Supplier's wisdom

1 February 2011
Entrepreneurs and business owners face many challenges in growing their firms, from sourcing finance to growing their customer base. For many this will involve outsourcing part of the operation to an external company. It can be difficult to know exactly what you will need as your business grows and to assess who will make the best supply partner. One of the most common problems entrepreneurs face is recognising when a good business concept has grown to a point where outsourcing to a specialist will be cost effective. Understandably, some will be nervous about entrusting part of their business to an external company. Discussing concerns openly with potential suppliers will often ease them. A prospective outsourcer’s costing process and service presentation should provide reassurance and help you understand how and what parts of the process can or should be outsourced. Often suppliers will have worked with a number of organisations making the transition from start up to fully fledged business. This means they have the experience to understand the problems businesses are likely to experience. This foresight can prove tremendously valuable since mistakes could be extremely costly. Outsourcing is not always the solution. A good supplier may point to deferring the decision to a later and possibly more beneficial date. The key for growing businesses is managing resources through the peaks and troughs. Some jobs the owners would have done themselves in the early days become too demanding when orders are high and yet might not be consistent enough to warrant employing someone full time. Suppliers need to make a profit, but the ability to buy by the hour or per unit is a massive advantage when it comes to controlling costs. Most business owners come to this conclusion a little too late. Once relieved of trying to do everything for themselves, they can concentrate on their core skills, applying them to help their business to grow. Whether a supplier takes the more “mentoring” role will usually depend on the skills of the entrepreneur. Many endorse the Branson principle of employing better people than yourself. To develop closer relationships and work out mutually beneficial strategies, business owners need to openly discuss their plans with suppliers, under a non-disclosure agreement if necessary. Ultimately if the outsourcing is very successful it may end up with the business having enough critical mass to take the operation back in house. This is not something to be afraid of talking about, because suppliers need to be aware of their part in the development process and will often be happy to work on this basis. Business owners and suppliers need to work harder at forging stronger relationships because it’s only when close working partnerships are developed that the benefits of outsourcing are truly realised.
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