Staying in Business When Your Supplier Can’t

It can take years to build a good relationship with a reliable supplier—one who offers unlimited supplies, advanced credit, volume discounts and delivery to your doorstep.

So when a supplier goes out of business, the pain is over much more than access to products. And while contractors in urban areas can generally find comparable replacements, the task gets more difficult in remote areas. If your business is down a supplier or two, take the time to research your options so that you can line up a solid replacement.

Look for the signs
First, try to anticipate the problem before being left high and dry. Look for these clues that a supplier might be in trouble:

• Products have become unavailable
• Shipping timelines aren’t met
• Employees have been downsized
• You have trouble reaching them by phone or email

Changing expectations
If your best supplier has bitten the dust, you’ll probably have to lower your expectations a bit.

“Expect to have to pay more at a new place,” says Peter Merrill, an executive board member of the National Association of Home Builders (NAHB). “They’re probably not going to give you the same courtesy and the same pricing you had before.”

Also, talk to someone who’s been there before. Merrill has seen several recessions in his time. Currently the president and CEO of Santa Fe, N.M-based Construction Dispute Resolution Services, he’s also a certified kitchen designer and recalls a period in the early 1980s when many of his suppliers started cutting back on supplies and staff.

“They’d let sales reps go and expected me to place my own orders,” he says. “I didn’t get the same service.”

And be careful what you promise to clients. Higher end items like accessories finished in gold, nickel and brass may be in short supply

Rebuilding relationships
“If you’re looking for any supplier, whether local or larger-scale, really ask them about the different terms they offer,” says Kyle Hensel, Director of the Clayton State University Small Business Development Center (SBDC) in Morrow, Ga.

It may take some time, but do your homework. To start developing a strong relationship with a new supplier, consider these steps:

1. Seek out payment terms that suit your cash flow needs. “Do you have to put any money down up front for the product?” asks Hensel. “How big is your [credit] limit?”
2. Check references. Just because somebody carries the right kind of faucet doesn’t mean their service is reliable. Find people who have worked with them and ask these questions: What is their availability of materials? Do they have a decent inventory? Do you end up waiting for special orders? Do they keep their delivery commitments?
3. Check out their showrooms. Are the products high quality? Will their employees be cordial to your clients?
4. Meet with them face to face. You’ll leave with more information, a stronger impression and often a better deal than if you don’t.
5. Ensure fair prices. Make sure the supply house isn’t selling to the retail public at similar prices they’re offering you. If so, you could end up short-changed.

In the meantime
“Don’t count on your suppliers to have the same inventory they’ve always had,” says Merrill. “[Often] they are discontinuing the items that don’t move that much and are making them special orders.”

That could mean anticipating a lag time on projects and having clients pick up supplies as soon as possible.

In the past, Merrill has headed off problems by communicating the situation to his clients. “I didn’t want to surprise them with anything,” he says. “The lead time for clients to make selections may be further back if something needs to be custom ordered.”

Even if your suppliers are in good shape, it is a good idea to collect contact information for back-ups, just in case. Creating a database of contacts will save you time and hassle, should you ever need a replacement.