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A business owner negotiating with her suppliers
Running a business

How to negotiate prices with suppliers

Proactive, early communication is key to negotiating a reduction or payment plan for your rent loans or other expenses.

Remember, your vendor is under no obligation to work with you on rent arrears, loan payments, or other financial obligations .

Steps to follow when writing a price negotiation letter

From keeping your cool and remaining friendly to clearly stating your ideal outcome, there are a few steps you should follow when writing a price negotiation letter.

  1. Attach any relevant, useful or required documentation to your letter. This can be a good way to back up any claims you made in the letter. You should also keep copies of all correspondence.
  2. Keep your tone polite and professional throughout the letter, and remain as simple and concise as possible.
  3. Explain the situation. This is your chance to talk about why you are asking for a payment reduction, relief or plan. 
  4. Suggest a clear alternative. This is where you should spell out your ideal suggested outcome, whether it’s a temporary payment freeze, an alternative payment plan or you would simply like to cancel a standing order for the time being.
  5. Ask about next steps. Is there a fee for arranging the requested changes? Do they want to have a phone call to discuss a solution?
  6. Include an amicable sign-off. This can range from thanking them in advance for understanding your position or commending them for their services over the years, to simply stating that you look forward to hearing from them. Some people even include their phone number here so that the recipient can reach them directly if they have any questions.
  7. Attach any relevant, useful or required documentation to your letter. This can be a good way to back up any claims you made in the letter. You should also keep copies of all correspondence.

How to negotiate prices with suppliers

Knowing how to negotiate with suppliers is important. Here are some more general pointers to keep in mind when negotiating with vendors:

1. Sell yourself as someone who will give them a lot of business

Suppliers are just like any other business owner: they want to sell as many products as they can and they appreciate the customers who will help them reach that goal. When negotiating with suppliers, make sure they know you are someone who will give them repeat business over the long term. If you have a track record of past purchases, let them know how much business they can expect from you based on those purchases. And if you’re just starting out, provide them with a sales projections plan that is based on logic and research.

2. Think outside of the price box

If the supplier won’t budge on price, you can still negotiate for other things that will help lower your expenses. For example, you can negotiate to reduce the amount of your down payment, for a discount when you purchase in bulk, for faster shipping without additional expense to you or for improvements to the warranty, such as its length or comprehensiveness. You can also ask for additional discounts when you pay your invoices early.

3. Talk to multiple suppliers

In order to encourage competitive pricing, talk to at least three suppliers and let each of them know that you are getting other quotes. Explain to them that you will go with the supplier that offers you the most competitive bid. Don’t forget to take quality into consideration when considering the bids.

4. Offer larger deposits for a bigger discount

Suppliers are concerned about their accounts receivable just like any other business owner, so another way to secure bigger discounts is to offer large deposits on your orders. If the supplier knows they will receive 50 to 60% of your payment up front, you will increase your bargaining power, and they may be more likely to cut you a deal on the prices.

5. Don’t accept the first offer

The rules are the same when dealing with a supplier as they are in any business negotiation, and the most basic rule is to never accept the other party’s first offer. Instead, you can issue a counteroffer or ask them to get back to you with a better price. You can justify this with the amount of business you’re offering to give them, the fact that you want a long-term partnership with them, or because the price includes services or features you don’t intend to use.

6. Consider transferring all your business to one supplier

Suppliers love business owners who order a lot of products from them, and oftentimes those people get larger discounts and other perks from the supplier. If you’ve been giving your business to multiple suppliers, consider transferring all of it to one company – but before you make the transition, call the supplier and talk to them about increased discounts in exchange for all of your business.

7. Be someone suppliers want to do business with

It doesn’t matter how much business you give your suppliers – if you’re a problem customer, you may not get the best deal because it’s too much work to do business with you. It’s important to maintain good supplier relationships by remembering that while they need you as a customer, you need them too. Be sure to pay your bills on time, maintain open communications, and treat the relationship as a partnership where both of you get what you need.

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How to negotiate price with suppliers via email: Samples to use

We have created a few letter samples for price negotiations with suppliers that you can use during the coronavirus pandemic to help you communicate with landlords, lenders, banks, insurance companies, vendors, suppliers, and others.

They won’t be suitable for every situation, so please seek legal advice if you need to.

Sample letter to bank, financial institution or insurance company to request payment relief

Date: <


To <>,

I’m writing to make a request regarding my <>, account ending in <<xxxx>>. I am temporarily unable to make my <> payment due to the mandatory shutdown of non-essential businesses. Even though I cannot <>, I am doing what I can to protect my business. I have contacted the relevant agencies for government assistance and grants.

I am asking for <>. I am committed to making lower payments and maintaining my agreement with you.

Please let me know if there is a fee for arranging these term changes.

Account details

Current loan: <>

Name of account/loan holder: <>

Branch address <>

Account number and BSB number: <>

Please contact me if you require any further information.

My telephone number is <>.

Yours sincerely,


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