12 Tips to Help You Negotiate Better Deals with Suppliers

Whenever you buy anything significant for your business, there is almost always room for some negotiation. From your raw materials to your office supplies, you should be able to get better terms and a lower price than is first offered. In many respects, negotiating with vendors is no different from reaching a deal with a customer. The goal is to reach an agreement that makes both parties feel like winners. Here are twelve tips to help you negotiate on price and terms with your suppliers.

  1. Be a Nice Buyer

Yes, your suppliers want your business. Even so, it would be wise to remember that a vendor can walk away from a deal just as fast as you can. The best way to get the most out of your supplier’s sales representatives is to be nice to them and work with them to find an acceptable compromise. You don’t want to cave in straight away and accept the first offer a salesperson makes you.  But nor do you want to gain a reputation for being a difficult person. In most situations, you will want to build a long-term relationship with your suppliers. So, treat a supplier like a partner, and then you will get a lot more out of the arrangement in the long term.

  1. Make Sure That You are Dealing with the Right Person

Before you begin negotiations, make sure that the person you are talking to has the authority to strike deals. If possible, try to deal with a senior salesperson or a senior manager of the vendor. If you are a new or small business, you might find yourself dealing with a junior salesperson who has only limited flexibility on price and terms. So, if you cannot get the deal that you want, you may have to tactfully try to escalate the negotiation to a more senior member of the vendor’s staff.

  1. Always Have a Plan B

Always enter a negotiation with a vendor with at least one alternative supplier in mind. And don’t be backward about letting the supplier’s salesperson know that you have alternatives. Having a plan B will give you more confidence during the negotiation, and having a fallback position covers you if the talks do not go well.

  1. Research the Margins

You will be in an excellent negotiating position if you know what your supplier’s costs are. So, it would be advisable to do some research into it what it will cost your supplier to source and deliver the products to you. If you know what a supplier’s gross margins are, you will understand how much room there is likely to be to negotiate on the sale price.

  1. Don’t Appear to Be Too Keen

Avoiding making it too obvious how much you need the product you are buying, or giving away your enthusiasm for the vendor’s offer. The longer you can make it appear that you are yet to be convinced to buy, the more the salesperson will be likely to want to tempt you with a better offer. The supplier’s representative wants to come away with a sale. If they are good at their job, they will not be willing to win a deal at any cost. But they will do everything they reasonably can to close the sale if you force their hand.

  1. Talk the Talk

negotiateIf you can demonstrate that you understand the market the vendor operates in, it will help to give you the upper hand. So, talk to other suppliers in the market, and find out the cost of alternative products. Learn a little about the challenges that vendors in that market are facing. And find out what is involved in manufacturing the product or providing the service. If you can show that you are knowledgeable about the product you are buying, it will help you make a connection with the salesperson. Your knowledge will also allow you to negotiate on more of an even playing field.

  1. Ask for a Price on Higher Volume Than You Need

Another way to find out how low the salesperson is willing to go on price is to ask for a quote for a high-volume purchase. Then, once you know what the high-volume price is, negotiate for a second quote on the volume that you need. You will then have the salesperson on the back foot because they have already told you the lowest price at which they could sell the product. Then you can reach an agreement somewhere between the two quoted prices.

  1. Sell Your Proposition

Remember that you are selling your company to the salesperson. An experienced salesperson will not be thinking only about the price of one deal. They will also be thinking about the long-term prospects for more sales from your business. They will also be considering the creditworthiness of your company and the possibility of using you as a reference. So, don’t forget to make the vendor aware of the benefits that they will gain from having your company as a customer.

  1. Negotiate on Price and Terms

If you have reached the lowest price that the vendor is willing to offer, try switching to pushing for more favorable payment terms. If what you are buying includes a service or support contract, then the terms of that agreement should be negotiable, too. Don’t forget the delivery charges as well. The deal that you strike with a vendor is not restricted to the initial price that you pay. You could also save your company money by getting an extra 30 days of credit from the supplier, free delivery, or a cheaper support contract.

  1. Offer a Deposit

Offering a deposit could get you a lower price and better terms on both large and small purchases. So, have a down payment ready to go when you enter negotiations, because it eliminates any concerns that the supplier may have about getting paid. A deposit is also a clear incentive for the salesperson to offer you the best terms. After all, what salesperson wouldn’t want to go back to the office with both an order and a check?

  1. Reach the Brink, and then Add One More Request

When the deal looks like it is almost done, try throwing in one more final request. By this time, the salesperson sitting in front of you will probably already be working out their sales commission, so they may be tempted into making one more concession.

  1. But Know When You Have Reached the Limit

It would be best if you were willing to walk away from any negotiation. But, equally, you should know when it is time to call it a day and agree to the deal. If you try and push it too far, you may wind up with no deal at all. Or you could find yourself with a supplier who resents the agreement that you made. If you want to develop a long-term business relationship with a supplier, the deal must be fair and equitable for both parties.

Conclusion

The critical point to take away from the above is that everything is negotiable to some degree. So, never be afraid to try negotiating with vendors on all aspects of a deal. Even if you only save a few dollars on every purchase you make, that will soon mount up to some serious savings for your business in the long term.


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