KBDN

Do Your Suppliers Have Your Back?

"Your business’ success is dependent on constant dynamic change, and your suppliers need to be ready to deliver on that.”

authors  | May 1, 2020

When was the last time you really looked at your suppliers and determined whether they truly have your back? Seriously, when was the last time you checked to see if you and your suppliers’ interests align?

It used to be that you could look your supplier’s owner in the eye and on a gut level know if they had your best interests at heart. But that’s no longer the case. Most suppliers are too big for you to know their CEO, and their top priority today is their investors. I’m not saying this is bad, just that this is your reality.

In the cabinet world, gargantuan corporations devour market share, enigmatic private equity companies acquire established brands and private/family-owned companies search for their cut. Sounds terrifying, right? Sure, change always is. But, no worries: We got this together. We just need to change how we determine who has your long-term best interests at heart.

So, how do we evaluate your current and future suppliers? Who will help you prosper in the future?

Let’s start with what we should expect from our partners. Demand the following from them.

  • Allow you to make the margins YOU deserve Products should be priced appropriate to their quality.
    • Exclusive to you, refraining from opening to your competitors
    • Prevent margin erosion by making products that do not require service work
  • Build your company’s identity over their own – Long term, you want your community to value you more than your product. If it is all about their product, you are dispensable.
  • Dynamic, innovative and on trend – They must keep you ahead of consumer needs.
  • Easy to do business with – They support you the right way from ordering to marketing to servicing. If it’s not easy, it’s costing you money.
  • Respect You – You don’t have to like someone to successfully partner with them, but you do have to have their respect. Only work with people who respect you.
  • You can see being partners together 5, 10…20 years from now

Now comes the hard part: determining who fits the bill. For the mega-corporations and equity companies, follow their money. Understand what their stakeholders expect and appraise how you fit in. A little Googling goes a long way.

Let’s start with “Big Cabinet.” Like big tobacco and big oil, our industry is being consolidated by mega-companies. It’s not inherently evil, just understand, as columnist Mike Barnacles once said, “Corporations don’t have feelings, they have interests,” and you need to make sure their interest is you.

So how do you know if one of these brands is the right fit for you? Do a little research.

  • One fantastic tool is the online transcripts of quarterly earnings calls that public companies post. These are quite insightful. To support stock prices, management will report not just results but also upcoming initiatives and forecasts. Plus, the transcripts include questions from institutional research companies asking the tough, discerning questions that reveal the true intention of your supplier. Compare what they report to financial professionals vs. what they tell you. Pay special attention to initiatives they are selling to investors and ask yourself if these initiatives are good for you. This may take some reading between the lines.
  • Talk to your local rep and discover the corporate priorities assigned to them. Again, see how the macro plan affects you in the future. Be cognizant of concerns the rep has as they may align with your own.
  • Observe the level of connectivity your supplier is attempting to build directly with your customers. Evaluate new programs and judge whether they help you better service clients or if your suppliers are simply moving your clients closer to themselves. You don’t want to be dispensable in the future.

When you look at the big three, you will probably find one strategizing to partner with dealers long-term, one sort of middling and the other turning hard toward capturing contractor, builder and consumer-direct channels. So, choose wisely and don’t get suckered into putting all your eggs in one basket. Remember, at the end of the day, it’s their basket, not yours. So, diversity is your friend.

Next up are private equity companies. They could be good or bad news to you, so uncovering their modus operandi is imperative. That is not as hard as you may think. They tend to specialize, so how they have profited in the past is a good indication of how they will in the future. Their company focus could be on growing through improved capitalization and/or management or they could be headed in the opposite direction, bleeding an acquisition dry of its cash and assets over time. And there are lots of options in between. Investigate the following: 

  • Their website – These companies typically state their mission and goals for their acquisitions right on their site. Review current holdings and how your supplier fits in that portfolio. Pay attention to how long they have held onto the other entities. Longevity is good for you as a customer.
  • Google articles – Read articles about their current and past holdings, especially articles from sources local to the business. Look for growth, improvement and how their partners fared along the way.

My message is: Don’t get freaked out when you hear “private equity.” At the same time, you do want to ensure they are the right long-term fit for your business, preferably one that is using capital and better management to improve you and your clients.

Our last group to review is the privately held or family-owned companies. Don’t make the mistake of thinking this category is intrinsically good for your business. It could be the perfect fit, but it could also be fatal if you end up trapped by the inbreeding of ideas or archaic static behavior. How do you uncover who they really are underneath it all?

Go to their website, look at their literature, listen to their leaders and look for:

  • A modern outlook on the industry – Compare them to the suppliers that are winning the market.
  • Customer experience – Would your customer choose them effortlessly?
  • Diversity in leadership – Do their ideas and life experiences align with those of today’s consumers?
  • Focus in their offerings – If they are trying to be everything to everyone, they may be spread too thin to succeed for you.

I love small companies, but you must make sure they have the fuel needed for the future. Your business’ success is dependent on constant dynamic change, and your supplier needs to be ready to deliver on that.

As you can see, there isn’t a magical category of perfect suppliers, but there are strategic ways to discover the best fit for you. Suppliers that have your back allow you to spend your time looking forward. ▪

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