be a routine part of your business. By completing this activity not only will you be better prepared in case something does happen, but you may also uncover other areas that can be improved.
Take these two steps to evaluate your vendors:
- Baseline your current vendors. Start with pulling out the contracts that you have now and baselining the status of those vendors. You’ll have to change the metrics to fit your business, but you might consider factors such as:
- How long is your contract with them and what happens when it ends?
- If you don’t have contracts in place, can you get them?
- Are the contract terms the best they can offer?
- How good is the quality?
- What issues do you have with this vendor?
- Research alternatives. If you had to replace a vendor, what would your options be? Researching these now means that if you ever need to replace a vendor you won’t be starting from scratch. This will also help you stay up to date with changes in the industry. What else is out there or what changes could your business be making now? As you research alternatives consider questions such as:
- How does the pricing compare to what you have currently?
- Do they offer features or benefits that your current vendor doesn’t?
- Can you test their quality to compare it to what you experience?
- What contract terms do they offer?
- What are their online reviews/testimonials?
Along the way don’t be surprised if you discover areas where your business can get better deals, better quality, or even learn about features and benefits that might be new to you. The point of this activity is simply that there is power in having the knowledge. In the case of a supply shortage, you can turn to this information to make a quick decision about how to fill a gap in the supply chain. If you’re looking to exit your business soon, you’ll want this information to show buyers. And you may just find other ways to improve your business. We recommend that small businesses look at this once a year, or at the very least once every two years. This way your business is always up to date.