How to Exit a Vendor Relationship Gracefully

by Rebecca Lake

Breaking up is hard to do, particularly when it involves a supplier that you've maintained a lengthy professional relationship with. Sometimes, however, it's necessary, to ensure the continued growth and success of your business.

When Ending a Vendor Relationship Makes Sense

Every situation is different, but there are certain red flags that can signal when a vendor relationship is in trouble. For example:

  • Your vendor is slow to respond to phone calls or emails
  • Supplies or services aren't being delivered on time
  • The vendor can't answer your questions
  • What's being promised doesn't match up with the product or service they're delivering
  • You're doing tasks yourself that you're paying the vendor to handle
  • The vendor is rude or they've bad-mouthed you to other people in your network
  • The cost of doing business with a particular vendor is putting a strain on your budget
  • These are just a few reasons why it may be time to make a change

When making an exit is the right move, planning your strategy beforehand can minimize the potential for any negative fallout.

Formulating Your Game Plan

Once you've decided that a particular vendor is no longer a good fit, taking action is the next step. There are several things you need to do to ensure that the process goes as smoothly as possible.

1. Review Your Contract

Before you move forward with ending a vendor relationship, it's important to take a close look at your contract. If the vendor has included a termination clause in the contract, you'll need to make sure that you're adhering to the guidelines that have been laid out.

In some instances, a vendor may impose a penalty for terminating a contract early. If any of the wording in the contract is vague or there's no clear reference to termination, it may be helpful to have an attorney review it so you understand what your rights and responsibilities are.

2. Document Your Reasoning

Assuming that your contract does bar you from terminating your relationship with the vendor at will, the next step is building your argument. Essentially, you want to document what you feel has gone wrong and the more detailed you can be, the better.

This does two things. First, it shows the vendor that you're not making the decision on a whim. When you can point to specific dates or incidents where something they did had a negative impact on your business, it makes it more difficult for the vendor to dispute your claims.

Second, it gives them an opportunity to acknowledge any shortcomings on their part and attempt to make things right. If the vendor didn't realize that the relationship was on shaky ground, they may be willing to go the extra mile to make it up to you. In some cases, your contract may require you to give the vendor a certain amount of time to get things back on track.

3. Give Notice with the Current Vendor

After you've spent some time documenting your reasons for making a change, you have to let the vendor in on what's happening. How you opt to share your decision depends on what kind of communication you have and the overall tone of the relationship.

When you're on reasonably friendly terms, scheduling a face-to-face sit-down gives you an opportunity to explain your reasoning. If things between you and the vendor have become volatile, on the other hand, a carefully worded email or letter may be more appropriate. Regardless of which route you choose, the most important thing is to keep your emotions in check.

4. Find a Replacement

Before you can completely walk away from a vendor, you should be scouting out potential replacements. Otherwise, you could hurt your business in the short-term if you're not able to get the supplies, products, or services you need to maintain day-to-day operations.

When vetting potential candidates, think about what it is you want from your new vendor that you weren't getting from the old one. For example, do you need a vendor that offers different invoicing terms? Are you looking for a different pricing structure? Understanding what your expectations are can help you avoid déjà vu with your next supplier.

Ultimately, the decision to cut ties with a vendor comes down to knowing what's going to be best for your business in the long run, and then implementing a plan to make the transition to a new vendor as smooth as possible.

About This Author

Rebecca Lake has been writing about small business, investing and real estate for nearly a decade. Her work has been featured on a number of online outlets, including The Huffington Post, Fox Business, CBS News and the Intuit QuickBooks Small Business Center.


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