Read Start Your Own Business Online
Authors: Inc The Staff of Entrepreneur Media
Start Your Own Business (47 page)
Dealing with Suppliers
Postage Meters
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. 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.
Payment PlansWhile most service providers bill you automatically without requiring credit references, equipment and merchandise suppliers are more cautious. Since you are just getting started, you will not be able to give them trade references, and your bank probably will not give you a credit rating if your account has just opened.
TIPWhile it is almost impossible to get exclusive rights to a manufacturer’s goods, you can ask that a sales representative not sell identical merchandise to another store in the immediate area. However, you may be expected to buy large amounts of the product to make up for lost sales to other stores.
If your supplier is small, the manner in which you present yourself is important in establishing credit. You may find the going tougher when dealing with a large supplier. A personal visit will accelerate your acceptance.
Present your financial statements and a description of your prospects for success in your new business. Don’t even think of inflating your financial statements to cover a lack of references. This is a felony and is easily detected by most credit managers.
Some suppliers will put you on a c.o.d. basis for a few months, knowing that if you are underfinanced, you will soon have problems with this payment method. Once you pass that test, they will issue you a line of credit. This creates a valid credit reference you can present to new suppliers until credit agencies accumulate enough data on your business to approve you for suppliers. Most suppliers operate on a trade credit basis when dealing with other businesses. This basically means that when you’re billed for a product or service, you have a certain grace period before the payment is due (typically 30 days). During this time, the supplier will not charge interest.
Carefully consider all costs, discounts and allowances before deciding whether to buy an item. Always take into account what the final shelf cost of any item will be. The most common discounts are given for prompt payment; many suppliers also give discounts for payment in cash. When you can, make sure you specify on all orders how the goods are to be shipped so they will be sent in the least expensive way.
Occasionally, suppliers grant customers discounts for buying in quantity, usually as a freight allowance for a specific amount of merchandise purchased. Some suppliers pay an increasing percentage of the freight bill as the retailer’s orders increase; others simply cover the entire freight cost for purchases over a minimum amount.
If you order merchandise from distant suppliers, freight charges can equal more than 10 percent of your merchandise cost. Ask what a manufacturer’s or supplier’s freight policy is before ordering, and make sure the order is large enough to warrant the delivery charges. If the manufacturer does not pay freight on back orders, you might consider canceling a back order and adding it to the next regular shipment.
e-FYIOne good source for finding suppliers is
ThomasNet.com
. This comprehensive online directory lists manufacturers by categories and geographic area.
Become familiar with each of your suppliers’ order-filling priorities. Some suppliers fill orders on a first-in, first-out basis; others give priority to the larger orders while customers with smaller orders wait. Consequently, most retailers specify a cancellation date on their orders. In other words, any goods shipped after that date will be returned to the suppliers. By specifying a cutoff date, you increase the chances that your orders will be shipped promptly and arrive in time.
Give careful attention to shipments when they arrive. Make sure you’ve received the correct amount and type of merchandise, and make sure the quality matches the samples you were shown.
chapter 20
IT’S IN THE MAIL
Setting Up Mailing Systems
M
ail is one of the lifelines of your business, and, depending on your industry, it can also be one of your biggest costs. That’s why it’s so important to figure out the most efficient, convenient and economical ways to send mail. This chapter covers everything you need to know about mailing—from postage metering and sorting to letter-opening machines.
Mailing Equipmentail is one of the lifelines of your business, and, depending on your industry, it can also be one of your biggest costs. That’s why it’s so important to figure out the most efficient, convenient and economical ways to send mail. This chapter covers everything you need to know about mailing—from postage metering and sorting to letter-opening machines.
There are many mailing machines that you can buy on the market that can help you save valuable time—so you can spend it on more important things, like growing your business.
e-FYIThe Click2Mail service offers a convenient way to create and send hard-copy mailings right from your PC. Simply place your order online at
click2mail.com
and have postcards, direct mail, fliers or greeting cards delivered directly to your customers’ doors.
Having your own postage meter saves a small business time and money. No more licking and sticking envelopes and stamps. With today’s electronic mailing machines, you don’t even have to stand in line at the post office to get your meter reset.
Electronic postage meters consist of a base machine through which envelopes are guided for stamping, which can be rented, leased, or bought from a mailing equipment manufacturer. The machine also has a meter, which must be leased from a U.S. Postal Service-approved mailing equipment manufacturer such as Pitney Bowes; federal regulations prohibit the ownership of the actual meter, as that is strictly controlled by the U.S. Postal Service. The faster and more automated the machine, and the more features it incorporates, the more it costs to rent, lease or own.
The primary difference between bases is how letters are fed through the machines. The least costly are the manual models that require you to feed letters, one at a time, through a roller. More expen sive models offer semiautomatic or fully automated letter feeding. Options for the base include stackers, which stack your mail, and sealers, which automatically wet and seal each envelope as it passes through the base.
SAVEIf rising postage costs are putting the squeeze on your new business, try shrinking your mailings. Many direct-mail and catalog companies are saving by reducing their mailings’ dimensions. Keep your mailings within the size of the USPS’ letter classification of 6 by 11 inches, with thickness no more than onefourth of an inch.
Even the smallest office can benefit from a meter to determine exact postage and print out a stamp, and a scale to weigh mail. The U.S. Postal Service estimates accurate weighing can save customers up to 20 percent on mailings.
An efficient, automated mailing machine can also save hours of time if you handle direct mail or large mailings. Mail that’s presorted and bar-coded bypasses many of the post office handling steps and is delivered 24 hours sooner than mail lacking automated preparation, according to the USPS. (And if you don’t think a day makes a difference, consider the results of a study by market research firm The Gallup Organization and mailing equipment manufacturer Pitney Bowes: Their study found that 11 percent of executives surveyed at large and midsize companies said the net income of their businesses would jump 5 percent if they received payments one day sooner!)
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