How to Negotiate With Suppliers
Big retailer Walmart has an extensive network of more than 100,000 suppliers for its stores. While your business is probably not dealing with that many suppliers, it doesn't mean you should learn to negotiate with the suppliers you do have.
Looking for ways to negotiate with suppliers? Keep reading for tips on how to negotiate to give your business the best prices and service.
Setting Objectives When Negotiating With a Supplier
First, you need to set objectives before any business negotiation. These key considerations include:
You need to determine what you are and what you aren't willing to compromise on. What is important to you? Do you need to cut costs?
You want to establish your preferred outcome—but you also need to be realistic. If you are not willing to compromise, your negotiation will probably not go very far.
Remember if you want to do business with that supplier in the future, you need to find a deal that makes both parties happy. Even you if get a good deal for the short-term, you want a good relationship in the future that may help you get better prices and other perks such as priority delivery. You can never underestimate the importance of goodwill.
- Payment terms
- Maintenance arrangements
- Lifetime costs of service or product
- Determine if product or service is essential to your business
Think Outside of Price
If your supplier doesn't want to budge on price, there is still room for business negotiation. This includes other ways to lower your expenses. For example, try to reduce your down payment or ask for a discount to purchase in bulk. You can also ask for faster shipping without additional costs.
Ask about improvements to the product warranty or increase the warranty length. You can also ask for longer terms to improve your cash flow.
See if there are any other discounts such as paying your invoices early. There are more ways to save money than the price of goods.
Don't Accept the First Offer
This is a rule for all negotiation skills—never accept the first offer. Instead, make a counteroffer or ask them for a better price during price negotiation. You can use the amount of business you are offering them and the fact that you want a long-term partnership to entice them for a better offer. Also check to see if the price includes features or services you don't need, and ask the supplier to remove them for a better deal.
Talk to Multiple Suppliers
In order to promote competitive pricing, you should talk to at least three suppliers. Let each of them know that you are getting other quotes. You should also explain that you will go with the supplier that gives you the most competitive bid.
Don't solely base your decision on price. You want to consider quality into consideration along with service and payment terms.
Sell to the Vendor
You want to think like a supplier. They also have a product that they want to sell, and they also want a partnership with you. Building trust and credibility help you determine the terms of your partnership along with favorable rates.
You want to show the supplier the value you can provide, especially if you are looking for a long-term contract. They will see you as an investment, and you will have success with these negotiations.
When you negotiate with suppliers, the vendors want to know that you will give them repeat business. If you have a track record of purchases, let them know how much business they can expect from you based on those purchases. If you are just starting out, show them your sales projection plans to show the business potential.
You also want to build your rapport. Having excellent rapport helps you negotiate better. You should be approachable, responsive, and attentive. You can get a competitive advantage if suppliers are comfortable with you.
Make Sure You Are Dealing With the Right Person
Before you start any negotiations, make sure the person you are talking to can make decisions and strike deals. If possible, ask to meet with a manager or senior salesperson with that authority. If you are a small or new business, you may have a junior salesperson that is limited on flexibility with terms and price.
If you can't get the deal you want with that person, you may have to ask to escalate the negotiation with a more senior member of the vendor's staff.
Always Have a Plan B
You should always enter a negotiation with one vendor but have an alternate supplier in mind. Don't forget to let the salesperson know that you have alternatives. If you have a plan B, you will be more confident during the negotiation.
You also have a fallback position in case the talks do not go well.
Prepare Ahead of Time
In addition to having your own objectives, make sure you do your research on the vendor. You want to learn as much as you can about this supplier and its products.
You should know your needs as we discussed above. Also, make sure you have your budget set along with the timeline and scope of your project.
- How do their prices compare
- What are their actual costs
- How do their service offerings compare
- What do their customers and reviews say
That's How to Negotiate
Negotiating with suppliers is vital to your business's success. Without them, you won't have what you need for your clients. Be mindful as you negotiate and learn how to negotiate on more than just price. Make sure you plan ahead and show how you can benefit the supplier with a long-term partnership.
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