In the business world negotiation is part of the game. Whether you’re a new startup or an established business it is important to negotiate the best price. As part of a continuation to our previous post “Controlling inventory costs leads to healthy profits” we discuss the importance of managing your inventory and supplies expenses.
When dealing with vendors or suppliers it is important to think in terms of “strategic partner” to achieve a mutual business relationship.
1. Be marketable. You and your supplier are both in the business to sell. You should consider selling yourself as a business with a promising future to your supplier. Let them know that you are someone that will give them repeat business over the long run. For example, if you’re a new start-up you can send them a sales projection plan to try and negotiate the best deal possible. Or if you’re an established business then you probably have a track record of past purchases which you can use to your advantage in negotiating a fair price.
2. Ask for promotions. Don’t be afraid to ask for promotions on your first contact with supplier. Most businesses have some type of promotion or incentives. Every supplier or vendor is in the business to sell as much as possible. They’re in the wholesale business, so it is to their best interest to give you buying power so that they can move their product out of storage. If the price being negotiated is still not fair to you then consider advertising allowances. Most manufactures have advertising programs/products that they can offer you for your store front. This will help save you money on design and printing services.
3. Shop around. Just like anything else in life, whether you’re buying a car or a house normally people shop around. The same thing with suppliers. To promote competitive pricing, talk to at least 3 suppliers and let them know that you’re getting quotes. Talk to recognized brand suppliers and others with low profile suppliers and compare pricing, but most importantly consider quality. There is no point in getting a good price when the quality of the product is bad, unless you don’t plan on staying in a business for long.
4. Don’t be problematic. It doesn’t matter how much buying power you have, but if you’re a problem customer, you may not get the best deal. Let me remind you of the term “strategic partner”. Treat your supplier like a partner. Negotiating is not always about being aggressive and unfair. Make sure to make payments on time, have communication and respect.
5. Paper talks. ALWAYS make sure you have any agreement or offer from your deal in WRITING, and make sure it matches the verbal agreement. Never sign or agree to anything before reviewing all the final terms. Most of the time suppliers will take card payments through the phone but it’s better to have them e-mail/fax you a payment authorization form with the terms of the deal.