Sep 24, 2022

SaaS Vendors Aren’t the Enemy…and why you should learn to love them

I just came back from SaaStr last week and was struck by the huge amount of ‘long tail’ solutions there are, for every kind of solution to business problems. Booth after booth was a new company doing X to solve Y problem. Lots of these companies I had never heard of before, but they were all solving very legitimate problems in SaaS Businesses today.

Like it or not, the success of your business depends on vendors. We all depend on hundreds of vendors to run our businesses. Especially if you’re in SaaS, then you will end up working with a lot of vendors. Vendors are a necessary evil - but I think you need to think of them differently. They encourage new development in your line of business and ensure you can meet your targets for revenue and profit. They are at the center of many of your organization's operations and initiatives. You might not realize how crucial it is to effectively manage your interactions with them. Previously, procurement was just the division that was responsible for making purchases of products and services. However, today, you should think about including procurement in your overall business plan and strategy. You should be employing a systematic approach to effectively manage your vendors if you want to get the most for your money and from their expertise. This will have a wide range of advantageous effects.

What purpose does a vendor serve?

Making the choice to start your own business is important, but it also brings risks. Being your own boss and owning your own company is a rewarding objective to realize, but it shouldn't be the primary motivation for starting a business. There are a lot of factors to take into account, such as whether you can manage your cash flow effectively and whether buyers will actually purchase your product. What platforms will allow you to advertise your business to gain viewers and customers that will purchase your product? Will you be successful or not? And most importantly, how will you find a reliable supplier who will support the expansion of your business in your niche?

I came to the conclusion that in order to run a successful business, we also need to adjust our perspective such as believing that vendors are the enemy. Many startups view their providers as entities or ‘things’ they must interact with. And what we've discovered—and what many astute businesses have discovered—is that by partnering with top-notch vendors, those businesses may help to determine whether they succeed or fail. Despite the fact that many of us despise dealing with suppliers and vendors, they can truly change things. At the end of the day, these businesses want to succeed with their customers as prove their product does what it says.

The challenging part of this is that as a start-up expands and does any type of publicity, the founders tend to be inundated with offers and pitches and a ton of emails and phone calls saying things like:

"Hey! This is who we are. Please work with us!”
“We are amazing. Buy our stuff!”
“We can be your best provider. We can help you grow. Get a demo now!”

But does this really help when it comes to selecting a vendor?

These kinds of pitches make it very hard for the founder to understand who is better, who is best, and who is worst. And, choosing the right partner for your business can be difficult and exhausting. Difficult and exhausting in the sense that there are lots of factors that we need to consider like conflicts inside the organization regarding issues of authority, equity, and workload, as well as the competition of vendors around you. For your organization to operate at its peak, it's critical to learn as much as possible about any business partner before entering into a partnership outside of the company. With this, the founder should do some research online, look at reviews, ask their peers, and get demos, and test the waters before handing over their hard-earned cash. But that’s a lot of time and energy for just one vendor. What if there are 4 vendors for every solution you’re trying to fix?

What precisely are we (Proven) trying to do?

As a business, we are trying to make the process of finding a great vendor simpler for you by promoting peer knowledge across private networks that you belong to (like a VC or PE firm), by assisting businesses to communicate with one another about their vendor experiences, and by sharing reviews and similar information to help you understand the real truth behind the vendor stories. By giving you, the founder, access to all this data, it will hopefully make it much simpler to select a high-quality vendor (and get a great deal too) rather than simply choosing the first that comes along.
We love reviews, but they only tell a very limited story. We know many review companies motivate buyers to give reviews by giving out gift cards, ect, so they can’t always be trusted. Proven works with the leading VC firms to provide a safe space for founders to connect with each other, learn about deals, discounts and perks, but also get private data about vendors.

Think about the common CRM that everyone needs to run their business. It doesn't matter if it's a big business like SalesForce, a little one like Pipedrive, or a medium company like Hubspot. Since a startup is constantly evolving, you need to think about the long term. Should you buy the cheapest thing now, only to rip it out in 2 years’ time?  Sometimes you need something right away, and you buy the product that’s good enough and cheap enough. But keep in mind you’re going to get stuck using this product for years. As a startup, certain tools will work now for you, but as you grow you realize you need to transition to a bigger or better product. The product you choose should allow you to adjust to changes over time.

It can be very beneficial to work with extremely high-quality vendors who understand the industry and understand best practices, and how things will work, they will be able to share case studies, and they have a lot of experience in the industry because they have worked with a lot of start-ups in the past. 

Businesses must cultivate their vendor relationships in order to reap the advantages mentioned above. When correctly implemented, suppliers can help grow your company, a buyer might look at acquiring you if they know you’re using the best tools and platforms to run your business, and partnering with great vendors can really help you to understand the business you're getting into. Remember, you might be getting into bed with these guys for years, so choose carefully!

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