Supply chain · 21 November 2016

How to stand up to supply chain bullies as a small business owner

Supply Chain Bullies
Large businesses that take advantage of smaller firms through late payments are known as supply chain bullies

For the latest in his series on tackling business disputes, solicitor David Walker advises readers how to stand up to supply chain bullies and protect company interests.

I often read blogs and articles about late payments and what needs to happen to tackle the problem. If you’ve read my previous articles you will have a pretty clear idea of my views on the subject.

However, I’m fully aware that there are plenty of supply chain bullies out there, especially large companies who think they hold all the power and can put the squeeze on their smaller suppliers. So, in this article I’m going to look at how the owners of smaller companies can stand up to their larger clients.

As a solicitor, I often become involved in payment disputes. On the surface, it can look like a simple case of late payment. But if you delve a little deeper, there’s often another underlying problem that causes the breakdown in the relationship.

The problem is usually an unequal balance of power, with the client thinking they have ultimate supremacy. They arrogantly think that suppliers are easily replaceable commodities and so they extract all they can from the relationship.

This problem is compounded by the supplier thinking they have no power, that they need the business at all costs and that finding new clients is hard. No matter how badly they’re treated, they just accept it. After all, how many times have we been told, “the customer is always right”?

Whilst these are two extreme ends of the spectrum, you don’t have to look far to find countless examples of supply chain bullies, grossly unfair business terms and of course, the devastating effects of late payments.

So, if a client owes you money, what can you do to shift the balance of power back in your favour and get paid as quickly as possible?

First, you need to know who has the power. If the service you provide is a pure commodity, or this was a one-off piece of work, it will be easy for your client to replace you and you will have less power. In these situations, don’t hesitate to use the legal system to your full advantage.

Your power comes from being in the right and having the weight of the legal system behind you. You just have to decide to use it.

However, if you have an ongoing relationship, you should make the process of replacing you as disruptive as possible for your client. This will shift the balance of power back to you so that it’s in your client’s best interest to pay you on time and resolve any problems you have.

Here are three ideas to make yourself as irreplaceable as possible to supply chain bullies:

1. Provide an excellent service

Engaging a new supplier is always risky and that risk increases considerably when your current supplier is providing an excellent service. Your client will want to be confident that the new supplier can provide the service to at least the same standard as you. So set the bar as high as possible.

2. Combine your excellent service with experience and perspective

Take your excellent service to the next level by knowing every little nuance of your client’s business and their industry. Use this information to tailor your services specifically to your client’s needs and be prepared to give them the benefit of your experience and perspective.

It’s going to take time and effort to gain this knowledge and that’s good, because it will be much harder for a new supplier to step into your shoes.

3. Build personal relationships within the business

The people you work with may not be the same people involved in paying you. Get some allies on your side. If you have a payment problem, ask to speak to the accounts team and explain how valuable you are to the business.

Letting them explain how disruptive it would be to lose your services can hold considerable weight when it comes to management decisions about suppliers.

These ideas may sound like common sense, and they are, but the more you can make yourself indispensable to your clients, the stronger your position will be when it comes to getting paid and resolving disputes. If you hold the balance of power, or at least have equal power with your client, just the threat of you walking away could be all you need to get paid.

There’s another point too. Even if there is no dispute over your services and you’re paid on time, we’re all at risk of being replaced by a cheaper alternative, or even new technologies if current trends continue the way they are going.

Therefore, making it as difficult as possible to replace you makes good business sense whatever situation you are in.

Catch up on the rest of David Walker’s dispute resolution series:

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ABOUT THE EXPERT

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry – advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

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