Negotiating a deal with suppliers in India can be tricky. With no fixed retail pricing laws and ambiguous benchmarks for quality, you need to take charge to get the best deal. Every deal works on a base of mutual benefits and every business runs for profit so ensure that you don’t encroach on the supplier’s basic revenue margin.
One golden rule in India which works for any purchase is the fact that more you buy, the lesser you pay. You, however, need not be too concerned as we have a few tips lined up which will help you strike that priceless deal with your supplier!
Here are a few pointers to keep in mind before you set out to negotiate the perfect deal with your suppliers:
- Your expected profit margin
- Benchmark selling price for your product or service
- Frequency of supply required
- The valuation of the material in terms of quality and price
- Accurate delivery and payments
- Maintenance expenses and services
Keeping these in mind, negotiate a price with your supplier which suits your start-up budget. Here are a few tactics we believe will help you strike the best deal…
Know Your Own Deal:
Before you finalise a deal, the first step is to know everything and we mean everything, about your product or service and its requirements. Assess the real value of the product in your market and how often you would need in the next year.
Explore a range of suppliers and their offerings before you settle for the final one. The real value of the materials you purchase are actually what you pay since there are no fixed retail prices in the country. Try you best not to overpay for your supplies to avoid your profits getting dramatically affected.
Showcase your Knowledge:
Don’t be afraid to show the supplier that you are aware of market trends and prices. Give him logical explanations for breaking down his prices rather than tactical ones. Offer him deals basis the quantity of purchase. Understand the supplier’s requirement and negotiate a deal that hits two birds with stone for you.
You can offer the supplier a profit and get yourself an economical deal. You may need to take the help of experts so don’t be afraid to ask for help or even talk to people who have negotiated before. This will give you an insight into how the market works.
Offer Quantity and Frequency in Supply:
Every businessman wants recurring revenue and so does your supplier. Negotiate a deal with him or her based on:
- The number of products you will purchase
- How many times you will purchase them
First bargain with him or her on the price of one product, but remember not to go down so as to hit your budget margin. Once you have negotiated a price, for a single product, much below where you started, start negotiating for multiple ones.
Start out with a package for a month and asses the product quality and utility. Once they suit your needs, negotiate a price for monthly subscriptions which will further bring down the value of standalone products.
Document Your Deal:
Deals can change frequently so it is important to put your negotiation on legal paper as soon as it is agreed on. Ensure every condition decided upon verbally matches the ones on paper and hire a business lawyer to do it. Check for deliverables on quality, quantity, damage, delivery, and payment cycles – these will decide the price of your products in the market and the ensuing revenue.
Getting your products into the market is a meticulous process that requires careful planning. Finance an integral part of this production process and it is important to ensure that you do not run out of working capital.
If a vendor is involved in the line of supply between you and the supplier, ensure that the price you offer suits both the vendor as well as the supplier. This will also motivate your supplier to keep supplying you at accurate deadlines with consistent quality, ensuring a smooth business for you.