All aspects of running a business all make an important contribution to the overall success of the operation, but some are definitely more crucial than others; one example being a good relationship with quality suppliers who deliver the goods you need to run your business at the right price. Here are some tips for negotiating with suppliers to get the best rates and service.
Know Their Costs
When it comes to negotiating prices, you will be in a much stronger position if you have some knowledge of what your suppliers are paying to acquire the goods that they are eventually going to sell to you. Armed with this knowledge, you can go into the negotiating process with a good idea of how much room you have to get the best price.
Focus on Areas of Mutual Benefit
Most negotiating efforts focus on cost—how much the supplier will charge you for the goods. If you are not getting much traction in this area, you might want to focus on other areas that could produce mutual benefits—you getting better monetary terms and the supplier getting more business. For example, you may want to discuss discounts for large volume orders, down payment amounts and specifics of the warranty.
Talk to Other Customers
It always makes good sense to find out about a potential supplier from businesses already utilizing their services. This can not only give you a sense of whether to do business with this supplier, but it can help you in your negotiating process. For any suppliers you are considering, get a list of customers that you can speak with. Look to get pricing information from them to get an idea of how much you might be able to get for the same products.
Have a Deposit Ready to Go
Just like you are concerned about taking on customers that will pay you in a timely fashion, so is your supplier. Having a deposit all ready to go—about 50 to 70 percent– can give you some serious leverage in the negotiating game. This act can show a supplier you are serious about doing business, and this can allay any concerns about future transactions. It is likely he will be more flexible in meeting your desires.
Get Multiple Quotes
Most business owners recommend getting no less than three quotes from suppliers all providing similar quality goods. When reaching out, make it clear you are pricing from multiple vendors and that you will be going with the one who gives the best pricing. If you find yourself in a position of trying to get better pricing and a supplier is insisting their products are of higher quality, it may be helpful to tell them that even though this may be true, they have been batched into the same quality group as other potential suppliers and your decision is strictly based on price.
How to Handle Suppliers when Cash Flow is Tight
If you find yourself in a bit of a cash flow crunch because of late invoices or other problems, and have a hard time getting together the money for purchase orders, you should always reach out to suppliers to see if there is any way to help, such as extended payment terms or altered terms to better coincide with cash coming in. You might also consider purchase order finance services.