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Soliciting Suppliers

Dear Advisor:

We will be celebrating the 50th anniversary of our family business next year and are undertaking preparations to celebrate the occasion. Some family members suggest we solicit our suppliers for monies for an employee scholarship fund in honor of the occasion. Others feel that doing so is sort of "strong-arming" our suppliers. What do you think?
 

Dear Reader:

Great question. The answer, in part, rests with industry custom. Do you and your competitors regularly solicit suppliers' donations to the company summer picnic, to pay for advertisements in the company's catalogue, etc? If so, a 50th anniversary scholarship fund is part of business. And 50th anniversaries, or their equivalent, certainly don't happen all the time.

On the other hand, much depends on your company strategy and philosophy. Some recognize that such donations come at a price: Either a quid pro quo or in a slightly higher than market price, over time. If the company wants to reinforce the "low cost producer" strategy with both its suppliers and its employees, it may pay not to seek or accept such donations.

From a family perspective, it's probably wise to do as little of this activity as possible. Industry practices are evolving to less and less donations. In the next generation, some family will likely be in the business and can enjoy such favors, while other family will not work in the business and may take exception.

In sum, we find the practice of seeking favors from suppliers on the wane, in general, more a product of the entrepreneurial generation and less appropriate into future generations.

-- The Advisor

 

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