Many businesses that used to have multiple suppliers to choose from no longer have that luxury. In some industries, the number of suppliers has decreased to the point that buyers have no choice but to accept the price of their supplier. In other industries, there continues to be enough options for business owners to source product at the right price. Regardless of the situation your company is in, knowing how to negotiate with suppliers can prove beneficial to your bottom line.
Here are 7 tips to help you in your negotiation efforts:
- Prove you are an asset – Give the supplier a reason to want to build a relationship with you. A common approach is explaining how your business is a doorway to new markets and has strong growth potential.
- Show you are dependable – Suppliers are naturally concerned about getting paid. Make them feel more comfortable working with you by sharing your track record in the industry or providing a higher deposit.
- Know your options – Get prices from other suppliers and let your supplier know that you have obtained other quotes. This will encourage them to give you the best price.
- Never accept the first price – You should always provide a counter-offer after receiving an initial quote. In most cases, you will receive a revised price.
- Consolidate purchase orders – Suppliers like it when they receive large orders. With a larger order, you can often negotiate lower costs and even use your position to get better delivery times if needed. Many companies will use a short-term business loan to capitalize on these opportunities.
- Withhold or cancel orders when the price is too expensive – While this is not an ideal negotiation tactic, it is one that companies sometimes need to use to get the best pricing. This tactic is most effective when there are other suppliers that you could turn to for products.
- Maintain good communication – When you are attentive and responsive, you can build a good rapport, which can help you in the future.
When you want to get the best cost and service from a supplier, you need to be proactive and do whatever is necessary to accomplish your goals. By implementing the above strategies you can strengthen your relationship with suppliers while maximizing the margins in your business.