Small Suppliers: How to Win Business From Companies That Already Have a Supplier

A small supplier can spend weeks trying to get onto a company's supplier list and still come away with nothing. The buyer has a price list, the current supplier is already approved, and nobody inside the company is particularly interested in changing a process that works.

Offering a lower price might get a meeting, but it does not guarantee an order. The buyer has to consider whether the new supplier can deliver on time, meet the company's requirements and sort out problems when they arise. For an SME, getting that first order often means finding a reason for the customer to use two suppliers instead of one.

Look at what the customer is buying

“The value on the invoice matters less than what remains after the costs have been paid.”

Imagine a small business that supplies cleaning products to offices. It approaches a property management company that already buys from a national distributor. The distributor supplies everything from detergents to paper towels and delivers to several buildings. Matching its prices across the full product range may be difficult for the smaller business. But the property manager might occasionally need extra stock before the next scheduled delivery. Or one building might use a particular product that the distributor does not always have available.

The smaller supplier could focus on those orders rather than trying to replace the entire contract. This requires asking the buyer a few direct questions. Which products are difficult to get? Are there minimum order quantities that do not suit smaller sites? Are deliveries sometimes delayed? If the buyer has no complaints, there may be little reason to pursue the account further. The point is to find out whether there is a genuine opening before spending money on quotations, samples and sales visits.

Make one offer the buyer can assess

A purchasing manager is unlikely to be persuaded by a promise of excellent service. They need to know what the supplier will actually do. For example, the cleaning products business could offer to keep five frequently used items in stock and deliver them to buildings within a defined area. It could also set a minimum order value to cover transport costs.

That is a specific offer the buyer can compare with the current arrangement. The supplier must first work out whether it can afford to provide the service. Keeping stock available ties up cash, while urgent deliveries can become expensive if orders are small or spread across a wide area. If next day delivery is only possible in certain suburbs, say so. It is better to set clear limits than accept an order and struggle to meet the deadline.

Start with one site or product

A company may be willing to test a new supplier without moving its entire account. A small order gives the buyer a chance to check the product, delivery and paperwork before making a bigger commitment. The supplier could offer to handle one office building for a month or provide a particular product that the existing supplier does not deliver reliably.

Before starting, both parties should agree on quantities, prices, delivery dates and payment terms. The supplier should also establish how much stock it needs to buy and whether it can cover the expense while waiting for payment. A trial order should not require the business to spend money it needs for wages, rent or existing customers. After the order, ask the buyer whether anything went wrong and whether another order is likely. That conversation is more useful than assuming the first sale will lead to a long-term contract.

Get the buying process right

Some SMEs lose opportunities because they prepare a quotation before checking the customer's requirements. A larger company may need supplier registration, tax information, banking confirmation, insurance documents or product specifications. It may also require a purchase order before accepting goods or authorising payment. Ask for the requirements at the beginning. There is little point negotiating a price if the business cannot meet the customer's basic conditions.

Payment terms deserve the same attention. A R30,000 order paid after 60 days can put pressure on a small supplier that must pay for stock immediately. If the business cannot comfortably carry that cost, it should explore a deposit, shorter payment terms or a smaller first order. If the customer will not agree to terms the supplier can manage, the order may not be worth taking.

Check the margin before agreeing to a discount

Consider an order worth R20,000. The products cost R13,000, delivery costs R1,000 and additional labour and handling cost R2,000. That leaves R4,000 before overheads, financing costs and tax. The buyer asks for a 10% discount. The price falls to R18,000, leaving R2,000 after those same costs. The supplier has given up half the amount left from the order, without necessarily reducing its workload. Instead of accepting immediately, the owner could ask for a larger order, fewer deliveries or collection by the customer in exchange for a lower price. If none of those changes makes the numbers work, the supplier should hold its price or walk away. Large orders are not always good orders. The value on the invoice matters less than what remains after the costs have been paid.

Decide whether to pursue more business

Once the supplier has completed a few orders, it should look at the account properly. How much does the customer buy each month? How much does it cost to deliver those orders? Does the buyer pay on time? Does the account generate repeat business without requiring constant discounts or extra work? A company placing smaller orders regularly and paying within its agreed terms may be more valuable than one placing a large order that ties up cash for two months. The smaller supplier may never replace the national distributor. It might supply one product, cover urgent orders or serve a few locations that are difficult to reach.

That can still be a worthwhile customer relationship, provided the work is profitable and the supplier can meet its commitments. For an SME, getting onto a large company's supplier list is only the beginning. The real question is whether the business can turn that first order into repeat sales without stretching its cash or cutting its margins too far.