13 Tips for Negotiating With Suppliers
The Young Entrepreneur Council asked 13 successful young entrepreneurs for their advice about negotiating with suppliers. Here are their best answers.
1. Never Compromise on Communication
I suggest starting with and maintaining solid communications. Start well, and it'll be great leverage in future negotiations. By being attentive and responsive to issues, entrepreneurs can build a rapport with the supplier, and gain the upper hand to use during a future meeting.
-- George Mavromaras, Mavro | Praetor Global
2. Research the Actual Costs
There's no better position to be in when negotiating a price than to know what it cost the guy on the other side of the table to make what he's selling. By figuring out the cost to make the product, you then have a much better idea of how much wiggle room you have in regards to negotiating.
-- Derek Johnson, Tatango
3. Know the Lingo
As the "supplier" of credit card processing services, I know the best clients are the ones who understand the industry basics or are open to learning them with my guidance, and therefore become their own best advocate. Talk to different providers and learn the jargon so you sound like you know what you're talking about (or actually do!), and the vendors will treat with respect.
-- Darrah Brustein, Finance Whiz Kids | Equitable Payments
4. Pitch the Supplier's Dream
Think like a supplier: They have the product and want to sell as much of it as possible. Present yourself as a resource with a proven track record of selling to the target industry. Understand that money talks, and a supplier that sees dollar signs will make a partnership with you. The trust and credibility you build will determine the terms of your partnership and favorable rates.
-- Jun Loayza, Lion Step Media
5. Discover Areas of Mutual Gain
Spend time to discover the supplier's goals to increase the mutual gains achieved in the agreement. For example, if the supplier won't budge on price, focus instead on other areas of the agreement, such as the amount of the down payment, the length and scope of the warranty, a discount for purchasing in bulk, and other areas of interest that might provide even greater benefits for both parties.
-- Doug Bend, Bend Law Group
6. Quote Multiple Suppliers
My best tip for negotiating with a supplier is to always get the service quoted by at least three other suppliers. I let the supplier know that I am getting quotes and will go with the best one available. This creates some competitive pricing.
-- DC Fawcett, Paramount Digital Publishing
7. Play the High/Low Quality Game
Do your research and have a target dollar amount that you want to pay. Tell the supplier that you want order a very high quantity and get their price. Once you get the price, ask them how much for an amount less then what you want. Then tell them you want this many pieces and you're getting it cheaper from their competitor. Give a reasonable price that makes sense, and they will beat it.
-- Ak Kurji, Genn ex Group
8. Reference Their Customers
The best data you can get from a supplier is from their customers. Before you enter into any sort of negotiation, you should always ask the supplier to provide a list of customers you can reference for the type of product you want. Customers like to talk about products they are happy with, and more often than not, they will share their prices.
-- Sunil Rajaraman, Scripted.com
9. Angle Your Start-up Strategically
Find an angle that you can hit home on. Give your vendor a reason that you're the customer of choice for the goods or service. If they know you are not a one-hit wonder, and someone that can be a long-term, profitable relationship you'll be in a stronger position. Be sure to have the cash to pay your bill fast or on time. What vendor doesn't love that?
-- Nathaniel Victor, Sonic Electronix
10. Have Your Deposit Available
If you want to create leverage with a supplier, be willing to make a deposit of 50 to 70 percent. The higher you go, the more your negotiating power is on the overall rate. At the end of the day suppliers are most concerned about getting paid. If you address this concern upfront by showing evidence you are easy to work with, you will have all the leverage you need to shape the negotiation.
-- Raoul Davis, Ascendant Group
11. Want It the Least
In most negotiations, the better deal will go to the person who wants it the least...or more specifically, appears to want it the least. Have backup suppliers ready in case of a deadlock. This gives you a peace of mind that will allow you to come across as more confident in any negotiation. Don't be afraid to walk away.
-- Richard Lorenzen, Lorenzen Capital
12. Help Them Save Money
Treating suppliers like partners is critical to a company's start-up's success. As much as possible, figure out how you can work with your suppliers to make their lives better, whether saving them money from their vendors or saving them time with your order. By understanding their business model, you can make orders in an efficient manner, which should lower costs for everyone.
-- Aaron Schwartz, Modify Watches
13. Pass the Authority Around
Challenge the supplier to utilize the limits of their authority by asking them if they have the ability to make the decision that I want them to make. Doing this sincerely, while being extremely pleasant to deal with, has always rendered me the best pricing from the 100+ suppliers my company manages. Also, make sure your supplier knows they are not the only one that you're working with. I say that it's company policy to get three quotes of like-quality product, and clarify that even if they think they're a better quality than others, we have already batched them in the same quality group, so it just comes down to price.
-- Ziver Birg, Zivelo