How to Negotiate With Vendors
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How to Negotiate with Vendors

Did you recently receive an offer from another vendor to offer you materials at a lower price than what you pay your current supplier? Have you learned that one of your vendors offers a lower price to another small business owner? Perhaps it is not simply about prices; do you need a supplier to provide materials faster? Do you want something of a different quality? You may be in a position in which to negotiate prices with your vendor. Sometimes, negotiating with suppliers can seem a bit daunting; after all, you don’t want to run the risk of alienating someone with whom you need to do business, but at the same time, you don’t want to be in a position in which you are being taken advantage of, either. Fortunately, there are a number of tips you, as a small business owner can follow, to ensure that you both being treated fairly and negotiating effectively.

Have a Plan

Before negotiating with a vendor, make sure you are clear on your objectives and what you want to accomplish. Create a list of what is (and, what is not) important to you, and what you or may not be prepared to compromise. Much like with hiring new employees, it is easy to tell when someone comes into an interview ill-prepared. A vendor will likewise be able to tell if you do not have your ducks in a row. In turn, it will make it more difficult for you to be taken seriously as a formidable negotiator if you are not clear (first, with yourself) as to what you are wanting to accomplish from the meeting.

Be upfront from the beginning of the meeting as to what your preferred outcome is, but also make it clear that you are open to exactly what the meeting is: a negotiation. It will be important for you to demonstrate your willingness to compromise as a negotiation is something from which all parties should walk away, pleased by the results. If you prove yourself difficult, then the vendor may actually be grateful if you take your business elsewhere.

Know the Competition

Knowing who the other vendors are for a particular good or service, along with their prices, will be key in negotiating better deals with your current suppliers. Additionally, don’t be afraid to reach out to those suppliers directly and get price quotes beyond what may be on their websites. Demonstrating that you have done thorough research, even being able to say, “I spoke with Mr. X at Company A, and he’s prepared to offer me a 10% discount, given how much I order at once.” Or, “According to Ms. Z at B Industries, they can provide me materials in a 2-3 day turnaround”. After all, anyone can quote prices from a website or marketing brochure, but taking the initiative to open up that communication can reap benefits when negotiating with your vendors. (And, you already have the necessary information if you decide that it is in your small business’s best interest to make a change.)

As with every aspect of negotiating, of course, it is vital to remain open-minded, (perhaps the company across the street gets a different price because they have been working with a particular vendor for years, and are “grandfathered-in” to a certain price), calm, friendly, and non-accusatory.

Don’t Smell of Fear or Desperation

Have you ever gone to a bar, shortly after a bad break-up, feeling sorry for yourself only to then have would-be suitors falling all over you? While you undoubtedly look stunning with crying-induced, mascara raccoon eyes, there’s a chance that much like animals, the people around you picked up on your vulnerability. A vendor with whom you are trying to negotiate will have the same sixth sense. This is where having done the homework as mentioned earlier comes in handy, as you will already have a back-up plan. Even if for whatever reason, your back-up plan is less than ideal and you would prefer to stick with your current vendor, you will have to not be afraid to walk away. Even if you are faking it, exude the confidence that you will be able to do the best thing for your small business. Chance are, the supplier will pick up on that confidence and will not want to lose the business of such a savvy small business owner.

Climb to the Top

If you are dealing with a vendor that is quite large in size, there’s a good chance that your specific contact person or account manager is not the one who has final say in decisions regarding prices, delivery dates, etc. If you feel that you are not making any headway with you current contact, it is okay to ask (in the most pleasant way possible, of course!) if there is someone else with whom they can speak. It is always best to ask and not just simply go over the head of the person with whom you were dealing; if you do continue to work with this particular vendor, it can sour the relationship with your contact, if they feel as though you tried to undermine them. But, it is okay to ask: you may find that in doing so, your contact actually has more pull than you thought, and perhaps they didn’t realize that you were such a skilled negotiator, or you may find that your contact really does want to try and work out a better deal for you, but their hands are tied and it would be better for you to speak with their supervisor.

This can be a delicate one, so probably best to have this negotiating tactic as a last resort.

Look at the Other Teams Playbook

The most successful sports teams are the ones in which players put ego aside and everyone works, together; try to look at your vendors as partners, not just some company with whom you purchase things. Understanding from where another person is coming is always helpful in any type of communication, including negotiating. Understanding your vendor’s business model, budgeting, etc., can help you both negotiate a better price for your own small business, while perhaps benefitting them, as well. In understanding their practices, perhaps you will find that if you place your orders on a Tuesday, rather than a Thursday, they can offer you a faster turnaround time. Maybe if you are able to pay a larger amount in a deposit, they can reduce the overall cost.

Make Sure Your Own House is in Order

Before going into negotiations with a vendor, make sure that you have been keeping your side of the street clean. Perhaps they were charging you what they were, initially, because as a new, small business, you didn’t yet have any credit and were therefore seen as a bit of a risk. If you have now established a responsible credit history, use that to your advantage. However, if you have sometimes been late in making payments to this vendor, then you may want to hold off on negotiations until such time that you have a more stable payment history.

The most important thing to remember when entering into negotiations to always be polite, open-minded and communicative. If you have kept the lines of communication with your vendor open from the beginning, it will make all current and future negotiations that much smoother.