Negotiation is a very common activity in the management of any business, whether big or small. Typically, new entrepreneurs may not feel confident negotiating at first, but negotiation is a skill that improves with practice and preparation.
The truth is that negotiation, like sales, depends more on the emotional side than the rational side. The key is to aim for an agreement that benefits both sides, because successful business relationships are built on trust and mutual value.
In this article, we’ll share practical tips to help you negotiate better prices and terms with suppliers.
How to be a master of negotiation
Before negotiating, research the supplier carefully. This will help you identify areas where you can reach an agreement and where it will be very difficult to reach a mutually satisfactory agreement. Understanding these two basic principles is important for any negotiation.
Below are tips for negotiating with your suppliers:
1. Make a list of possible suppliers
Your first task will be to make a list of potential suppliers that might interest you. Research the market, look for reviews of each one, check their website/social media, and make your choice.
2. Look for a supplier with a track record
Of all the suppliers on your list, choose the one with the most experience in their field to start with. Once you have their number, call and arrange an initial meeting.
3. Prepare for the meeting/call
One of the keys to success in a negotiation is being well prepared; gathering information about the supplier's history, the products or services they offer, their prices, and so on.
4. Keep your goals in mind
To bring the negotiation to a successful conclusion and get a win for yourself, consider whether your supplier's offer will help you achieve your goals and if it fits within your budget.
5. Be flexible and put yourself in your supplier's shoes
Allow yourself to be a little flexible, especially if you're dealing with a supplier you've worked with before. If the experience has been positive in the past, you might want to relax a bit.
6. Take your time
In negotiations, you should never make hasty decisions; the supplier will understand if you're asking for a few days to consider their offer.
Aspects you should negotiate with your supplier
There will come a point during the conversation when you'll need to negotiate the terms of the service. This includes: prices, payment terms, exclusivity, and so on.
1. Prices
Your goal will always be to get the best price. Suppliers usually present rates that are supposedly fixed; however, there's always room for negotiation. If, for example, you're placing a large order, you can always try to get an additional discount. This is one of the fundamental principles of wholesale. If the supplier is unwilling to lower their prices further, you can look for alternative ways to save on your own costs, e.g have them cover the shipping costs.
2. Exclusivity
In some sectors, it's common to ask your supplier for exclusivity agreements: that is, signing a contract that states that they cannot work with other brands in your sector. This, of course, will increase the price you pay. Advertising agencies, for example, often cannot provide their services to two different bank brands because they have already agreed to exclusivity with one of them. This helps reduce direct competition in your market.
3. Payment terms
In order to pay your suppliers, you must first earn income from the sales of your product or services. To ensure you have the cash flow to meet your debts, it's very common (and advisable) to agree to payment terms of 30 or 60 days. This way, when it's time to pay your supplier's invoice, you'll have already sold your product and have the funds available to pay them.
4. Process control
If you reach an agreement, it's important to determine how the product or service will be delivered by the supplier. To optimize time, try to monitor the delivery of your order by following up with calls.
Build relationships, not just transactions
Remember that:
- negotiation is an art that involves a great deal of empathy and the ability to read the other person,
- a good supplier can become an important long-term partner for your business.
Therefore, we advise you to invest time in building a strong relationship based on trust and transparent communication, because a supplier who values you as a customer will be more willing to offer better terms, prioritize your orders during peak periods, or alert you to potential supply challenges.
Did you find these tips helpful? Read more on our blog.
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