Tips • April 6, 2022
Negotiating with Suppliers – a Handy Checklist
The Rules of the Negotiation Game
Negotiating with your supplier is a common situation for small businesses. Every business has needs for resources or information, and there are certain strategies you can follow, which can help you improve your negotiation skills. We've put together a checklist of expert tips for success, which you should keep in mind during your next contract negotiation session.
You can consider these the rules of the negotiation game:
1. Tell the truth.
One of the goals of the negotiation process is to create mutual respect and trust. While both parties come to the table with things they want, stretching the truth too many times can make suppliers question your integrity. Being branded untrustworthy can ruin your supplier relationship, as well as your reputation. Build a good foundation and both sides will end up benefiting from your long-term relationship.
2. Be on their side.
It’s understandable that you want to get a good deal from your potential supplier, but the objective isn’t to take them to their absolute, rock-bottom price point. Let your supplier know that you’re looking to build a mutually beneficial business relationship.
Be firm, but also realistic. It’s a lot of hassle to renegotiate terms later or find a new supplier if you can’t reach a compromise. You’re more likely to succeed by being transparent and sympathetic with them. Your suppliers get the certainty of your business, and you get a favorable deal. Taking this perspective can help guide you to a successful negotiation.
3. Use local currency.
When it comes to working out the financial components of your deal, it’s always best to try to make purchases and payments in the supplier’s local currency. This helps avoid hidden fees when converting between different currencies. Using local currency is also a sign of respect, as you're taking that extra step on your end. This lets the vendor know exactly how much they’ll receive with each payment, rather than an approximation based on fluctuating exchange rates.
4. Take your time.
Never agree to a deal without doing your due diligence. Even if you’ve made negotiation progress, and you’ve followed all the key actions to ensure you get the best deal, you need to take the time to create a negotiation strategy, as well. Ask smart questions, gather information, do your research, and come prepared for a discussion that could take a considerable period of time.
5. Bring your poker face.
Silence is powerful, and it can be uncomfortable in business negotiations. But you can use this to your advantage. A solid poker face can help you overcome resistance points. Silence gives you the appearance of self-control, confidence, and calm. Your supplier won't know what you’re thinking. When you finally break your silence and ask if there’s wiggle room, they might bend just to end the standoff.
6. Don’t be afraid to say “That’s not good enough".
You know what your terms are and the non-negotiable numbers you need in place to maintain your margins and overhead. If the supplier's lowest price isn’t giving you what you need, be honest. If what they’re offering isn’t good enough for you and you’re willing to walk away, that’s your cue to start looking elsewhere.
Effective negotiation strategies require you to set limits and stick to them. Whenever possible, make a list of acceptable alternatives, in case you and the supplier aren't able to compromise on payment terms.
7. Remember that you can walk away.
This is a critical rule in supplier negotiations. If your suppliers know how badly you want or need their product, then the supplier holds all the leverage. If you walk away, you’ve taken away their leverage over you.
Suppliers don't want to lose a potential long-term buyer over a few dollars. In the end, they’ll often make the deal, rather than let their competition steal your business away from them. Walking away is a last resort and a risky decision unless you're confident it might persuade your supplier to be more flexible.
8. Be a good customer.
When people enjoy doing business with you, that positivity trickles down through all of your supplier interactions. This means paying bills on time, being reliable, and being a good negotiating partner, which involves finding common ground that results in a win-win negotiation.
Being a good partner is a benefit for everyone involved. Word-of-mouth goes a long way, as do long-standing relationships and positive testimonials. The more positive experiences people have with you during previous negotiations, the more they’ll recommend you.
Truly Financial Doesn't Require Negotiation
We know how hard it is to be a small business owner, trying to get the most bang for your buck and encourage your business’ growth. When you work with us, you don’t need to follow any of these rules to get what you want. We skip all the fat-cat banking and complex financial terms so that we can focus on giving you the best options for your business.