Small businesses may not have the same reach or resources as larger competitors when it comes to suppliers, but that doesn’t mean they can’t negotiate.
Being a small business is tough. It’s common for smaller companies to operate on fairly slender margins amid high competition, and things can be especially complex for importers or exporters vulnerable to exchange-rate fluctuations.
For these businesses, negotiating with suppliers can be one of the best ways to maintain cash flow and ensure a healthy profit margin while keeping competitive in financially taxing times. Here are some basic steps small businesses can take to negotiate a better deal with suppliers.
1. Ask the question
It may seem simple, but so many businesses forget to ask their suppliers whether they can get a better deal. In the process of looking after their own bottom line, suppliers can sometimes forget that organisations purchasing their goods are the ones keeping them in business. Because of this, suppliers usually won’t offer a discount without prompting, so it’s worth asking where there is room for negotiation.
2. Don’t expect too much
Asking is important, but it’s also a good idea not to force the issue. If a supplier names their lowest price, listen to them. As a small business, it’s important to understand how far your relationship with a supplier can take you. Insisting on a deal that benefits you in the short term could cancel out the goodwill you’ve generated over the history of the relationship.
3. Have a plan
It is a good idea to have some sort of proposal in mind before you meet with suppliers to negotiate pricing or terms. Keep in mind what you want and where your boundaries are, but also what you could do for them in return. Offering a handful of mutually beneficial scenarios can show that you understand their need to make a profit and that you value the relationship.
4. State your goals
Sharing information about who you are and what you’re trying to do can help your suppliers get on board and support you in your strategic aims. Right from the start, it is a good idea to talk to your suppliers about your goals for the company. They may have ideas on how to help you get there.
5. Buy in bulk
Buying in bulk can be a good way to get a better price on your stock. If you are too small to do this on your own, it might be a good idea to investigate collective bargaining. Teaming up with other small businesses to place a group order could make your custom more valuable to a supplier.
If that isn’t a possibility, it may be worth investigating forward ordering. Locking down orders in advance can sometimes allow you to purchase goods at a fixed price, which helps you control costs and can reduce the time you spend on administration. This is a particularly good idea for importers and exporters that are vulnerable to fluctuating exchange rates. Securing a set price through forward ordering could protect your business when the dollar goes against your favour.
6. Do your research
When you’re a small business, it’s important to keep your ear to the ground. This doesn’t just mean keeping your eye on the Aussie dollar, but also staying aware of how fluctuating prices could affect the different parts of your business. Having this awareness allows you to be proactive and look for suppliers that can help you mitigate any potential difficulties. It’s also worth seeking out suppliers that are small businesses. Startups sometimes have greater flexibility to negotiate than larger, more established suppliers.
7. Maintain the relationship
Finally, remember to maintain a relationship with your suppliers. Getting on the phone to ask about their business and potential new products works to maintain a personal connection that could help when it comes time to negotiate.
It could also be worth reassessing how your business spends money. Here are four things you may be paying for unnecessarily.
