By now you have already suffered the anxiety attack after looking at your 2005 year-end numbers. Surely, the fact that you spend hundreds of thousands of dollars with various vendors has been haunting you since you began figuring the equation in your head with every waking step. If you trimmed a mere 2% off your produce, another 1% off your dairy, and a whopping 5% off your meat bill, you might have been able to cash those paychecks that you have stashed in your underwear drawer. When I first began my journey down the restaurant road, a friend told me a story about a very smart and attractive woman he was dating in college. Walking through the produce department of a campus grocery store he picked up a few bananas from the large pile that said twenty-cents per pound. A bit further down the aisle, another pile of slightly spotted bananas were on sale for eighteen-cents per pound. The smart woman told my friend that he should exchange the more expensive bananas for the cheaper ones. He said it didn´t matter, that it was only two-cents per pound difference. She said if he went through life not paying attention to saving ten-percent of everything he spent, he would end up in a very bad position. Ten percent at the end of the game is the difference between winning and losing. And, that is where your vendors come in.
Remember a few weeks ago when I suggested you call your vendors to see how they were doing? Well, now it´s time to call them again. Last time the call had to do with the money you owed them. This time, it has to do with the money they owe you. Each year around this time, vendors begin looking at where they can raise prices on the products that have increased in price to them. The rain has hurt the lettuce crop. The corn is being planted late. The drought in Texas is killing the melon production. And, the strawberries are out of control. Each year, it seems as though another story sports a new geographical location to launch the news that prices are increasing. But, now it is time to strike first. The best defense is always a strong offense. So get ready to call you vendors and ask for a meeting.
During the meeting make sure your vendor realizes how happy you are with their service. And, make sure that the vendor realizes that you really like doing business with them. But, also let the vendor know that you will be reducing your produce bill, and your milk bill, and your meat bill in 2006. And, although your bill will be going down, your ordering won´t be. Now, also let the vendor know that you have spoken to other vendors and that your plan is very feasible. And, that your vendor´s competition is very anxious to help you with your plan if your current vendor isn´t that receptive to it. And, you will find, for the most part that your current vendor is willing to work with you.
Nothing hurts a vendor more than losing an account, especially if that account is one that orders regularly and pays, on some schedule, even if erratic. Remember how many salesmen come stop by to sell you something. The vendors face tremendous competition. Don´t think because you don´t pay within the terms of the invoice, or in full with each check, that you are not considered a great account. Anyone who orders and pays his or her bills is an account worth keeping. What matters at the end of the year is how much you spent with any given vendor. And, if you analyze your bills, you will see that a large portion of that final sum could be interest and other charges that simply do not have anything to do with the price of lettuce or the cost of ketchup.
Once you have those figures, explain the situation to your salesperson and his boss, the sales manager, who will be at the meeting once you inform them that you want to negotiate a contract. Keep in mind you are not threatening to take your business elsewhere. You are attempting to turn an impossible situation, (it will be impossible to order anything else from them unless they lower their prices), into a workable relationship.
The majority of the time, the vendors will agree to a price reduction on some items. And, that is what you want. You want them to know you are watching your invoices and your business. By doing this you may not only get a small break on the current prices, but also they won´t be so quick to raise your prices in the future. Ten percent throughout the year is the difference between success and failure, in business and relationships.