How to Negotiate with Suppliers As a Small Business
Shop around., Study the competition., Understand the business., Use your position with the supplier in bargaining.
Step-by-Step Guide
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Step 1: Shop around.
Before you begin negotiations with any one particular supplier, you should know what your alternatives are.
Get price and availability quotes from multiple suppliers.
It would not be productive to go into negotiations with one supplier if the requests you make are not reasonable according to the industry standard.You can let your supplier know that you have done your homework.
In your negotiations, you might even say, “I have compared prices with X, Y and Z suppliers, and I am prepared to go with the lowest price.
Right now that is X, unless you would like to match it or beat it.” -
Step 2: Study the competition.
Especially if you are dealing with a limited commodity, something that few suppliers are able to provide, you need to know the industry.
You should research the companies that are involved in that sort of business and know their relative strengths and weaknesses.
Get copies of annual reports from the Secretary of State, review marketing brochures, or study their sales catalogs to gain information.
You can use the following information to negotiate better deals for yourself:
Other companies that provide the same product.
Prices offered by your supplier's competitors.
Variations in product delivery.
Variable payment terms.
The relative market strength of your supplier and their competitors. , Talk with various suppliers and learn their concerns and their business practices.
The more that you know their needs, the more you will be able to provide them and offer in a negotiating session.
Additionally, if you sound knowledgeable when you are discussing the business, you will add credibility to your arguments, and probably get a better deal., As part of understanding the marketplace, you should know if you are a major part of your supplier’s business.
If the business that the supplier gets from you is a primary portion of its income, then you are in a much better position to negotiate.
On the other hand, if your business makes up only a small portion of theirs, then you may need to take a softer position in negotiating.Use the cutoff of 10% or so to measure the role that you play in your supplier’s business.
If you provide more than 10% of their revenue, you can afford to be more demanding. -
Step 3: Understand the business.
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Step 4: Use your position with the supplier in bargaining.
Detailed Guide
Before you begin negotiations with any one particular supplier, you should know what your alternatives are.
Get price and availability quotes from multiple suppliers.
It would not be productive to go into negotiations with one supplier if the requests you make are not reasonable according to the industry standard.You can let your supplier know that you have done your homework.
In your negotiations, you might even say, “I have compared prices with X, Y and Z suppliers, and I am prepared to go with the lowest price.
Right now that is X, unless you would like to match it or beat it.”
Especially if you are dealing with a limited commodity, something that few suppliers are able to provide, you need to know the industry.
You should research the companies that are involved in that sort of business and know their relative strengths and weaknesses.
Get copies of annual reports from the Secretary of State, review marketing brochures, or study their sales catalogs to gain information.
You can use the following information to negotiate better deals for yourself:
Other companies that provide the same product.
Prices offered by your supplier's competitors.
Variations in product delivery.
Variable payment terms.
The relative market strength of your supplier and their competitors. , Talk with various suppliers and learn their concerns and their business practices.
The more that you know their needs, the more you will be able to provide them and offer in a negotiating session.
Additionally, if you sound knowledgeable when you are discussing the business, you will add credibility to your arguments, and probably get a better deal., As part of understanding the marketplace, you should know if you are a major part of your supplier’s business.
If the business that the supplier gets from you is a primary portion of its income, then you are in a much better position to negotiate.
On the other hand, if your business makes up only a small portion of theirs, then you may need to take a softer position in negotiating.Use the cutoff of 10% or so to measure the role that you play in your supplier’s business.
If you provide more than 10% of their revenue, you can afford to be more demanding.
About the Author
Kimberly Roberts
Creates helpful guides on DIY projects to inspire and educate readers.
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