When is the last time you renegotiated pricing with your suppliers? It’s one of the best ways to decrease your expenses so you can realize more profit in your business. As they say, everything is negotiable, but you should be prepared before you go to the bargaining table if you want to get the best deal. Here are seven tips that can give you the upper hand.
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. In addition, if you request and are granted longer terms, you will improve your cash flow. 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 percent from you up front, you will increase your bargaining power, and they may be more likely to 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 counter offer 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 product from them, and oftentimes those people get deeper discounts and other perks from the suppliers. If you’ve been giving your business to multiple suppliers, consider transferring all of it to one. 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.
Negotiating with suppliers doesn’t have to be difficult, but it does pay to have a plan before you approach them. Follow the seven tips above to increase your odds of walking away the winner.