From the fiery lessons of trial and error, here are my top three tips for start-ups that need to manage suppliers:
Be clear that any diversions from the agreed quote must be agreed in writing before anyone incurs additional expenses.
It’s also important to make sure you’ve got a way out or to pause the agreement if your circumstances change (as they often do in start-ups) or if you’re not happy with the supplier’s work.
This sounds simple, but it’s amazing how often the best managers fail to do this and end up in all kinds of trouble. Once you’ve decided on a supplier it’s easy to be excited, start work, and never firm up and sign off on an agreement.
In my first six months of Posse, I engaged a lawyer who seemed really passionate about our project. He was always at the office taking meetings, introducing me to people and offering to help in many ways above and beyond what a lawyer would normally do.
I thought this was wonderful until I got bills that added up to more than $110,000 along with a proposal to exchange a chunk of the debt for a massive amount of equity in my new company!
At the time, I couldn’t believe I had been so stupid, but I’ve met lots of other founders with the same stories or worse.
When you sense a problem with dates, a budget, or if the work isn’t good then deal with it straight away. Sit down with the partner, try to understand the root causes of the problem and come up with a solution together.
It’s important to be polite and always try to keep the relationship intact. It’s likely you’ve committed to a budget, so if you want to exit gracefully without being stung for the entire bill, you’ll need to be friendly. And it’s unhelpful to have people spreading bad stories about you around town. Bad karma too!
I dealt with my lawyer dilemma in the worst possible way. I sat on the bills and hoped they would go away. They didn’t, and a year later we went to court.
The whole mess took 18 months to clear up before we settled. It cost legal bills, time and energy that would have been better directed toward building our product.
I’ll never make that mistake again!
You’ll get more out of your suppliers if you focus on what motivates them.
Make sure they feel part of something exciting and important. Invite them into your office as much as possible and try to get their office to feel like an extension of your brand.
Supply partners love public credit because it helps them win more clients – try to promote their involvement in your success as much as you can through your website, presentations and so on.
We recently started outsourcing our sales calls to a company in Sydney called Inform Connect.
We work so closely with them that they really have become an extension of our own team. We present the company’s vision and values to their people just as we do with our own.
They’re regularly at Posse’s offices and Friday demo sessions, and their office walls are covered with our stickers and posters. Inform have lots of other clients, but everyone there wants to work on the Posse account and we get awesome results.
Selecting and managing external suppliers is challenging, but everyone needs them. It’s so important to get this right.
I only now feel like I have a handle on how to choose and work with the best people. When you find an amazing partner and everything works seamlessly, the results can be magic!
