2016-01-22 00:00:00Cash FlowEnglishhttps://quickbooks.intuit.com/in/resources/in_qrc/uploads/2017/05/Cash-Flow-Negotiating-the-Best-Deal-with-Vendors.pnghttps://quickbooks.intuit.com/in/resources/cash-flow/negotiating-best-deal-vendors/Negotiating the Best Deal with Vendors

Negotiating the Best Deal with Vendors

2 min read

In business, life is one long bargain, particularly for small and medium enterprises. While bigger brands have the advantage of size and market share, SMBs often have to rely on their powers of persuasion to score a good deal with vendors. Truth be told, size aside, negotiation is a critical skill to possess and has inspired books with titles such as ‘The Art of the Deal’ by legendary American businessman and current Republican presidential front-runner Donald Trump. So if negotiation is an art, is it something that can be learned? Or do you have to be born with an aptitude for it? It’s probably more of the former, which is good news, and comes in handy when operating in multiple transactional contexts. This article focuses on how to utilise these skills when it comes to vendor selection and vendor management. What’s in it…for both of you? The goal of any successful negotiation is for both parties to leave feeling like the bulk of their needs have been met, and that any compromises undertaken have been fair and mutual. Here is a list of elements that constitute the business-vendor negotiation process. The purpose of the vendor selection process Make sure you have a clear idea about what exactly it is that you’re trying to accomplish when negotiating with potential vendors, vis-à-vis the following:

  1. Which products and services are really essential to your business?
  2. Price
  3. Payment arrangements
  4. Delivery terms
  5. Service and maintenance arrangements (post-purchase)
  6. Product quality and value for money
  7. Cost over time/lifetime costs

Negotiating is a two-way street and hinges on both parties’ willingness to give and take. The fruits of a balanced approach to negotiating with your future vendor include a ‘goodwill bank’: a store of trust and mutual respect. This might require sacrificing a good deal in the short-term for an even better deal in the long-term. Instead of trying to come out on top on every front, see if this is a company you might want to work with in future, and let go of the desire to dictate terms. You could find yourself enjoying rebates and price reductions over the course of your relationship. Know your vendor Do your homework by researching potential vendors and their clients. Find out about their level of experience (are they new, or are they seasoned?); how big they are, and how much of a monopoly they have; and also find out what going rates are for the products and services you’re looking to buy. If the vendor on the other side of the negotiating table is a fresh arrival on the scene, or if they’re small, you would have the upper hand. Put together a crack team Once you have a clear sense of who you’re negotiating with, and what it is you’re trying to accomplish, put together the best team possible. Team members should be knowledgeable about the services/products you’re trying to score and the negotiating strategy being used. Once all this is done, it’s a matter of ‘ready, set, negotiate!’ Don’t accept the first price you are quoted: see what you are getting for it, and if there are certain features you can opt out of to bring the price down. Assign a vendor manager to handle your vendor once you’ve brought them on board. Finally, good luck!  

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

Hit the Bull’s Eye: How to Negotiate the Best Deal with Your Supplier

Negotiating a deal with suppliers in India can be tricky. With no…

Read more

Credit Card Tips for Small Businesses

When you’re moving to accept cards as a payment option, it’s important…

Read more

Cash Method Accounting: Is It the Best Choice for Your Small Business?

When you own a business, it’s common to choose between popular accounting…

Read more