Negotiating with suppliers: Be aggressive or pay the price

Lee Biggins was on a steep learning curve when it came to negotiating with suppliers for his early-stage business. Here, he discusses how he learned to get the best deal.

In a world so focused on staying lean and healthy, it really should be no different for businesses. There are so many different aspects to consider when keeping a business lean and from the very beginning I have placed huge importance on being smart about our suppliers. As soon as a small business gains brand awareness, suppliers will be quick to raise their prices, so you can’t be afraid to be aggressive in your negotiations, as every deal should result in good margins.

When our company was in its initial stages I had to quickly learn the most effective way to negotiate the best prices for the business. Looking back, I can see that most of the learning process came through trial and error; now I know that the best way to ensure I keep the businesses’ rates down is by being friendly but assertive to make sure we secure the best prices. Based on my own experience, here are some key suggestions to ensure your small business keeps its costs down.

Do your research

When preparing to negotiate the best deals for your small business, the most important thing you can do is research; equipping yourself with background knowledge is vital and will go a long way in ensuring you are getting the best rates.

  • Be aware that negotiating with suppliers is not just about getting the lowest price, but that it is more important to secure the best price for the best product.
  • Know what to look for in a supplier; reliability, quality and value for money are all factors that shouldn’t be compromised.
  • Identify potential suppliers.
  • Draw up shortlist from the suppliers you have identified; this should help to keep you focused and aware of who the most suitable suppliers are for your business.

Understand your supplier

This is of the utmost importance and a little research can go a long way. Before you deal with suppliers, you should find out more about them; do they monopolise the market or are they a smaller business? Do they have competition?

  • A supplier who runs a monopoly will be far likelier to have the upper hand; it isn’t struggling for business so meeting your demands won’t be a priority.
  • Alternatively, you can use your supplier’s competition to your advantage – mention their competitors and they will likely comply with your demands so as not to lose you.
  • Make sure that price isn’t placed over quality; ask around and make sure that the supplier has a good reputation for quality services and products.

Have a game plan

When negotiating deals with suppliers, do you ensure that your employees form and follow a plan that enables them to prepare for win-win results? An effective plan for negotiating the best deals should include:

  • Being aware of why the desired outcome is necessary.
  • Identifying the other side’s interests and understanding the reasons behind them.
  • Identify more than one acceptable outcome and rank them in order. While your employees should be aiming for the optimal outcome, it is crucial to have some back-ups in place.
  • Be aware of alternative suggestions should a negotiation with a supplier hit a wall.

Employ the right people

If your business is in the position where it is ready to bring staff on board, recruiting the right people for your company is critical; talented, productive employees will aid in the smooth running of your business. When looking for staff who can take on suppliers, there are certain skills that I believe to be vital. Furthermore, training should be provided for employees to ensure they remain motivated and don’t become static in their positions. I would suggest recruiting staff who are:

  • Confident – they should be able to negotiate with your suppliers without fear.
  • Strategic – employees possessing the ability to be strategic will be able get the most out of your suppliers.
  • Adaptable – staff who can easily adapt will be effective when negotiating to keep your prices down; they should be able to readjust their stances with ease.
  • Determined – you need employees who won’t give in at the first challenge; negotiating prices can be a difficult process. Staff who know what they want and go after it will be a huge asset to your company.

Communicate effectively

It is vital that negotiators understand that importance of good communication and have the ability to actively listen to what is being said to them. All too often people will disengage and switch off when they are being spoken to, and if your employees have tendencies to do so it could cause problems when trying to achieve the best deals for your business. Effective communicators should be able to:

  • Engage fully with what is being communicated. The best negotiators are not those who go in with all guns blazing, but instead listen to what is being said and quickly identify weaknesses in the other side’s argument.
  • Verbalise effectively what needs to be conveyed. Good communicators will know how to get their point across clearly and concisely.
  • Build and maintain relationships with your suppliers.

Know the limit

While your main aim should be to achieve the best prices for your business, and you shouldn’t be afraid to negotiate aggressively, it is vital that negotiators understand what the limit is. There is a lot to be said for goodwill, and there is a line that shouldn’t be crossed.

  • Decide whether you want to do business with this company in the future; if not then you can be slightly more demanding. However, if you are looking for a long-term relationship with a supplier then you will need to tread more carefully.
  • Although getting the best deal in the short-term is important, the long-term should also be considered; a good relationship may offer you perks and deals in the future.
  • A good deal is one that meets both parties’ needs; while you should be assertive in your demands, it is imperative that your company doesn’t become intimidating as that will most likely cause any deals to break down.
  • Moreover, make sure you are able to recognise when a negotiation has reached a stalemate. Assure your employees that sometimes the best thing to do is walk away, and begin a search elsewhere.

The reality is that, to keep your business lean and profitable you have to be ruthless. Constant updates and analysis will ensure that your business is running efficiently and that you are getting the most out of your employees. With the right training and the right tactics there is potential for you to achieve the best possible rates for your company.

Further reading on suppliers

Related Topics

Negotiation

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