One of the biggest reasons why companies and startups fail is due to the mismanagement of their budget. Many companies lack the services of an accountant and they don’t take a good look at their financial situation before making decisions such as creating a new product or starting a new marketing campaign.
One problem that far too many business owners overlook is the cost of raw materials versus how much the end product sells for. This is a basic fundamental of business; you need to spend less on making your product in order to create a higher profit margin. This is ultimately what helps you determine the cost of your business, but it also means that you’ll need to do a lot of research in order to determine the right supplier.
To help you pick the right supplier for your raw materials, we’ve put together a list of things to keep in mind.
Comparing Costs and Value Between Different Companies
Whether you’re purchasing aluminium metal sheets or spools of thread and fabric, there are likely many companies around you that offer the same or similar services and it’s a good idea to compare prices between various businesses in order to get the best deals. However, it’s not just the price of the item itself that you should be thinking about. In some cases, purchasing raw unprocessed materials can often be more expensive for your business especially if they need to be further refined or shaped into what you need it to become.
For example, you always have the option of making shirts yourself from spools of thread and different materials, but it’s likely cheaper for you to purchase blank shirts and garments and place your own designs on them if you’re a fashion business. Similarly, there are some companies that will charge a lot for shipping and transport costs, and you need to keep these in mind if you want the best profit margins.
Receiving Recommendations From Other Businesses and Friends
Another great place to look is by asking your friends and other companies for recommendations. Of course, you don’t want to approach a competitor but it does make sense to ask your business mentor (if you have one) or friends in the industry. These recommendations are usually the best choice for finding a supplier because it means they can help you get better deals and you have guaranteed quality.
Building Lasting Business Relationships
Another important point to remember is that you need to build lasting business relationships with whomever your supplier is. This will help you get better deals in the future and the constant communication means that you’ll know when there’s a shortage of something well in advance or if they can offer you better products for a lower price. There are many unique advantages to getting to know your suppliers, so it’s important to focus on working with a company that you feel comfortable with, not just a company that offers the best prices.
