I was talking to a new restaurant owner not long ago, and he was very proud of the system that he had for finding the best deals from his food vendors. He explained how he talks to all of his vendors each week, has them submit bids, fills out a spreadsheet with updated pricing, and then splits up his purchases line-by-line. Based on the story that he told me, I can only imagine that it takes a few hours each week to find the best deals on all of the items that that restaurant needs to run: chicken, lettuce, etc. While the timing wasn't right to disagree, I do in fact disagree with his system.

I've worked for several large companies throughout my career, and all of them had one thing in common. They all worked with a couple hand-picked, and contracted vendors. You see, the companies that I worked for realized that it was best to review pricing once per year, and then pick the vendor with the best mix of service and price, and then get back to focusing on running our own business. A mentor of mine that I worked for years ago used to say, "You can't save yourself to profitability", and he was exactly right. 

Let's say you are looking at paper costs and want to buy a cheaper disposable napkin. You could hunt around each week and find out which company has the best price in the market for napkins, but in the end you're still going to have to buy napkins. It's impossible to bring the cost to zero. And while you are hunting around, burning your time, and comparing costs, what are you really saving? It's quite possible that any cost savings that you uncovered were completely devoured in your time spent, or the fact that you needed to drive to pick-up the napkins instead of getting delivery. Not to mention the fact that while you were crunching numbers there may have been food quality issues, service issues, or worse that weren't addressed because you were looking at a computer screen.

There's another issue with this system too: none of those vendors that your squeezing are really giving you their best price. And since there isn't a contract between you and your vendor, there probably aren't any limits on what percentages the vendor can raise prices. This can become extremely costly when the market price spikes on a particular item like coffee, chicken, beef or bacon (as is expected to happen next year in 2013).

You really can't save yourself to profitability. You can only cut so much. I propose that a better strategy is to "shop" vendors once per year and then sign an agreement with whichever vendors you choose. Then get back to work on things that really do improve profitability like a smart marketing plan, excellent service, a quality product delivered consistently, and building strong relationships with your guests and your community. 

Over the past few weeks I've seen and heard a bunch of advertising promoting "Small Business Saturday" on November 24th. The event, originally started by American Express in 2010, promotes shopping at brick and mortar small businesses in the local community, and was meant to offset the two other heavy promotional events of national retailers: Black Friday and Cyber Monday. The question I have is: shouldn't every day be "Small Business Saturday"?

I live in Sheridan, Indiana, a community of just 2,667 according to the last census. We have a lot of small businesses here, and I try to use them as much as possible. It's true that sometimes it's more expensive to shop in Sheridan, but if I want the convenience of driving four blocks to the grocery store for milk or eggs on a Saturday morning, then I need to support the local grocery that sells those items. Sure, I could get both the milk and the eggs for less, sometimes substantially less, if I go to the other grocery chains just a few miles away, but then eventually our little grocery would probably disappear.

I was in a meeting the other day with a small business person, and was stunned when he mentioned that he was using a well-known online company for the printing of business cards and letterhead. This person runs a local small business, but doesn't buy locally himself. When I asked "why" his answer was, "Too expensive". I think he's making a mistake.

It's obvious to me that if you want your local community to shop (or eat) at your establishment, then you need to return the favor. Now I'm not saying to ignore the cost of locally sold products; cost is always a factor. What I am saying is that it is vital to the success of any small business to support the community not only through philanthropy, but also through good old-fashioned commerce. "I'll shop at your store, if you shop at mine." The increased cost of buying locally will hopefully be offset by increased revenues from other local customers. And even if it doesn't completely off-set, a bit of community "good will" can never hurt either.

And while we are talking about it, I think that shopping local starts by joining the local chamber of commerce. Some businesses don't see how the chamber can benefit them, but it all comes down to one word, "relationships". That's what "Small Business Saturday" is really all about - starting and maintaining relationships. People do business with who they know and trust, and small businesses need to build those relationships to increase business and stay in business.

So...where do you get your business cards?