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How to Find Suppliers for a New Business

How to Find Suppliers for a New Business
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Suppliers are essential to any retail business. Depending on your inventory selection, you may need a few or dozens of suppliers. Sometimes suppliers will contact you through their sales representatives, but more often, particularly when you are starting out, you will need to locate them yourself -- either at trade shows, wholesale showrooms and conventions, or through buyers' directories, industry contacts, the business-to-business Yellow Pages and trade journals, or websites.

Suppliers can be divided into four general categories.

  1. Manufacturers. Most retailers will buy through independent representatives or company salespeople who handle the wares of different companies. Prices from these sources are usually lowest, unless the retailer's location makes shipping freight expensive.
     
  2. Distributors. Also known as wholesalers, brokers or jobbers, distributors buy in quantity from several manufacturers and warehouse the goods for sale to retailers. Although their prices are higher than a manufacturer's, they can supply retailers with small orders from a variety of manufacturers. (Some manufacturers refuse to fill small orders.) A lower freight bill and quick delivery time from a nearby distributor often compensate for the higher per-item cost.
     
  3. Independent craftspeople. Exclusive distribution of unique creations is frequently offered by independent craftspeople, who sell through reps or at trade shows.
     
  4. Import sources. Many retailers buy foreign goods from a domestic importer, who operates much like a domestic wholesaler. Or, depending on your familiarity with overseas sources, you may want to travel abroad to buy goods.

Reliability is the key factor to look for in suppliers. Good suppliers will steer you toward hot-selling items, increasing your sales. If you build a good relationship and your business is profitable for them, suppliers may be willing to bail you out when your customers make difficult demands.

Related: Defining Your Market in 7 Steps

Remember, though, that suppliers are in business to make money. If you go to the mat with them on every bill, ask them to shave prices on everything they sell to you, or fail to pay your bills promptly, don't be surprised when they stop calling.

As a new business owner, you can't expect to receive the same kind of attention a long-standing customer gets right off the bat. Over time, however, you can develop excellent working relationships that will be profitable for both you and your suppliers. Once you have compiled a list of possible suppliers, ask for quotes or proposals, complete with prices, available discounts, delivery terms and other important factors. Do not just consider the terms; investigate the potential of your supplier's financial condition, too. And ask them for customer references; call these customers and find out how well the supplier has performed. If there have been any problems, ask for details about how they were reconciled. Every relationship hits bumps now and then; the key is to know how the rough spots were handled. Was the supplier prompt and helpful in resolving the problem, or defensive and uncooperative?

Be open, courteous and firm with your suppliers, and they will respond in kind. Tell them what you need and when you need it. Have a specific understanding about the total cost, and expect delivery on schedule. Keep in constant communication with your suppliers about possible delays, potential substitutions for materials or product lines, production quality, product improvements or new product introductions and potential savings.

Suppliers often establish a minimum order for merchandise, and this minimum may be higher for first orders to cover the cost of setting up a new store account. Some suppliers also demand a minimum number of items per order.

Related: Understanding Your 'Unique Selling Proposition'

This article is an edited excerpt from Start Your Own Business, Fifth Edition, published by Entrepreneur Press.
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