In any business or industry, the need to buy in goods, materials or services is essential. These tend to be things that, while important to the overall offering are not necessarily core competencies for you or your company. And so often, when getting these services in the temptation is find the cheapest supplier, whack a huge mark-up onto their service and enjoy the benefits.
Sadly, this tends to be a recipe for complete disaster. There are many former business owners who will testify to the fact that their business failed, not because of anything they did, but because of something that a third-party supplier or contractor did. The reality here is of course that they were responsible for bringing in this party in the first place. And given that outsourced solutions are never going to disappear, here are some tips on how to handle them.
Always work with the best
If you want to have a reputation of being the best in the business than you need to work with the best partners. It doesn’t matter what the nature of your business is, the partner relationships are key. It is also important to recognize that it is about the partnership that is best for you. You need people you can get on with, partners that align with your vision and mission, the kind of partners that you would go to war with. Let’s say that you are in the building industry and you need a partner to supply materials for a site that you are working on. Start with a simple online search for something like, ‘steel reinforcement suppliers Melbourne,’ and see what comes up. Speak to some of the companies that the search returns. Speak to other contacts in the industry and then engage with somebody on a trial basis. Depending on how things pan out you can then look to work on a longer-term basis.
Lead the way
In forging relationships with suppliers, you need to be the kind of partner that you would want to work with. In other words, if you expect your partners to deliver on time, then you need to pay on time and be as true to your word as you would expect them to be to you. For commercial relationships to work they need to be healthy and based on trust and respect. You absolutely cannot expect that from your partners if you are not able to give it to them in return.
You don’t have to make massive mark-ups on services that are not yours. It is important to recognize where you bring value and that is where you should be looking to make your returns. If you need to bring in a third-party to do work on a job it is often better to agree a fee with the business contractor and have them pay you a referral commission, rather than you re-billing your client and adding a large mark-up. If that is the case, there is often a misalignment of expectations with the payee expecting a level of service commensurate with a large fee, while the contractor believes that they have gone above and beyond the call of duty at the rate they have charged. The problem of course is that you have added 40 percent in the middle!