Supplier Negotiation Tips

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All businesses have to make purchases and do deals with suppliers. The deal that you get can impact on the service you are able to give to your customers, and, ultimately, your profitability. One of the ways to improve the deals you get from your suppliers is to be a better negotiator. Here are some tips:

  • Decide on your budget – this is an important starting point, and will frame everything else that follows. It is a good idea to have multiple price points in mind, i.e. an ideal price, plus a price you are prepared to go up to for the right deal.
  • Learn as much about the product or service as possible – the more you can learn about the product, service, industry and business that you’re dealing with, the stronger your position will be. Of course this doesn’t mean pretending you know more than you do. A little bit of research, such as picking up some of the jargon, or understanding the pricing models of your suppliers, will go a long way.
  • Figure out your priorities – price is obviously important when you are negotiating with a supplier, but it is not the only consideration. You should therefore work out your priorities – what are you willing to pay more for, and what is not really valuable to you. Remember, just because the supplier says it is valuable, doesn’t mean it is.
  • Get the timing right – the worst time to negotiate with a supplier is when you are under pressure or are up against a deadline. This puts them in greater control of the situation, so try to avoid it when you can.
  • Speak to multiple suppliers – unless you know the industry or product you are buying inside out, this is the only way to contrast and compare what you are being offered. Even if you do understand the product you are buying well, you might find better deals are available if you spread the net a bit further.
  • Let the supplier mention the first price – to borrow a cliché, don’t show your hand first. Always let the supplier present the first price. You should regard this as the opener and the starting point for negotiations, so don’t accept it.
  • Point out the supplier’s weaknesses – when you are negotiating a deal with a supplier you should adopt a firm and fair approach. This doesn’t mean putting the supplier down, but it is worth concentrating on the things they are not good at in order to get a better deal. If you get to this stage with them you are likely to be satisfied that they can deliver what you need, so repeatedly going over the good parts of their offering is not going to get you much further. Focus on their weaknesses to strengthen your argument for better terms.
  • Make your business attractive – make doing business with you worthwhile to the supplier. For example, can you place a bulk order, or can you pay upfront. Maybe you can introduce them to other potential clients or give them something else that they would find valuable, and will give you a better deal in return.
  • Compromise – in the end though, you might have to compromise. For example, if the supplier cannot give you a lower price ask for things like better delivery terms or a more favourable returns policy. These can add value to the deal too.
  • Deal on your terms – finally, you should do the deal on your terms. This means not being pressurised into making a decision, regardless of the deadlines that are put in front of you. Most of these are arbitrary, so if the supplier wants to do a deal, even after the deadline has passed, they will.

For more tips and advice on managing and running your business, please contact a member of the Gilroy Gannon team today.

Posted in Tips.