Choosing the Right Supplier

Many entrepreneurs are given great advice about how to launch their business. From building a business plan, financing, marketing, and building relationships with clients, there is a wealth of quality information available. Often overlooked, however, is the importance of choosing the right suppliers. Picking the right ones will allow your emerging business to equip itself with the tools needed to provide a specialized service, or line the shelves with great products that build sustainable margins.  Selecting the wrong suppliers though can lead to frustrating delays, upset customers and shrinking profitability.

While price is often a major priority for cash-starved new businesses, many small business advisors recommend examining several other critical factors as well when choosing a supplier.

Building Relationships

Firstly, what kind of business relationship can be fostered with the new supplier? Take Greg Lam’s story as an example. A self described serial entrepreneur and now a small business consultant (, Lam once operated a video company that was finalizing preparations for a presentation to high ranking political guests. Realizing the night before the presentation that an equipment part from his supplier had failed, he put his firm’s relationship with that supplier to the test.

“We called our suppliers at midnight, saying ‘hey we need this part.’ They went out to a store, found it and gave it to us at no extra charge above our original rental cost because they knew how important that event was to us.”

The relationships that entrepreneurs build with suppliers are dynamic, so cultivating ones that help suppliers better understand their needs, strengthens partnerships will serve the growing business well.

“I know someone who runs a successful computer software company,” started Kevin Armstrong of The Alternative Board. “About eight years ago he had fallen behind on his payments to his suppliers. He went up to them and said ‘We’re not going to be able to pay you this month, we’re not going to be able to pay you next month, here’s our plan, here’s why we’re having a cash flow problem, but we promise we’re going to pay you.’ The supplier went into the back room with his partner, came back out and said ‘No problem, in fact here’s some money we’ll lend you.” The reason they were able to do this, Armstrong explained, was because of the honest relationship they maintained with the supplier.

If you ever owe (your suppliers) money, don’t hide, it’s about the worst thing you can do” Armstrong added. “It is a partnership, and when you’re partners you wouldn’t steal or hide money from them.”

The Right Fit

Another area to consider is whether the supplier is the right fit for your business. This can range from having a convenient location close to you, having a good supply of the product you need on hand and making it easy to do business with them.

“Some large suppliers won’t give credit to new businesses starting up,” noted Lam, “so working with them can be quite hard, whereas local businesses close-by could be easier.” He also added that each supplier offers different terms of credit which should be carefully read and understood. “What are the terms, how long do you have to pay and how much credit can you get with them?” Offering access to credit or even willingness to match competitor’s prices, he explained, shows a supplier’s commitment to getting your business.

Also, try to find out what a supplier’s reputation in the marketplace is before doing business with them.

“Ask for references,” recommends Sandy Huang of Pinpoint Tactics. “It’s such an obvious thing, but many people don’t bother with it.” She also mentions that most suppliers are happy to show testimonials and success stories, but that doesn’t necessarily paint the full picture. “Until you pick up the phone and talk to an actual customer, you can’t really get a sense of what it’s like working with that supplier or vendor.”

For help finding the right supplier why not consult Small Business BC’s Resources for Market Research which includes a list of useful trade directories for companies both home and abroad.