One of the biggest drivers of cost for businesses is the deals and agreements they have with vendors. The cost of supplies directly affects a business’ own prices for products and services, and is also a major factor in its overall profits.
The price of these goods isn’t set in stone, though. Most vendors have room to maneuver on the first price they quote for their goods or services. At the same time, some business owners are reluctant to haggle over terms and prices.
Entrepreneur Mike Eisenga says that understanding how to negotiate with vendors can go a long way in determining the long-term success of a business. To that point, he provides five negotiating tips to help you get better deals from vendors.
Tip #1. Connect on a Personal Level
People like to help other people with whom they form a connection. We are more likely to help people we like than people we don’t like, for instance.
The same principle goes in business. If you are able to make a personal connection with your vendors right from the beginning, you are more likely to get a better deal.
Try making a connection early on in your first meeting. Connect over a sports team, an interest, or a family situation. It’ll help break down barriers.
Tip #2. Understand Their Position
You likely know the specifics of your own company’s true costs and your actual bottom line. Researching and understanding what your vendors’ actual costs and bottom line are can help you get a better deal.
If you know what their breaking point is, you’ll know when you have an opportunity to try to get more out of the deal — and when the vendor simply has no more wiggle room.
Tip #3. Create a Mutually-Beneficial Relationship
There’s no better situation than when both parties can gain something out of a relationship. This applies to deals with vendors, too.
If you are able to create a situation that not only gets you what you want but also benefits your vendors greatly, then you’ll be able to negotiate better deals.
Your vendors may not be able to negotiate much on price, but they could provide better terms in other areas. If you give a little in one area of the negotiation, you may be able to get a little in an area that matters to you.
Tip #4. Have Backup Plans
To avoid doing this when dealing with vendors, get quotes and have conversations with multiple potential suppliers. This will allow you to compare various offers and negotiate from a position of power.
Tip #5. Be Willing to Say No
Along the same lines, you need to set your own walking-away point and actually walk away if the negotiation doesn’t fit within these means. Again, this speaks to the importance of not being desperate.
When you say no to a vendor, you put them on the spot. If they really want to get a deal done, they’ll budge off their terms when you tell them a prior offer just won’t cut it for you.
About Michael Eisenga
Mike Eisenga is a successful commercial real estate investor with a banking and finance background and is the former mayor of the City of Columbus. As a President of both American Lending Solutions, a mortgage lending company (he founded and operated from 2000 to 2018), and First American Properties, he has a track record of creating and operating successful businesses. Mr. Eisenga is also devoted to property development and construction, primarily serving smaller local communities. Especially in the senior housing sector.