6 tips to negotiate better with your suppliers
Whether you’re running the latest trendy ‘café with no name’, or a full-blown manufacturing operation, you will have people in other businesses who supply you with goods or services. To ensure you set up your business to profit, you want to achieve the best price for what you buy. This is where your negotiation skills come in, so here are six tips that may help you negotiate better.
What does the product or service you’re buying cost in a retail environment? Your wholesale price should be better than this, providing you with a healthy margin to contribute to your profits.
Are you paying a premium for dealing with traditional local suppliers? Looking further afield (and potentially online) may give you an idea of the room you have for negotiation.
Be clear in your mind about your business objectives. Know what prices you plan to offer to remain competitive, and how much profit you need to achieve to match your business plan projections.
For help with drafting a business plan read our How to write a business plan article. You may also find our How to create the best pricing strategy for your business article useful.
Don’t feel the need to fill a pause in your conversation about pricing. Give your supplier the opportunity to ‘show their hand’ before you show yours.
When negotiating, you want the other person to put the first number on the table. This is called an ‘anchor’ and you can generally negotiate down from this point.
See if they will share how they currently price their product or service, to establish this anchor.
Think about all the ways you can ‘give something back’ to your supplier to reward them for giving you a good price. For example, you could praise their products on social media and talk about the good relationship you have with them. Or you could agree to feature their brand prominently in your store or on your website.
Tell your supplier about your plans. You might be surprised how much they value the positive and shareable word of mouth you generate, and therefore may factor this into a better price for you.
This is a very important gesture as it builds trust in the relationship and demonstrates that you are not a time waster.
Just like you, your suppliers want to work with people who they can trust and people who pay on time. Plus, this approach also puts all your negotiation effort on paper, as you will now have a baseline with them for future pricing.
You can even ask your supplier whether they give a discount for early or immediate payment.
If all else fails, their price is too high and they will not budge, then walk away and invest your energy in finding a better match for your business.
You will at least have gained some valuable experience in the art of negotiating price.
Successful businesses rely on good business relationships – so it can be good to treat negotiations as a partnership-building exercise rather than a haggle where each side is seeking to gain every cent of financial advantage. Always remember that both parties have to benefit from the arrangement you agree, and it’s easier to work with good suppliers than to be constantly searching for new ones.
This article is a general overview and should be used as a guide only.