This Issue's TLDR...

• The only lesson that I took away from performing due diligence on 500+ Amazon native brands
• A hack to push through higher Sourcing Costs with Amazon?
• The KEY to a great supplier relationship

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I've conducting some level of due diligence on 500+ Amazon native and DTC brands.

Actually, if we're being precise...I've conducted some level of due diligence on 512 brands.

When you look at that many businesses, patterns start to emerge.

Good business practices, bad business practices.

Good P&Ls, bad P&Ls.

Good product categories, bad product categories.

I could probably write a 3-part newsletter series on all of the "patterns" that I've seen.

And, maybe I will.

But not today.

Today, I want to focus on something that I observed in a single brand that totally changed how I think about supplier relationships.

Due to the NDA that I signed to look under the hood at this brand, I'm of course not going to reveal the name.

I'll just say that the brand is in the supplements category and, we'll call it "Brand X".

Enjoy!

Supplier Secrets from Brand X

Like I said, my deep dive into Brand X flipped the script on everything I thought I knew about supplier relationships.

Suppliers are usually treated like vending machines. You order, they deliver. End of story. But Brand X? They made their suppliers part of the business. And it paid off...BIG time.

Here are the five things that Brand X did with its supplier, which every brand should steal:

1. Cut your Supplier(s) in on the Action

Most brands squeeze suppliers on price and call it a day. Brand X did the opposite. They gave their key supplier (Supplier X) a slice of equity. Yeah, real ownership.

What did that get them?

Faster production, priority lead times, and price breaks (pricing was pegged to Supplier X's highest volume customers, plus 5%).

Why did Brand X do this?

Because now Supplier X had skin in the game. As Brand X grew, Supplier X won, too.

How to Steal This Move:

• Offer warrants, profit shares, or even a sliver of equity to your most important supplier.
• Frame it like a partnership, not a handout. "We're scaling fast, let's win together."

2. Make Suppliers Your R&D Department

Suppliers know what's trending before you do. They work with tons of brands and see the hits and the flops.

Brand X tapped into this by pulling Supplier X into product development early.

The result?

They launched innovative formulas and packaging that hit the market first. That kind of speed kills the competition.

How to Steal This Move:

• Don't just send suppliers a product brief. Ask them what's hot. What ingredients are blowing up? What are other brands screwing up?
• Bring them into brainstorming sessions. Make them feel like part of your product team.
• Use their know-how to shortcut R&D and get to market faster.

3. Get Your Suppliers to Fund Your Growth

This one blew my mind.

Brand X didn't just get good payment terms; they got Supplier X to cover some launch costs.

Promotions, initial retailer shelf fees, even some marketing dollars.

Why did Supplier X agree?

Because Supplier X wanted Brand X to win (see Point #1 above). It meant more volume for Supplier X in the long term and higher value on its stake in brand X.

How to Steal This Move:

• Don't just push for net-60 terms (though you should). Ask if they have co-op marketing dollars or launch support funds. You'd be shocked what some suppliers will cover.
• Frame it as, "Help us crush this launch—you'll benefit when we scale up reorder volume."
• The worst they can say is no. And often, they won't.

4. Flip Cash Flow in Your Favor

Working capital is everything, right? Feels like I talk about this point at least once a month in this newsletter.

Brand X hacked this by syncing supplier payments with retailer sell-through rates. They didn't pay upfront. They paid after product was moving. That meant more cash in their pocket when they needed it most (during growth surges).

How to Steal This Move:

• Push beyond standard terms. Pitch flexible payment schedules based on product sell-through.
• If you're rolling out to a major retailer, ask the supplier to align payment timelines with retailer POs. "Let's get paid when we get paid."
• It reduces risk for you, and savvy suppliers get it.

5. Treat Your Supplier Like a Market Spy

Suppliers see everything. Brand X leaned into that.

They treated their supplier like an inside source on the market. Competitive pricing? Retailer performance? Which brands are killing it (or dying)? The supplier had the tea (as the Gen Xers say).

How to Steal This Move:

• Schedule regular supplier check-ins, but don't just talk production. Ask about the market. "What are you seeing?" "Who's growing fast?" "Any big shifts with retailers?"
• Suppliers love being treated like experts. They'll open up if you ask the right way.
• This kind of intel can shape your strategy before your competitors see what's coming.

The Bottom Line:

Suppliers aren't just vendors. They can be your secret weapon. Make them part of your team. Cut them in, ask for their advice, get creative with terms, and let them help you scale. You'll not only get better pricing; you'll get a partner who wants you to win.

And when you win? You scale harder and faster than the brands still treating their suppliers like vending machines.

Stop thinking transactions. Start thinking partnerships.

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Has anyone else tested this?

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FYI, ~15 months later, this interest rate differential -- and negotiation opportunity -- still exists.

As of the beginning of March, the China/US 10Y Bond Yield Spread is -2.40, meaning:

Debt in China is 240 basis points cheaper than in the US (for 10-year durations).

The spread compresses for shorter term debt, but it's still cheaper in China.

Sean Frank @SeanEcom 2024 tip of the day, day 1: Interest rates in China are about half that of the west. If you do business in China, ask your partners for aggressive payment terms. Them holding the debt is cheaper than you using a line of credit. 10:53 PM • Jan 1, 2024 2 Retweets 133 Likes Read 16 replies

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This 60-second Short punches well above it's weight class in value.

On its face, it's a great story about reducing investment cost on a new product.

But when you zoom out, there's a more profound lesson:

Great relationships -- business or otherwise -- are rooted in a mutual understanding of needs, motivations, and obstacles.

The key to making any deal happen is by figuring out where your counterpart's needs, motivations, and obstacles overlap with yours.

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What are the characteristics of a "good" seller?

I suppose the answer depends on what you, as a buyer, want from the seller.

Does your investment thesis require the seller/founder to continue to be involved in a meaningful way?

If so, a "good" seller is probably one that 1) genuinely wants to build with you and 2) is someone that you would want to endure the rollercoaster of entrepreneurship with.

Or, does your investment thesis assume no future seller involvement after a transition/integration period?

If so, a "good" seller is probably one that lays all of their cards on the table, earnestly helps with the transition, and then disappears and doesn't meddle (even if they don't agree with your management decisions for "their" business).

Point is..."good" is facts and circumstances based.

Clint Fiore 🦬 DM for Biz Deals @ClintFiore My favorite Sellers: - are motivated by a legitimate, major personal reason they MUST sell (i.e. not just open to selling if they can get the 'right price') - have been treating their business like an asset for years (i.e. excellent books and not like a personal piggy bank or… https://x.com/i/web/status/1894719920023409029 1:3 PM • Feb 26, 2025 2 Retweets 25 Likes Read 5 replies

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