Small businesses may find negotiating with suppliers difficult without the leverage enjoyed by larger organisations, but with preparation and incentives on hand it is absolutely possible to secure good deals.
1. Know the Market
Prepare yourself by researching a supplier’s market. Learn about the different players in the industry and gain an understanding of alternative offers out there. Make sure the other party knows you are familiar with the market context so you have a sound platform from which to negotiate. Don’t be afraid to shop around before making a decision.
2. Identify What’s Valuable
Know what you want from a supplier and find out what they want. This doesn’t have to be about money – think special services or payment terms. Cash flow may be more important than discounts, for example, so you may want to negotiate longer payment terms. On the other hand, you might be looking for higher profit margins, so you could seek a discount in exchange for paying upfront.
The supplier may be looking to reduce delivery costs and therefore willing to offer a generous discount for a bigger order every quarter instead of three monthly shipments. If that fits with your business, you can start from there.
3. Be a Good Customer
Maybe you didn’t negotiate a deal when you started the relationship, or perhaps you’re after a better one. Having a good track record as a customer – that means paying on time and being courteous in your dealings – will help as the supplier will have a good incentive to keep you as a customer.
4. Increase Suppliers’ Sales
Suppliers love repeat customers because it makes their job easier, so if you can promise regular business or more business, they are more likely to be open to negotiation. Consider asking for a discount for bulk buying, or offer to push more customers their way by leveraging your network, referring complementary businesses in your industry, for example.
It works the other way too – you may be able to secure a good deal because a supplier’s valued customer referred you, so tap into your network to find those relationships.
Negotiation is not about winning or losing but about finding the point at which both parties can walk away satisfied with the deal. Coming to the table informed, with a willingness to offer incentives and ask for favours, gives small businesses a strong negotiating position and a solid foundation for a healthy business relationship.
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