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Monetization / Safeguarding ones business with manageable supplier prices
« on: November 26, 2016, 01:51:52 PM »
I'm coming up to a crossroads with my business, and there's one area I don't exactly know how to approach.
It's to do with purchasing from suppliers and setting myself up so I don't regret it later on.
The main point of the business is going to be offering convenience for consumers who purchase a particular brand on a regular basis.
The problem though is I don't have the buying power to negotiate good unit prices from the start, so I am going to have to play by their rules and pay their wholesale price.
But I want to put myself in a good position, so later on if the business kicks off, or their particular brand becomes a top seller, I can renegotiate the price for larger order quantities.
But because consumers will be brand loyal, and if the supplier plays hardball I will be left with two options as far as I can see.
1) Carry on paying the high wholesale prices
2) Drop their brand, and offer a replacement with another supplier of similar type using the new found buying power.
With option 2) I may keep a sizable number, as the service I'm offering should be strong enough for them to consider staying, but I underlined may because it's an unknown variable.
So with all that, I'm thinking along the lines of supplier agreements.
Agreements with certain stipulations (e.g. delivery time frames) and volume targets set over a certain period to hit (e.g. a yearly contract that is renewed based on the previous year's sales volume)
But I haven't a clue with regards to supplier agreements, what the pitfalls are or anything to compare to get a feeling for what is talked about in these supplier agreements.
Any help or pointers in the right direction would be much appreciated.
It's to do with purchasing from suppliers and setting myself up so I don't regret it later on.
The main point of the business is going to be offering convenience for consumers who purchase a particular brand on a regular basis.
The problem though is I don't have the buying power to negotiate good unit prices from the start, so I am going to have to play by their rules and pay their wholesale price.
But I want to put myself in a good position, so later on if the business kicks off, or their particular brand becomes a top seller, I can renegotiate the price for larger order quantities.
But because consumers will be brand loyal, and if the supplier plays hardball I will be left with two options as far as I can see.
1) Carry on paying the high wholesale prices
2) Drop their brand, and offer a replacement with another supplier of similar type using the new found buying power.
With option 2) I may keep a sizable number, as the service I'm offering should be strong enough for them to consider staying, but I underlined may because it's an unknown variable.
So with all that, I'm thinking along the lines of supplier agreements.
Agreements with certain stipulations (e.g. delivery time frames) and volume targets set over a certain period to hit (e.g. a yearly contract that is renewed based on the previous year's sales volume)
But I haven't a clue with regards to supplier agreements, what the pitfalls are or anything to compare to get a feeling for what is talked about in these supplier agreements.
Any help or pointers in the right direction would be much appreciated.
