Acquiring new customers is the lifeblood of any
company. In fact, any company that is not adding new customers is at risk of going out of business. Given that most firms derive about 80 percent of their revenue from 20 percent of their customers (the 80/20 rule), a company could face severe financial risk if it loses one or more key customers. Moreover, when it comes to the reasons precipitating customer loss, many are beyond a company’s ability to control. While a customer can replace you with a competitor, that customer also can go out of business or be acquired by another company.
Being too dependent on customers in a specific industry is another form of risk. All industries go through upward and downward business cycles. For example, in 2015 the oil and gas industry underwent a severe downturn and the price of crude oil dropped to historically low prices. Contract manufacturers that were dependent on customers in this industry found themselves scrambling to make ends meet.
If most business executives agree that adding new customers is important, then why don’t many small businesses have a strategy for acquiring new customers? Because it’s hard! It is easy to fall into the trap of relying on existing customers for new business. And, why not? You’ve worked hard to build a trusted relationship. Existing customers bring work opportunities with minimal sales effort and your win ratio is typically high (25+ percent). But, as stated earlier, relying on existing customers is a risky strategy.
Why is it so hard to win new customers? The answer is obvious: They do not know you. From their perspective, finding new contract manufacturers (suppliers) is challenging and important for many of the same reasons. Customers want to spread their manufacturing risk across many suppliers. If a supplier goes out of business, is acquired by another company or suddenly has quality issues, having multiple sources minimizes supply chain risk. In addition, multiple sources keep supplier prices competitive.
The process of evaluating and onboarding new suppliers is time consuming. Buyers are inundated with sales reps from contract manufacturers wanting to earn their business. So, it is critical that a prospective contract manufacturer quickly capture the buyer’s interest. Below are major categories of information buyers will consider when evaluating new suppliers:
- General description – A short but powerful description of the company, its focus and expertise
- Size – Depending on the application, the size of a contract manufacturer could be important
- Capabilities – The number and type of equipment, including high-end manufacturing equipment
- Certifications –Insight into a supplier’s quality systems and regulatory compliance
- Customers – Credibility that comes from name-brand customers and customer awards
How MFG.com Helps
MFG.com’s supplier profile is the place to highlight your company’s expertise, certifications and unique capabilities. Buyers have easy access to supplier profiles when reviewing quotes or searching for suppliers with specific capabilities. The supplier profile is like a resume. It needs to stand out to the reader, focus on only the most important details and not be too long. The objective of the supplier profile is to get the buyer’s attention so the buyer will consider your quote and be willing to engage in a conversation to learn more about your company.
The opening paragraph is critical, especially the first couple of sentences. If they do no grab the buyer’s attention, the remaining text will not be read. Simply put, the buyer is looking for a reason to stop reading and move to the next supplier.
The number of persons you employ is just a fact. It is more important to understand that you should spend your time pursuing buyer organizations that match your profile. For example, a three-person shop will have a very difficult time qualifying to become a GE supplier because of GE’s prerequisites: financials, quality programs, manufacturing capacity, required certifications, etc. However, other buyers may actually prefer smaller, and potentially diverse, suppliers.
This filter is usually the first one a buyer will use to identify a short list of potential suppliers. Choose only those specialties where you really excel, such as machining or molding. If a small shop lists many, vastly different capabilities, it might suggest to buyers that you outsource work. It also could undermine your company’s credibility.
Having third-party organizations that can attest to your shop’s conformance to industry standards is a critical element in building trust and credibility.
Customer awards and testimonials serve as other important ways to build credibility. Brand-name customers are best because buyers immediately understand the standards to which larger companies hold suppliers.