What is a preferred vendor?
Selling to Local Retail Businesses
Is your product a good match for the retailer?
Research the establishment. Speak with the manager or owner. They may appear to be enthusiastic but remember, they are looking for a bargain, a deal. It doesn’t matter if they are not making your product, they want the biggest bang for their buck. Stand your ground when offering a wholesale price. You make money based on volume. The more items you sell, the more money you earn, but you must price for profit.
Determine how your product will be sold and when.
Are you selling individual cakes or slices? Are you selling individual pies or slices? What about cookies? Are they being sold by the 5 dozen? What is the shelf-life of your products? How long will your products stay fresh?
Products being sold for resale should have one of the following dates. Use what works best for you and the retailer.
Use-By: This label is aimed at consumers as a directive of the date by which the product should be eaten; mostly because of quality.
Sell-By: This label is aimed at retailers, and it informs them of the date by which the product should be sold or removed from shelf life. There’s no negotiation on this.
Best-By: This is a suggestion to the consumer on which date the product should be consumed to assure ideal quality.
Where Will a Preferred Vendor Sell Products
Look for small vendors. You are seeking businesses that will work with you and be willing to push your products. There are a few red flags you need to be aware of, however. Veer away from vendors who want you to take the product back after the sell-by date. If they have too much of your inventory, they need to buy less. There are no buy-backs. These are perishable products.
Avoid signing a contract until you know there is a market for your product at that establish. It is not mandatory that you sign a contract. The down-side either of you can end the wholesale relationship at any time. If you want something in writing, seek legal assistance.
Set up a Preferred Vendor Communication Process
Design a “what happens if list.” In the event, you cannot produce a product what is the contingency plan? These retailers are depending on you and one bad experience can ruin your reputation.
How will the retailer communicate the establishment is closing due to bad weather or financial issues. Emergency situations will impact your bottom line.
Preferred Vendor Sales is a Marathon Not a Sprint
Slow and easy wins the race. Never take on more than you can handle. Don’t set unrealistic expectations with the retailer. Try to be as transparent as possible.
A word about getting paid.
For many small businesses, offer net 30-day payment terms which creates a financial challenge. Many companies can’t afford to wait 30 to 60 days from the date of invoicing to get paid. You’ll need funds to pay for your immediate business expenses.
Whenever possible, you want to offer payment terms to only your best clients. This offer benefits your clients and gives you a tactical advantage over competitors. However, you also need to avoid offering payment terms to clients who have a high risk of not paying. You can use small business invoice software for payment upon receipt.
If you decide to offer a payment term, make it worth your while by asking the following:
“Please pay within 21 days” or “Invoice payment terms: net 30. Interest accrued at 2.5% per month thereafter.”
Preferred Vendors Use the Carrot & the Stick
Think of this as a stick-and-carrot approach. Yes, be polite (carrot). But don’t be afraid to show there’s a stick too! Advising vendors there will be interest charged on late payments gets you paid slower, but it also seems to ensure a higher percentage of invoices will get paid.
The easiest way to determine if a client has good credit is to review their commercial credit report. You have every right to request it and review it. A credit report can let you know if your prospective vendor has a good track record of paying other vendors. This track record is the best indicator of how soon they will pay you. Remember, your business, your rules. Stand your ground.