If for no other reason than expanding your business model to include new types of offerings, you will probably add new suppliers from time to time. In addition, sometimes suppliers go out of business or are unwilling to make necessary changes to improve their and your business models. In other instances, your rapid expansion may outstrip the quantities that current suppliers can provide.

Regardless of the reason, working with part-time and nonprofit suppliers can add breakthrough resources for reducing your and your stakeholders' investments. Let's start by looking at part-time suppliers

A break-even analysis encouraged me to describe for you the investment-reduction benefits of working with part-time suppliers. In that analysis, I compared the costs and investments of someone working part-time from home in a new business while holding a full-time job, with instead setting up separate premises and working full time for a new business. There was a large increase in investments (as well as operating costs) associated with shifting from part-time income supplementation at home to full-time work away from home in a new enterprise.

One of the cases I studied was for a computer consultant who served other small businesses. This man had a good-paying job at a local investment company, a job that kept him busy about fifty hours a week. Because he was young, and had lots of energy and ambition, the computer consultant was willing to work another ten to fifteen hours a week for his own business.

Because the young man's employer required him to work at home sometimes, he already had all the necessary equipment, Internet connections, and software for the consulting business. To serve a small business client added neither any investment nor any costs.

Because many of his benefit needs (such as health insurance, retirement plan, and so forth) were covered by his full-time employer, the computer consultant only looked for the part-time business to yield the same after-tax income per hour as did his full-time job. As a result, his small business clients could hire him at a much lower cost per hour than his full-time employer was paying. If the small business clients were located on the other side of the world, he was available during the daytime where they were, which was almost as good as having him working part time on their payrolls. In addition, his employer paid for the computer consultant to receive lots of training, something that small business clients benefited from at no additional cost to themselves.

While not all part-time suppliers will offer as low prices and lack of investments as this computer consultant did for his clients, the case for working with part-time suppliers is often not too much less attractive than this example. If the part-time suppliers operate in a low-wage country, you add that benefit to buying their time at a large discount from the full hourly cost of someone in a high-wage country.

Such cost and investment advantages become more significant when you choose a business model (either by the way you organize the work or how customers are served) so that lots of part-time suppliers can provide a substantial percentage of all the work you need done. For instance, if you wanted to use lots of part-time suppliers to automate your processes, each one could do just a few bits and pieces of the project while an independent part-time supervisor coordinated the virtual team.

In other cases, tasks such as twenty four hours a day, seven days a week customer service could be parceled out so that individuals could sign in from their computers and be paid on a piecework basis for whatever work they do.

You may be thinking that approach is fine for activities that aren't very capital intensive, but are wondering what can be done if you need someone to use expensive equipment. The part-time supplier can have an advantage in such circumstances, as well. Most companies only operate one work shift, which means that their equipment is idle for fourteen to sixteen hours a day. A part-time supplier can often contract with his or her full-time employer to use the equipment during the evenings and early mornings. When such equipment sharing occurs, the equipment cost may be minimal compared to the full investment or lease price.

I experienced why it can be an advantage to work with part-time suppliers when I contracted to have the cover designed for a book. Because the quality of cover designs doesn't seem to relate to the cost but, rather, the talent and experience of the designer, I normally pay as little as possible while seeking the most capable person available. In this instance, I had met one of the best book-cover designers in the United States, and I thought it would be worthwhile seeing what he could do.

I was pleasantly surprised when the designer quoted me a fee that was only about 10 to 15 percent of the amount that top independent book-cover designers usually charge. He also made himself available to work with me on the assignment during the business day while at his full-time job with a local publisher. Where an independent cover designer will normally produce, at most, three designs to choose from, this man did more than twenty-five designs. And he produced by far the best cover that anyone had done for me. It was a pleasant surprise to find that I could access that kind of talent on a tiny budget.

I suspect that part of the reason I got such a good deal was due to his interest in the project. As a part-time supplier, he could afford to put extra time into my job because it pleased him... without risking his family's livelihood. I'm sure his employer, by comparison, expected a certain number of book covers to be completed every week or the company would have replaced him with someone who would meet their expectations. It also may have been enjoyable for him to work without any production pressure. Since I was in no hurry, he could play with things in a way that he normally could not with new books.

Part-time suppliers have the opportunity to become more effective through specialization without experiencing the emotional or physical fatigue that can come from doing too much of one thing. Part-time suppliers can pick assignments, as the book designer did, that are quite different from their normal tasks so that the work feels a little like recreation... for which payment is received.

The importance of part-time suppliers is so significant that I want you to be aware of its corollary: Your part-time suppliers should also use part-time suppliers. In the case of the book designer, for instance, working with a part-time photographer to shoot a special cover image cover could have helped to create an even better result at little added investment.

Let's look next at nonprofit suppliers. My observations are based on a case history. A woman had been a world-class dancer until an accident cut her career short. Not sure what to do next, she took a job working for a government agency (which bored her to tears) and began part-time teaching for various dance studios. Tired of her government job, she became a full-time nanny (taking care of youngsters in their family's home during the days) and taught dancing part-time in the evenings and on weekends. Her income was low, and her life was difficult.

She learned about growing revenues, reducing costs, and eliminating investments. A key challenge was where to hold her classes. She couldn't afford to buy a building, and rents were astronomical for space that could be used to teach dancing. Dance studios are usually quite busy serving their customers during prime hours, and they don't want to rent to a competitor. What could she do?

She looked into renting space in churches. These houses of worship were often the biggest and most beautiful of the older buildings in the area, and they were usually empty except on weekends. To help cover the costs of heating and upkeep, many churches rent space to reputable people for activities that benefit the local community. Teaching exercise and dance classes seemed to fit within what a church would welcome.

She was delighted to find a perfect spot about five minutes away from where I taught my class. A space like this one in Boston would have cost about $800,000 to purchase. Even the least expensive space she could find in not very convenient locations charged $5,000 a month for rent. She lacked the money to make a security deposit for such space.

The church happily offered her up to sixteen hours a week during the hours she wanted to teach. The rental rate was $25 an hour. As a result, her monthly cost for rent was only $1,700, and she didn't need to provide a security deposit or to make any investments in leasehold improvements.

The church offered another important advantage: It was filled with people taking classes from morning to night, six days a week. All of them could see that she was offering exercise and dance instruction there. If they wanted help with dance or exercise, most of those who attended other classes or church services there would find the location to be convenient. For some, it would be possible to take two unrelated classes back-to-back during the same evening.

The business model also offered another important advantage: Instead of spending money for space that would be empty most of the time, she would only have to rent what, where, and when she needed space. If she could add a class that would be highly profitable in another community, then she could rent space in a church in that community for just the hour or two a week she needed to offer such a class. A highly profitable, low-cost, minimal-investment business model was born.

Let's examine several reasons why using a nonprofit organization as your landlord may be a very low-cost and low-investment choice:

1. Nonprofits usually receive financial donations that subsidize the cost of all their operations.

2. Nonprofits receive donations of volunteer time to do most of their activities, which further reduces their operating costs. In some cases, volunteers even construct buildings... further reducing investment costs.

3. In many countries, nonprofits are also exempt from sales, use, property, and income taxes. As a result, nonprofits can charge less for rent and receive more cash after taxes than a for-profit organization that has to pay such taxes.

4. If a nonprofit organization's leaders decide that they like what you do, they can choose to subsidize your activities and to offer you their premises or supplier resources below their own low costs.

5. Customers may favor your organization because you are using the facilities of a nonprofit organization that they approve of. As a consequence, customers may be more willing to buy and to pay higher prices when considering your organization's offerings.

Now let's look at an extreme example of the advantages that nonprofit suppliers can provide. Wealthy people often find it more attractive to donate their land, buildings, and other valuable resources to nonprofit organizations rather than to sell them. Such a decision is normally motivated in part by a weak market for selling such items, some reduced costs from obtaining income and estate tax deductions for donations, and a desire to help the nonprofit organization prosper in some new way. When such motives and circumstances exist, the nonprofit organization may enjoy very low costs for its newly acquired and mostly unused properties.

I saw many examples of such advantages while I was taking classes to learn to meditate. Each class was held in one mansion or another. These were not only gorgeous buildings, but some were also surrounded by beautiful grounds. Each mansion had been a gift to the meditation-teaching organization. Whenever I stayed overnight at such facilities, the cost was very low... often lower than for a hostel, even though the facilities compared favorably to what you would pay many hundreds of dollars a night for in Europe. Although I never looked into it, I'm sure I could have leased some land or buildings for business purposes from this organization on a highly favorable basis. If I had tied what I was doing on the premises to something that would have greatly helped the meditation-teaching organization to add more students, there might have been no facility charges at all.

Many times for-profit organizations perceive that they would gain great strategic advantages by having a sister organization that is a nonprofit entity. The for-profit organizations often go to great lengths to establish such arrangements. It may be much more attractive for for-profit organizations to seek, instead, supplier arrangements with existing nonprofit organizations that deliver major cost and investment savings.

What is the key point of working with part-time and nonprofit suppliers? Redesign your company's business models, methods of operating, ownership of facilities, use of facilities, breadth of product line, and offerings so you can employ part-time and nonprofit suppliers to help reduce investments by 96 percent for you and your stakeholders compared to what these investments are now in ways that will also help make your organization and your stakeholders more successful, profitable, and cash-flow positive.

Author's Bio: 

Donald Mitchell is the author of Business Basics which provides 52 lessons in how to create a new enterprise that will have 400 times more profit and 8,000 times more cash flow and value. To learn more, you can read excerpts from the book at: http://www.amazon.com/Business-Basics-Customers-Investments-Stakeholders...