Supply costs are one of the biggest cost associated with running a business. How can you negotiate a better deal with your suppliers and therefore lower your cost?
Do your research
Create a shortlist of suppliers that may suit your needs and are likely to be successful candidates. Then compare and contrast each supplier by how well they fit your needs and where they may be lacking. This can help you find the best match for your business in a clear and efficient manner. There are different sources you can use during your research:
- Buying groups and their partners
- Word of mouth referrals/social media
- Business directories
- Business newspapers and magazines
- Industry-specific publications
Negotiate fairly & reasonably
Aim for a fair and sustainable agreement that improves both parties’ relationship.
Focus on these seven main points:
- Payment Terms
- Maintenance Agreements
- Customer Service
- Quality Ongoing Costs / Extended Costs or Lifetime Costs of products or services
- Value for Money
When you have your set list of objectives, prioritise them. Define the ones you are not willing to compromise on and others where you can be flexible.
Beware of prices that seem far too low. They say if it seems too good to be true, then it probably is!
Draw up a contract
Once your negotiations are complete and you have agreed to close a deal with the supplier, it is wise to draw up a contract that outlines the terms of your deal. Be sure to include all basic legal contract requirements.
Maintain a good relationship
Maintaining a good relationship is key to stay on positive terms with your suppliers. Being responsive and paying your bills on time are one way of ensuring the relationship doesn’t get strained. If you are in an industry with seasonality or similar, make sure you communicate with your suppliers to plan ahead for the demand of certain products.