When entrepreneurs get ready to start a company, it is important that they prepare for any future hangups, including the possibility of the company’s supplier going out of business.
Anne Field offers advice on how to prepare for complications with suppliers in an article on American Express’ OPEN Forum. In order to protect the company, entrepreneurs should discuss with a lawyer how to include safeguards against any vendor complications in the contract. It is important to think of the worst-case scenarios, such as bankruptcy or quality problems.
When choosing a supplier, look for back-up suppliers at the same time so you will be prepared to transition if necessary and minimize any drop in profits. In order to have a sense of whether your supplier is in trouble, take the time to monitor the company’s financials. If you have to switch vendors quickly, be ready to pay higher costs.
It is also important to build a good relationship with your supplier. In Entrepreneur magazine, Bob Reiss notes that suppliers appreciate companies that pay on time, personalize the relationship and provide adequate lead times.
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