Once you have decided which suppliers you want to work with, you need to negotiate terms.
Before you start to negotiate, draw up a list of the factors that are most important to you, such as price, delivery schedule or payment terms. Decide what you are – and aren’t – prepared to compromise on.
It’s essential to plan your strategy in writing before beginning negotiations. This will help you set clear goals and work out where you will draw the line and walk away from the deal.
Before you start negotiating, state the aspects of the deal you’re happy with and the points you want to discuss. Ask the supplier to do the same.
Don’t indicate that there are things you’re prepared to concede on or compromise on too early in the negotiations. Instead, use these as bargaining chips, making concessions in return for concessions made by your supplier.
Push the supplier to indicate a starting price and details of any discounts offered early in the negotiation. Never accept the first offer – make a low counter offer in return. The other party is likely to come back with a revised figure. Always ask what else they can include at the given price.
If the price is suspiciously low, ask yourself why. Are the goods of sufficiently high quality? Do they really offer value for money? What will after-sales service be like?
If the price includes features you don’t need, try to lower it by asking to remove those features from the deal.
You can also use your bargaining power to get a good deal. For example, if you’re a big customer of the supplier, you could ask for bulk discounts.
If you squeeze the price too low – perhaps by threatening to walk away from the negotiations – you may end up getting a poor deal. The supplier may have to cut costs elsewhere – in an area such as customer service, which could prove costly to you in the long run.
Set out in writing the key points of any agreement you reach.