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Improve Business Profits by Negotiating with Suppliers

Follow these five negotiation tactics to boost profits and build better and longer-term relationships with suppliers.


A recent BayGroup International study on supplier relationships revealed an interesting insight – when sales transactions happen in any business organization, around 55 cents of every dollar goes back to the suppliers. Therefore, it is imperative that entrepreneurs negotiate with suppliers to get the best deals for supplies and raw materials in order to keep profit margins optimal. This holds true for distributor-supplier relationships as well.

Here are five tips to help you negotiate with your suppliers:

 

  1. Seek mutually beneficial transactions.

    Economic conditions are constantly undergoing a change and have become very unstable worldwide. As a result, suppliers are levying tougher terms and charging higher prices. Instead of accepting each and every opening term of suppliers, create terms or transactions that are equally beneficial to you as well as your vendors. For example, ask your suppliers if you can get discounts on goods or services if you exhibit that you are a loyal or new distributor. The best bet would be to ask them, “What is the best price?”

  2. Demonstrate your potential.

    Inform the supplier that you have plans to expand your venture in a few months and they are assured of receiving more orders in the future. Accompany this with a forecast of growth and it gives suppliers the impression that you are serious about your expansion plans and can become a loyal customer in the future.

  3. Identify the needs of your suppliers.

    Distributors generally focus only on their needs and find ways to meet those needs. However, it is crucial to understand how suppliers work. For example, you could offer an essential service to suppliers as barter for their products. By adopting this approach, you propose different ways to reach a deal that is beneficial to both parties.

  4. Study the competition.

    Visit several supplier websites to help you bag a better price with a preferred vendor. Don’t be afraid to mention that other suppliers offer a better deal (if that is the case). Most suppliers will consider giving you concessions to win your business.

  5. Calculate the details wisely.

    Include calculations in your negotiations. For instance, know when you will have to make the payment, if you follow a 30-days credit policy. Find out if a supplier will consider partial payments or not. It may be possible that you will have to provide a bank overdraft to the suppliers. Or simply ask if they can accept a 60-day credit policy instead of a 30-days credit policy.

Also, remember that pricing should not be the sole deciding factor while negotiating with suppliers. Obtain the best deals considering other aspects such as providing quick delivery in short time frames and flexible payment terms. By following these negotiation tactics, you can boost your profits and build better and longer-term relationships with your suppliers.

 

Jayden Samuelson is an online marketing expert and a regular contributor to Promo Direct. He likes reading articles on online marketing industry and has been a part of discussions on many boards and forums.

 

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