We were broke. We were looking for every way possible to save money even though we didn’t have any. We had no choice but to be resourceful when we started Barefoot Wines. It wasn’t long before we realized that the best use of our limited funds was simply to improve the quality of our business relationships.
Did our customers, suppliers and employees like us? Did they know us? Did they trust us? If so, we could get more done with less. If not, it would cost us significantly more money and limit our opportunities to grow.
One of the greatest lessons we learned during our adventures creating this top-selling wine brand was to put ourselves in the other person’s shoes. Sounds simple. But it’s not. We learned that we really had to probe deeply to find out what each group wanted. It wasn’t always what we thought. We asked tons of questions, and after a while, we began to understand their needs and help them achieve their goals.
We thought our suppliers’ top concern was getting paid, and getting paid on time. Sure, that was a big factor, but we discovered other, more subtle interests they were just as keen on. They wanted to grow their business, just like we did.
Our largest supplier provided us with bottles, corks, closures, and cartons, basically all our packaging needs. Our good credit and terms with them were critical to our survival. The first time we discovered we couldn’t make a payment to them on time, we were shaking in our boots. We knew we could not afford to lose them. But after we thought about it and the long-term consequences, we decided to take the initiative and we gave them a call.
We told them we were aware that we owed them $40,000 and the payment was due in two weeks. We said our cash flow report indicated that we would not have the funds to pay them on time. We said we knew they were counting on our payment to pay their own bills, and we were calling because we wanted to give them a heads-up so they could plan ahead for this shortage of funds. Further, we told them that our next three receivables were earmarked for them, and our account would be current within 60 days.
They said, “Wow! Nobody ever called ahead of time us to tell us they’re going to miss a payment. They usually go dark and we have to chase them down! You’re the kind of customer we want to do more business with!” They extended our credit terms right then and there, even when we were late on our payment! By showing empathy for their position, they felt they could trust us. We reinforced our relationship by signing a long-term agreement with them.
Interestingly, we had started this positive relationship by how we behaved under duress. We continued to build this essential rapport by meeting with them in person every quarter to share our plans, our progress, our challenges, and our opportunities. They knew that if our business was successful they would grow with us. They would sell a lot more supplies to a high volume, popular-priced wine than to an exclusive high-priced wine.
After a few years, we had a tremendous opportunity to sell to a giant chain in Florida with more than 600 stores. It meant a huge increase in volume …if we could only afford the supplies to fill their initial order! When we shared this opportunity and corresponding challenge, our supplier agreed to raise our credit limits and extend our terms to get the business going. Building that relationship was worth a fortune!
Once they saw us as a true “partner,” they would regularly advise us about changes in the marketplace, competitive initiatives, and best practices. This insight was invaluable, especially to a new, struggling company. Eventually, we ordered supplies from them at quantity discounts and they warehoused them at no charge until we needed them. This enabled us to lock in the best prices without sitting on inventory.
Today when we ask entrepreneurs what they need the most, “More money!” is the most common refrain. But when we probe a little deeper, it’s their relationships with their suppliers that need their attention. Instead of playing suppliers off against each other for the best prices, we found that giving the one that was eager to grow our empathy, our loyalty, and our plans for expansion, we forged a solid strategic alliance worth more than money.
How is your relationship with your supplier? Do you really need more money, or would extended credit, free warehousing, and reduced costs of goods satisfy your needs?
Source: Business News