Be a Big Fish in a Small Pond with Vendors

“You often don’t have the capital to strike normal compensation relationships with vendors. You also can’t promise volume or make longer term commitments because you don’t know.” 

How do you give yourself the best chance for success with vendors? I learned the answer from my brother. My brother runs our family’s real estate business in which he manages about twenty buildings. Instead of working with the largest elevator companies, insurance brokerages, contracting companies and other vendors, he works with vendors that consider our business meaningful to them. If you provide a vendor with $1 million in business and their revenue is $10 million, you matter. If you provide a vendor with $1 million in business and their revenue is $100 million, you are a rounding error. While working with the largest vendors can add credibility, you may end up being a small fish in a big pond.

Smaller vendors are also more likely to price their services based on the potential of your business as opposed to the business at hand. If a $10 million vendor will win $250,000 of your business now, but your business with them might expand to $1 million, they may see the opportunity and provide the $250,000 for $150,000. Larger vendors usually look only at the business currently in front of them and price accordingly. This doesn’t only relate to price. It can also impact the resources committed to your business. When my brother’s team calls the elevator vendor, they don’t get the young buck out of elevator school. They get the President of the company.

These concepts are not new. They are employed by companies all the time. We all understand “big fish in a small pond.” However, when you are a young organization looking for credibility, you often try to align yourself with large, established vendors. Vendors are key to riding the wave of growth and progress. Make sure they wake up thinking about your business.