It’s no secret that a strong relationship with your key business suppliers pays off. Building trust and mutual understanding with your suppliers can help your business negotiate long-term cost savings and boost operational efficiency. In one McKinsey analysis, companies that regularly collaborated with their suppliers showed higher growth and lower operating costs than their industry peers.

If you are running a seasonal business, you may find it tougher to sustain supplier relationships as compared to your year-round counterparts. During the off-season, you may experience long periods of decreased order volume and strained cash flow, followed by a spike in orders when peak season hits.

Year-round businesses, on the other hand, offer suppliers the stability of high order volumes on a regular basis. This can mean that seasonal buyers end up paying a premium or taking lower priority in fulfilment when the busy season rolls around.

While seasonal businesses may have certain disadvantages, you can still negotiate favourable terms and nurture supplier relationships with the right tactics. Here’s how your small business can build and sustain stronger partnerships with your suppliers:

Be transparent about your needs from the start

Finding a reliable supplier begins with communicating your unique needs as a seasonal business. By explaining your business cycle and patterns, you can narrow down which suppliers are most open to going the extra mile to align with your requirements.

As a seasonal business owner, Funding Societies’ customer Achmad Mustofa highlights the importance of coordinating with suppliers. His small business in Indonesia, Toko Hidup Bekah, sells covers and blankets for cars and motorbikes. Sales surge significantly during the rainy season, and drop sharply when the dry season arrives.

“I make it a point to provide an explanation about our sales cycle to suppliers. This ensures that the products we sell and our product sales targets are well-coordinated with suppliers to match seasonal demand,” says Pak Achmad. With such active communication, he shares that his suppliers have been very flexible in adjusting to changes in demand so far.

To start off, give your suppliers a clear picture of your business’ seasonal peaks and troughs, drawing on your sales data from previous years. You can also integrate key suppliers into your business strategy by sharing your demand forecasts and product sales targets for the year.

Proactively pinpoint and manage risks in your supplier relationships

From geopolitical unrest to adverse weather, today’s business landscape is fraught with uncertainties. When such disruptions fall during peak season, the impact on your supply chain and sales can be devastating.

Seasonal businesses can work collaboratively with suppliers to identify potential risks and find solutions that benefit both parties. For example, if you foresee supply chain disruptions in the months ahead, it might be more efficient to build up stock once you wrap up your peak months rather than waiting for the end of the lull sales period.

This strategy helps your suppliers to save on warehousing costs and allows them a longer lead time to fulfil your orders. On the other hand, this also gives you more bargaining room to negotiate favourable payment terms. In the long run, this collaborative approach will result in enhanced trust between you and your suppliers.

Secure a long-term supply agreement

A long-term contract can give your seasonal business an edge over year-round peers and pave the way to a stronger supplier relationship. Many suppliers will be happy to lock in a longer-term contract, as this helps them to mitigate their price risks and exposure.

In return, you could use the opportunity to negotiate a lower-than-average price on the materials you need, or a guarantee that prices will not fluctuate more than a certain percentage annually. Alternatively, you can opt to negotiate additional payment terms, such as extended payment terms during the low season when you’re more likely to have cash flow issues.

Another stipulation that you can consider is a contract clause that gives you priority for supply of products or services, ensuring that you have everything you need to meet customer demand during the busy season. Whatever you choose, aim to create a win-win situation for both sides – mutual respect and fairness will keep your supplier relationships thriving.

Leverage supplier financing to make prompt payments

Small businesses often run into cash flow gaps, impacting their ability to pay suppliers on time. Over a third of SMEs in our Digital Finance and Payments Behaviours Report 2023 said that fulfilling payments to suppliers or vendors was their top payables issue.

For seasonal businesses, this gets even more challenging – lower cash flow during the slow season can result in late payments on your end, while delayed payments from your customers during peak season can strain your cash flow. To pay your suppliers in a timely manner and strengthen your vendor relationships, you can consider closing the gaps with seasonal business financing.

“We rely more on financing between December and February, since corporate customers tend to pay slower during this period,” shares Hui Ling, owner of Singapore food catering business The Live Stations. “The influx of holiday orders and seasonal festivities can strain our cash flow, and having access to additional funding helps us bridge the gap.”

Supply chain financing can provide funding for you to pay suppliers on time or even earlier, while giving you an extended time to settle your balances. Another option is term loans, which provide working capital to fulfil your cash flow needs and invest in growth during peak season. By assuring suppliers that they will be paid fairly and promptly, you also gain the leverage to ask them for priority in fulfilment or even discounts upon early payment.

Turn your key suppliers into partners

The best supplier relationships aren’t just transactional – they’re partnerships where both parties are invested in each other’s success. This means taking the time to share your goals as well as learning about your key suppliers’ goals, and developing strategies to achieve them together.

During your regular meetings with trusted suppliers, carve out some time to talk about your upcoming projects and the challenges that you face. For instance, if you’re a food business in the midst of designing your menu for the festive season, your suppliers may be able to predict shortfalls in certain ingredients and recommend alternatives.  

In turn, you can brainstorm opportunities to drive your supplier’s success. For example, you can provide referrals to potential clients in another industry that your supplier is looking to expand in, or offer publicity opportunities at an event that you’re organising. By working together in innovative ways, you can form lasting partnerships and secure reliable, high-quality service for your business.

Strengthening supplier relationships with the right support

With strong supplier relationships, your seasonal business will be better-positioned to lower costs and drive growth even in an uncertain landscape. If you face a cash flow crunch, financing support can help you pay suppliers on time, manage risks, and seize opportunities when peak season hits. Find out more about which financing option can fit your needs by taking this quiz.

 

Disclaimer: The information provided to you in this blog post is intended only for general information purposes only and does not constitute legal or other professional advice on any subject matter. The materials and the information provided are not intended to be and do not constitute an advertisement or solicitation. In no event will Funding Societies be liable to any party for any direct, indirect, incidental, special, consequential or punitive damages for use of such information by you or any unauthorised third party. 

 

Dorcas Pang
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