Ever had a situation where your rep came back with a signed contract and, as you looked at the contract, you suddenly realized that the price didn't take into account the two previous price increases you received from your supplier?
Not a good feeling. It means that when you received those supplier price increases, you were just too busy to build them into your pricing. It also means that the price is going to cut into your margin unless you renegotiate with the homeowner.
Saving Money is Making Money Home improvement contractors spend far more time and energy managing their marketing and sales than they do their supplier relationships. Why is it worth the trouble? One simple reason: Saving money is making money. If you monitor supplier relationships by, for instance, not being afraid to challenge price increases, demanding discounts, asking for “extras” such as additional co-op monies or even delays in implementing price increases, you can add considerably to your bottom line profits. In addition, you'll get treated with more respect. You'll know a lot sooner if that supplier relationship is beneficial for your company, and you'll be in a better position to seek a new supplier, one that can benefit your company more.
I'm not advocating that you hold suppliers hostage or continually beat them up for “more and better.” Suppliers are critically important, and it is key to have good relationships with them. But it is the home improvement company owner's responsibility to buy at the right price, get the right service, and offer the right product.
Who's Your Supplier? To home improvement company owners, “supplier” means whatever manufacturer or distributor they're buying their windows, siding, or shingles from. But your suppliers also include the subcontractors from whom you buy labor, media and other suppliers of marketing, the company that supplies your cell phone service, companies that rent you equipment, and companies that sell you financing. In fact, a typical home improvement company has dozens of suppliers of every type and size.
If you want to better manage your supplier relationships, the first step is to identify who your suppliers are, then figure out how they can save you money at different times.
To help me track my suppliers, I set aside time every quarter to review a list of all the people and companies I write checks to. I go through my profit-and-loss statement and look at expenses. My goal is to make sure that all these suppliers are providing me with goods and services in the best possible way.
I also do a yearly product comparison to make sure I understand our price position in our marketplace. I use a matrix to produce an apples-to-apples comparison of our product with other manufacturers' products. If all things aren't equal, I'll call in my manufacturer's rep and show him what he needs to do to remain competitive.
Of course, none of this would make much difference if I were an insignificant or, worse, a bad customer. As their customer, I strive to fulfill my suppliers' every responsibility and obligation. That starts with paying them on time. In addition, I sit down with them at the beginning of the year and lay out my budget. I tell them what we plan to do. I offer a projection of our anticipated yearly purchases. I do this with the three or four companies that represent 80% of my product expenditure. And I never cry wolf. If there's a legitimate problem with an order, I'll be in touch. But I don't abuse the relationship. If you've kept your promises, you can hold suppliers to theirs.