When we started Technacraft, one of our most challenging tasks was to find suppliers who would take us seriously and treat our fledgling company with the respect they afforded their longer-term accounts.

In this automotive-dominated economy, too many suppliers are interested only in the million parts per year order. However, if you dig deep enough and ask enough questions, you will find people willing to work with you.

It can be as easy as picking up the Yellow Pages to locate the right vendor. On the other hand, the right company can be on the next block and you'll never know it. Until you can afford to hire a purchasing person to root out the best suppliers, keep your eyes and ears open for potential vendors. Ask questions of everyone and anyone who may know of someone who does what you need done. Subscribe to the trade magazines for your industry. And the magazines that cover industries whose products and processes are required to build your product.

Getting net-30 terms from your vendors may take a while, but it's well worth it when it happens. Your cash flow situation becomes a little less scary. As we established credit with each vendor, we were very careful to pay their bills on time, so we could use them as a credit reference for future vendors. Once we had several vendors giving us terms, we typed up a credit application form with all the pertinent information on it. Now when we desire terms from a new vendor, we can simply fax them the form.

However, in the beginning, expect to be on a COD basis with your suppliers. You can ease the cash flow problem by trying to sell to your customers on the same basis. In our market (gift retailers), it's not unusual to ask COD of a new account -- at least for the first, or the first couple, of orders. Ask around about the practice in your market. There's one thing certain -- you won't get cash terms from a customer if you don't ask for them!

When you're trying to get your product out in front of the maximum number of people, sometimes you have to give terms to important accounts. However, check their credit! Just because you recognize their name doesn't mean the company pays its bills.

Nobody cares about your product as much as you do. Things that are important to the functionality, fit, and finish of your product must be made perfectly clear to the vendor producing it for you. Leave nothing to chance. Specify exactly what you need and make sure it's in writing. Even then be sure your vendor interprets your drawing the way you intended. When you take delivery of your parts, inspect them before writing your check. The UPS driver will wait while you make sure that what's in the box is what you expect.

Use a purchase order system to buy parts or services that are critical. Specify on the order what exactly you are buying or having done. We only use verbal orders for off-the-shelf-type parts such as fasteners, transistors, eyelets, etc. Verbal orders for common items have saved us time when time is precious. Too much paperwork can obfuscate rather than clarify.

As your customer base expands and the orders increase, keep an eye on delivery times of your critical parts. Nothing is more frustrating than having orders in house that can't be shipped due to a parts shortage. Keep a record of delivery times for all parts. Ask your sales reps to give you best guesses as to expected volumes. For a new product, these truly are guesses, but until you establish some history, they are better than nothing.

If you do have a situation where deliveries will be delayed, call your customer and explain the situation. People appreciate honesty and understand that delays can occur. Just don't make a habit out of late deliveries. Remember, your reputation is being formed daily. Bust your butt to deliver in a timely fashion.

As a young company, you will be pleased when you find a supplier who is willing to work with you, give you what you need at a fair price, and maybe even give you net-30. When you find these folks, treat them fairly by paying your bills on time and giving them your repeat business. Having good supplier relations is critical to any company but I believe it is even more critical to a startup.

At Technacraft, one of our goals is to bring critical tasks in house. At the present time, we have to job things out that we eventually want to do ourselves. Because we are bootstrapping the business, there is not enough cash to purchase all the equipment needed. As we are able to bring more jobs in house, we will be reducing our dependence on outside sources as well as adding more value to our product in our own plant. This will improve our margins, which in turn will allow for more equipment purchases, which in turn will... You get the picture.

Re COD sales, cash terms -- even advance payments -- are much more available than most entrepreneurs believe. If prospects want your product and understand why you need cash, i.e., you haven't tried to snow them into believing you're something you're not (i.e., a big company), cash is available simply by asking. Too many entrepreneurs don't ask.

Second, there's danger in Edd's last paragraph. Too many entrepreneurs try to pull too much back in-house as they start to grow -- for "control", for "extra profit margin" (usually illusory), etc.

That's almost always a mistake. If the effort expended in bringing tasks in-house were, instead, expended in finding good suppliers and developing lasting, trusting relationships with them, everyone would come out ahead -- and especially the entrepreneur.

I think of Nick McKay of Helmac Products in Flint who invented the roller-type lint remover 40 years ago. He still dominates that market -- over 60% share worldwide. Yet he still buys from the same plastics molder that helped him when he was starting. Nick is expert in lint remover marketing and technology. He's perfectly content to let his supplier -- and friend -- be the expert in plastics.

Every company needs to develop and maintain a core competence -- the essential element that lets them compete in their chosen market. For a product-line manufacturer, that "core competence" is almost always marketing and sales, secondarily an (evolving) technology. Anything that takes time and attention away from improving that "core competence" is bad for the company -- and should be farmed out.

A good measure of this balance is sales per employee. In the early '70s, electronics manufacturers were doing about $25K per employee. By the late '70s, it was up to $50K, by the mid-'80s it was up to $100K, and today's the sky's the limit. There are more than a few electronic manufacturers today doing $500K per employee, and up.

The high-sales-per-employee company is lean and lithe, fast and fluid. It can instantly react to change and adapt to change. It isn't burdened with fixed assets and fixed ways of doing things. It's a "survivor" -- and the most likely to succeed.