How to Negotiate Better Deals with Suppliers

If you’re a business owner, goods and services likely account for a large portion of your costs. Which means any reduction in those costs can translate into higher profits for you. So it can definitely be worth your time to try and negotiate better deals with current and/or prospective suppliers, provided that you don’t jeopardize your relationship with a valued supplier by asking for too much.

It can be a delicate process, especially considering that when negotiating with suppliers you’re typically dealing with salespeople who have been trained to get what they want. Keep in mind, however, that you’re also a valued client and they know that their bosses don’t want to lose your business. So you have leverage.

When you do enter negotiations, don’t accept a supplier’s first offer, even if it’s a good one. You may find yourself paying more down the line because you’ve presented yourself as someone who easily accepts their terms, and a supplier will remember that.

Ask if you can get a discount on your goods and/or services because you’re a new customer, a loyal customer, etc. The worst a supplier can do is say no, and there is the possibility that they’ll offer at least a small discount, which can add up in the long term. Consider asking, “What’s your best price?”

Another good tactic is to demonstrate your value as a client and your potential for growth. If you’re a smaller business, it’s easy to feel insignificant in the negotiation process. Nevertheless, when it comes to buying, you can negotiate as if you’re a larger company because, after all, you may well be one in the future. So make a point of showing that you are indeed a valuable customer -- one who is easy to work with, pays promptly, and has good growth prospects.

To get the best deal possible, prepare for your negotiations. Both suppliers and purchasers go in with the same bottom line: how much money they want to charge or spend. If you can get a hold of a price list beforehand, you can formulate rationales for the prices and terms you want. In turn, consider what compromises you’d be willing to make for a better deal and whether you can offer a supplier something they’ll value that won’t cost you too much. Maybe there’s a product or service you can barter with.

Part of your preparation should include various calculations. For example, if your credit terms are normally 30 days, what would be the payoff for you if you’re able to provide full or partial payment with your order? This might require a bank overdraft, so you must determine what that would cost and how big a discount you’d need to make this option worth your while. Also consider the savings you’d achieve if you were to negotiate 60-day credit terms, for example. If you had to pay a slightly higher price, how much more could you afford?

Get to know the supplier’s competition. This can motivate a salesperson in your favor. You can drop competitors’ names or even say, “So-and-so offered us a better price but since we like doing business with you, we want to give you a chance to improve your offer.” They may give you concessions that you never knew existed.

In the end, price should never be the only deciding factor. Consider what other things a supplier might be able to do for you, such as holding stock for quicker deliveries, providing extended payment terms, or offering to lower delivery charges if you agree to a broader delivery time frame. They may even be able to add value for your customers with offers like promotional giveaways or extended warranties. Only after you’ve explored all these extras should you focus on price.

Susan Konig is a freelance writer in New York. She has been writing about finance for 15 years, for publications including Crain's New York Business, The New York Times, and Registered Representative, a national publication for financial advisors.