Skyrocketing Prices? 3 Vendor Negotiation Strategies to Slash Costs in Your Business

With the prices of almost everything being up recently, getting the best deal from your vendors is not only an advantage, it’s a necessity in today’s world. We’ve been negotiating on behalf of our clients for the past three years and have gotten extremely successful deals with vendors. Here are the three tactics that have helped us the most so you can implement them into your next round of negotiations with your vendors. 

Well if you aren’t in the trades or you don’t own a restaurant, this guide is not for you as our experience falls outside of your industry. But if you are in either of those two industries, then this guide is for you. 

Let’s get right into it with the first tactic.

Imagine this, you get a new job order for the biggest job you’ve come across. It seems doable so you accept it and start working on it. You do an incredible job and finish the job perfectly on time without a single flaw. Once you’ve finished, the client charges back the deposit and then decides they won’t pay you for that job. Is that a good deal to you? Absolutely not! Now would it be a good deal if in return for that job you got 10 more just like it that did pay you? Now we’re talking, and that could be a great deal. 

This is exactly what vendor negotiations are about. It’s not about you getting everything for free and only you getting your way. It’s finding what you can give to the vendor that’s equivalent in value to you getting your way. That way when you ask for a massive deal, the vendor says yes, just how you probably would to that example from earlier. It’s crucial that both sides win. If one side isn’t winning, then it’s only a matter of time before the other side stops winning as well. 

Figuring out how to help your vendor win can be really difficult, especially if it’s your first time or you don’t have many resources. But don’t worry, here are three tactics that we’ve used to help even the smallest companies and one of these ways is a huge multiplier to your leverage. 

So let’s cover that one first and we can blame this tactic for making us successful at vendor negotiations for our clients.

That is to group together similar businesses. For us, this is easy, whenever we have multiple clients that use the same ingredients or materials, or vendors, we’ll group all their purchase values together and negotiate as one. That way thanks to the massively increased sales volume, each business can get a deal that’s worth a whole lot more than they could on their own. 

Here is how you can do it too. Chances are that you are already friends or at least know more businesses in your area that purchase from the same materials or ingredients as you. If you do, suggest the idea of grouping your purchase numbers together and doing a joint negotiation with your vendor. You can group multiple businesses together but make sure you have 1 representative. If the representative is you, you go and ask your vendor for a deal and bring up that you have other businesses interested in working with them as well if they are able to do what you ask for. Usually if the volume of sales you present is large enough you’ll almost always get an incredible deal here. This also has the added bonus that for every job you lose out to your competitors, you’re getting cheaper materials or ingredients.

Maybe you can’t for whatever reason get other companies involved into negotiations. What else can you do?

More sales is always a win for your vendor so if you can’t bring them from other businesses, you might be able to bring it yourself. By agreeing to exclusively use that vendor for certain materials/ingredients or entirely using that vendor if possible as long as they hold their end of the deal can be a great way to get some really good deals. This works really well in areas that have a lot of competition between vendors and works especially well if you purchase very large amounts from that type of vendor. 

If exclusivity isn’t an option and bringing other people along also isn’t, you can use guaranteed sales as an offer. You can commit to doing a certain amount of purchases for a certain amount of time in exchange for whatever you want to ask for. This is extremely effective and can be paired up great with asking for a fixed price over the duration of the agreement. 

Now the strongest tactic of the three is to actually combine them, using these tactics together makes them much stronger than when they’re used alone.

This lets you ask for much bigger deals. Do note that these are not the only ways to make your vendor win, there are infinite ways and some may even be unique for your business so be sure to think of everything you can do to make your vendor win so when you ask for what you want, they always say yes.

Moving onto the next tactic and that is to not overfocus on the price. Just like we talked about finding every way for your vendor to win, figure out every way that your vendor can help YOU win.

Only focusing on price is like playing a basketball game and not going for wide open layups because you only want to shoot half court shots. You won’t win often by doing that. There are many times that the vendor might not be able to give you a price drop so you need to be prepared to win elsewhere. The best part? Even if you do get a price decrease, you can also ask for these and win even bigger than before.

So how else can you win other than through discounts?

Like the wins for your vendor that you can provide, there are many ways but here are three things you can ask for. And again, try to figure out what you want, anything that’s an improvement to you is worth asking for. Here’s the list:

#1 Delivery. Ask for on site delivery, more frequent deliveries or any other more convenient form to get the supplies to you. This can be a huge money saver thanks to the amount of time you save by not having to pick up supplies yourself. 

#2 Format. Maybe you don’t want to have to purchase in such large quantities at once, or you want more item variety per order with lesser volume for each item. But by altering their order rules you can make your life a lot easier and potentially save storage space, provide customers better choice or reduce waste. All great ways for you to win as well.

#3 Payment timing. Ask the vendor for different payment timings. Maybe you pay after the job is complete, you can pay a deposit or you can get even better credit terms with them. The price itself doesn’t have to change but the way you do pay it absolutely can. Give it a try.

Overall, try to think of anything other than price that your vendor can do which benefits you. That way if you’ve already gotten a good price drop or they simply can’t give you one, you have a lot more ways to win.

Our final tactic is to ask in small steps, this way you build trust and setup a good relationship before you ask for the larger things your vendor can do for you. Ask for too much too early and you risk breaking the relationship with the vendor. It’s very important that the vendor trusts you and that you’ve been a valuable client of theirs before you start asking for big things. Skipping this can make even the most enticing offer on your end useless since the vendor might not even believe it. The more rapport and previous results that you have with your vendor, the more you can ask for with less to give in return. 

Those are our three essential tactics for vendor negotiations. If you want to learn even more ways to win at vendor negotiations you can get our guide for free here: https://www.woopenvironmental.com/negotiations-playbook