How to Negotiate with Suppliers and Vendors

Reducing costs without risking relationships

With the cost of doing business rising and competition increasing, you’re no doubt thinking about ways to reduce expenses.

It’s true that every cent counts. However, cutting costs often proves to be a bad long-term strategy.

Lower costs tend to result in lower product quality, less engaged employees and no new ideas in development, all of which lead to unhappy customers.

Thankfully, there’s often a way to reduce expenses without blunting your competitive edge. Through the art of negotiation, you can streamline operations and identify cost savings that add up to big wins.

This guide will walk you through what’s on the table, tips to approach negotiations constructively, and how to keep your business name synonymous with quality and great service.

What’s up for negotiation

As a small business owner, you might think you don’t have the buying power to negotiate a better deal. That couldn’t be further from the truth.

Negotiating with suppliers and vendors is about more than haggling over price. It’s about forging strong partnerships that evolve with your business.

A quick tip first: Before you go into negotiations, make sure your business details are up to date. Suppliers will likely start with a business name search to make sure you’re legit. Contact our local support team to check your business name and contact details are in order.

Longer contracts = lower prices

Committing to a longer-term agreement can often secure you a more favourable rate. Vendors value the assurance of ongoing business.

Whether it means regular re-ordering, long software subscriptions paid upfront, guaranteed minimum quantities or retainers for service providers, stability for the supplier often translates to a better price for you.

Volume discounts

The theory is that the more you buy, the less you pay per unit.

It’s often more efficient for suppliers to process larger orders or ship full containers from overseas. Purchasing in bulk or agreeing to order a certain quantity over time can lead to significant savings.

Extended payment terms

Negotiating for more time to pay your invoices can improve your cash flow, giving you breathing room to manage your finances more effectively.

While this might not reduce your expenses, it can help with budgeting.

Early payment discounts

The flip side to extended payment terms is a discount for fast processing.

See if suppliers offer incentives for paying within a certain timeframe. This information might not be public, so it helps to have a good relationship with the vendor or other customers.

Bundled services

Suppliers might offer discounts if you bundle various services or products together. Software vendors tend to work this way by default, while more traditional businesses may need convincing.

How to negotiate with suppliers constructively

Negotiations are always about relationships. You might be angling for a lower price, but there’s a difference between the cheaper option and a better deal.

By approaching negotiations with creativity and focusing on mutual benefit, you have a better chance of securing a favourable outcome for both teams.

Research the market

Understanding the going rate for the goods or services you’re purchasing is a good start. This enables you to negotiate from a position of strength.

It also helps you to know when to push a little harder and when to shake on the deal.

Know who you’re negotiating with

Business ownership structures can add a layer of complexity to negotiations. You might unknowingly be negotiating with a competitor’s key supplier or even their parent company.

Conduct a business name search to investigate the ownership structure before reaching out. Follow it up with desktop research to check the business’s relationships.

Be ready to walk away

Sometimes, the best deal is the one you don’t take. If a supplier can’t meet your needs with a reasonable agreement, be prepared to seek alternatives.

Having another supplier in mind is a good idea. You can even reach out for a comparison quote, provided it won’t ruffle any feathers.

Focus on the relationship

A strong relationship with key suppliers is more valuable than a few dollars saved. Approach negotiations as a collaborative effort to find mutually beneficial solutions.

Be professional and courteous, and focus on finding a solution that leads to long-term benefits.

Fair’s fair

While negotiating, aim for a deal that’s reasonable for both sides. Squeezing suppliers too hard can backfire, potentially harming your relationship, your business name, and any chance of future negotiations.

Offer value in return

Think about what your business brings to the relationship. Word-of-mouth referrals, marketing promotions, website backlinks, or the promise of future business can be powerful incentives for suppliers to offer you better terms.

Start negotiations on the right footing with Registry

Any savvy supplier will conduct a business name check as part of due diligence. As a small business owner, ensuring you’re trading under a registered business name is an essential first step in a long and successful relationship with key partners.

We make it easy with hassle-free business name registration and renewal. Your details are always up to date, so you enter negotiations with confidence.