A Startup Guy

Sometimes, the cost of savings is too high.

Recessions are tough. They’re not fun to live through, and I’ve endured several. But what really stinks is business people frequently make things worse than they have to be. We panic and give in to fear and that causes smart business folks to make soem really dumb moves. We scale back on marketing, even if our business isn’t suffering, “just in case.” We make cuts that damage customer service and product quality. I saw some of these situations play out with someone I know just in the past couple of weeks.

I’ve got a friend who sells a product to local businesses. He’s great at what he does and his service is phenomenal and he treats his customers like gold. I’ve frequently seen him do incredibly fast product deliveries (much quicker than a customer should ever expect) and eat extra rush or production charges in order to over-deliver to his clients. So it was with shock that I saw a couple of his long-time customers ditch him in favor of an untried vendor in order to save rediculously small amounts of money. In one case, it was a penny. A PENNY! In another case it was to save a couple hundred dollars on an order that was tens of thousands of dollars. That means that customer went with a vendor they don’t know (whose quality they don’t know) in order to save half of a percent. What’s worse, both could have gotten a better deal from their trusted vendor had they just told him what price they needed to beat for him to keep the business.

Here are a couple of issues with this situation. First, the customers are almost certainly responding to fear and perhaps sheer panic. People making buying decisions at companies start to get worried in recessionary times that they may be seen as expendible and they start looking for ways to cut costs… at any cost. However, if you have a great relationship with a vendor you can trust, that’s business gold right there. Dependable vendors who love you are not easy to find. Ones willing to move heaven and earth to deliver to you are worth a fortune. Dumping them over pennies or fractions of a percent in savings is just plain stupid. This guy I know has already saved these companies thousands by not passing on extra fees he incurred trying to keep them happy. Now they’re going to dump him for a few cents without even a word. Sad.

I’ve seen on multiple occasions where a buyer, thinking they’re getting a better deal from an untried vendor, dumps their reliable vendor. Then they get let down by the new vendor. Suddenly, they’re in a panic for product. They’ve burned their bridges with their old reliable vendor and they can’t get the product they need, at the quality they need, quickly enough. Suddenly, this buyer is looking inept and expendable to his company. Trying to play games has landed them exactly where they didn’t want to be.

Find vendors you can trust. If  you have to pay a little more for them, they’re worth it. Be loyal to them and they can help you make it through tough economic times. Treat them as expendable and you may find yourself out in the cold.