Successful entrepreneurs understand the importance of building long-term business relationships that can contribute to their bottom line. That’s why many business owners invest their time and energy into maintaining strong relationships with their partners, employees and clients. And while each of these relationships has its own set of challenges – and rewards – the relationship between business owner and supplier/vendor cannot be overlooked.
Suppliers wield great power in the business world. Simply put, a supplier’s rate impacts a company’s profit margin. So how can business owners best position themselves at the bargaining table? Obviously possessing strong presentation and communication skills are important traits to bring into the room, but negotiation skills are just as valuable, if not more.
And while many business owners consider the art of negotiation innate, it can be taught. Utilize the five tactics below when negotiating the best prices with suppliers and vendors; it could mean the difference between staying in the black or sliding into the red.
- Know how to talk the talk
Want to earn a supplier’s respect? Know the lingo. Understanding an industry’s unique jargon may come with its own learning curve, but once decoded the negotiation process suddenly becomes easier to navigate because all of the parties involved are speaking the same language.
- The first offer isn’t always the best offer
Price negotiation should be treated like a house purchase – never accept the first offer put on the table. Instead, be prepared to counter offer and bargain back and forth until a fair amount is reached. If the quote includes features that won’t be used, or if the offer doesn’t adequately reflect the amount of business the vendor will incur as a result of the deal, then request a lower price. Just be careful to not drive the price too low. That’s when shoddy deals are made and quality (i.e. customer service) is sacrificed by a vendor now trying to cut costs.
- Gather quotes from other suppliers
There’s an old adage that says “there’s nothing wrong with a little friendly competition.” The same is true in business. Competitive pricing is an entrepreneur’s best friend. Therefore, always request at least one additional quote from other vendors before negotiating with a supplier.
In fact, honesty is the best policy in this instance. Let the vendor know that quotes have been gathered from their competition, and the lowest bid will be awarded the contract. If all goes according to plan, the vendor will cut their initial, proposed cost. This is an example of competitive pricing at its best. But don’t make the mistake of telling Vendor A what Vendor B’s price is in an attempt to beat Vendor B. Sharing the fact that A is high is fine but if A’s rebuttal still is high, it’s time to either pay the higher price or give B the business.
- Have a deposit available
Sometimes in business it’s all about shaping the negotiation, and there’s no better way for a business owner to do this with a supplier than by making a substantial deposit. This gesture of good faith not only shows a vendor how serious the business owner is about making the purchase, but also how easy they are to work with. Think about it… money talks. And at the end of the day, suppliers are just like any other business, they like to get paid. From a supplier’s perspective, a large, lump sum up front is hard to walk away from. That’s why a deposit is a powerful negotiating tactic for any business owner to use to their advantage when striking a deal.
- Discover areas of mutual gain
Negotiating can be unpredictable. For example, what happens when a supplier refuses to lower their price? If this occurs, look at the contract more closely. Perhaps there are areas outside of pricing that can give both parties an opportunity to benefit from the agreement. For instance, concessions can be made to the warranty, payment terms, shipping fees, discounts on bulk purchases and more. In other words, consider everything negotiable and nothing final until the contract is signed on the dotted line.
Negotiating isn’t for the faint at heart. It takes both confidence and finesse. If you need assistance requesting a quote from a vendor, negotiating a procurement contract or securing a vendor discount, contact Lucrum Consulting. Our team is prepared to help you sharpen your negotiation skills to ensure your business receives the best supplier price in the industry.
You can find more information about how to get the best from your supplier at the Quickbooks blog about negotiation skills.