What Have You Done for Me Lately

September 4th, 2008 Chris Posted in Financial | 2 Comments »

In class last night, I was discussing how critical it is for organizations to strive to achieve an on-going relationship with customers. Not for some airy-fairy reason but because it’s the only way to survive these days in business.

Why? Well, basically it’s a heck of a lot cheaper and faster to sell to a current customer than a new customer. That improves profits. And if you keep customers for multiple transactions, then you can afford to lose money on the first. That means you can out-spend the competition to get that first customer and then keep them to turn it into a profitable relationship.

In many industries, it’s all about who can spend more to win the customer.

And that reminded me that on the flip side – in our business – I need to fire a few more suppliers for whom I am a repeat customer.

Ok, not fire per se, but check to make sure that we continue to get the best deal possible. Once you start to do business with a supplier there is a fair bit of impedance to switching. You may have a personal relationship and as long as you’re getting good service, you don’t question their prices. It’s convenient to go back to someone you know – they understand your business and give you what you.

And there in lies the rub – they’ve won your business and don’t need to be aggressive with pricing going forward. And in a micro business, cash is king – it’s your salary.

Our process is that every year or so we look at alternative suppliers for everything we do. I’ve written before about how changes in technology providers’ business models really help micro businesses. It applies to all your suppliers.

For each supplier, we typically look at two or three alternative – getting quotes for what we need. As long as we’re happy with our current service, we give the current supplier the opportunity to match the pricing. They usually do. And if they won’t – you need to switch.

Just last week, we cut our CD reproduction costs in half, just by giving a couple of other shops a quick call and getting a quote.

Sometimes it’s a tough conversation with your supplier and people can even be offended. But remember – if they aren’t giving you their best price, they are taking salary out of your pocket. Are you so concerned about their feelings that you’d take money out of your own pocket and give it to them? That’s called charity and has no place in a business relationship.

Make it a point each year to get a couple of competitive quotes for every supplier in your business. They are making their profit on your repeat business. Make sure they deserve it.

C.