Strategic Partnering: Turning Suppliers Into Partners

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This is a special guest post as part of Make A Referral Week 2009

Anita CampbellBy Anita Campbell of Small Business Trends

Like most sole proprietors and small business owners, I often felt I was going it alone. It was me against the whole world – until, that is, I learned the power of partnerships.

A properly chosen partnership can be THE defining moment in your company’s history. It can bring in customers at a rate you could barely dream of!

Think I overstate the case? Just consider one of the most famous partnerships, between a young upstart called Microsoft and then-giant IBM. IBM chose the Microsoft DOS operating system for its new line of personal computers. That fateful partnership put Microsoft on the map — and its geeky founder, Bill Gates, atop the Forbes 400 list.

I’ve learned that some of the best partnerships are those with your suppliers. Suppliers value partnerships because it means selling more of their stuff. There’s something in it for them – as well as for you.

But what, exactly, are the benefits for your business? Try these:

  • Access to new markets and customers, enabling you to grow faster.
  • Resources and Tools, such as sophisticated fulfillment systems that otherwise would be completely out of reach.
  • Training that helps you become a smarter, more effective business owner.
  • Advantageous payment terms, allowing you to place larger orders and fuel growth, without incurring a bankrupting cash crunch.

Most business owners say “that’s great, but how exactly do I partner?”

Sometimes examples are the best way to learn. So I’ve assembled five examples I’ve used myself or seen other small businesses use with great success, to grow a small business with a strategic partnership with a supplier:

1) Get suppliers to carry credit/paper – Fast growth often brings a cash flow crunch to a small business. Here’s the problem:

big order + more up-front expenses = less cash to run the business

Try to find suppliers that are willing to advance inventory or supplies without requiring upfront payments. Perhaps they will give you 30-day payment terms. Or find ones willing to accept payment in stages or “just in time.” Look for seller financing, too, at low interest rates. Trade credit is the single largest source of credit that small businesses tap into – why shouldn’t you?

What it means is you and your supplier can grow at the same time. As you sell more, they benefit and so do you. And you may not need to resort to expensive bank financing or credit cards for operating cash or expansion funding.

2) Co-marketing / co-advertising – Another way to partner is to share marketing responsibilities and costs. The supplier may have bigger bucks to spend on marketing and advertising. But as a merchant you may have a better grasp on how to reach customers online or in your community. Here it pays to “know oneself.” Know exactly what you bring to the table.

3) Training and systems for productivity – Big companies that supply you often have valuable sales and merchandising training that you can benefit from. Just look at the technology companies that have partner programs: Microsoft, HP, Intuit, even Amazon with its Web Services.

They may have technology systems you can use to make your business more profitable and efficient. You may have to trade paying higher prices to get access to these valuable productivity enhancers – but then, it may be worth it because of the efficiency and infrastructure support they bring.

4) Trade off Web presence for inventory and fulfillment – Find a supplier without a good Web presence, and become their Web arm. Many suppliers – especially small suppliers or those in staid markets – are baffled by the Web.

One fishing tackle etailer I know had extensive Web technology and marketing expertise – not to mention 500,000 monthly visitors. They were able to leverage those assets to get an exclusive to their brick-and-mortar supplier’s line of goods (fishing gear) and a sweet drop-ship contract. For both it was a marriage made in heaven, because both sides could focus on what they did best.

And I can share confidently that without that supplier, the etailer would not have been able to monetize their website to anywhere near the extent they did. That partnership with their supplier put them on the map.

5) Open up new markets – A well-structured partnership can open up new markets for a business. One company I know maintained high-traffic informational websites and wanted to break into the Hispanic market in the U.S., but had no Spanish-speaking personnel. It partnered with a Mexican media company that wanted to break into the U.S. market. Together both companies were able to tackle a new market that individually they were ill-equipped to do.

Choose one of these paths and you may discover the partnership will become THE defining moment that puts your business on the map.

About the Author: Anita Campbell is Editor in Chief of Small Business Trends, an online community of small business people.


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