The prices of raw materials have increased significantly as industries recover after COVID. The high prices are adding to costs and making businesses worried about their supply chain.
In these times, vendor negotiation is the way to get the best prices and a contract that works your way. However, not every entrepreneur may know how to negotiate well.
Here are a few proven ways to help you negotiate with confidence and win the situation in your favor.
You can’t negotiate if you don’t know the prices, standards, and other aspects of a product. Whether it’s steel or packaging materials, you need to know the market in-depth for effective negotiation.
We recommend making a list of vendors you think are fit for doing business. Then research each of them using ways like:
- Visiting their website
- Checking their portfolio
- Trying samples of their products
- Evaluating their R&D
You should also have an idea about prices and quality variations of the raw materials to source.
Think Like a Supplier
Your supplier or vendor is an entrepreneur just like you. They also want to sell their materials and get a good price. Just like you, your supplier also has limitations and boundaries they cannot cross.
Thinking like your supplier will help you understand what they want and how they think. You should try to discover their pain points as you do for your customers.
The better you understand your suppliers, the better will you be to identify and capture opportunities.
Communication is a big part of vendor negotiation. A business owner with good communication skills will be a natural negotiator.
You can also negotiate well by developing communication skills. Many people think good communication means being able to present what you want. However, that is a big mistake.
You have to listen well to communicate well. If you don’t listen, you will never realize your vendor’s needs, demands, or preferences. Listening well will also help you think like your vendors.
You can negotiate better once you listen well and understand where your vendor stands.
Be Ready to Compromise
Negotiation can be defined as a compromise. Whether your supplier accepts a lower price or you pay for shipping, each is an act of compromise.
As a result, you can never be rigid in a negotiation. You should know how far you can go and decide how much you are ready to compromise.
Your vendor too, will do the same and come to a common ground.
Price Isn’t the Only Way
We think of getting the best rates whenever someone mentions vendor negotiation. However, setting your eyes on price only may not always be the right choice.
Your supplier may not be able to lower their price beyond a point. But they may be ready to compromise on other grounds, like paying for shipping or packaging.
You should try to understand where your vendor can compromise and push the deal that way.
Be Mutually Beneficial
Businesses thrive on mutually beneficial relationships for the long term. If all goes well, your vendor will be a regular stakeholder in your operations. You will have to rely on your suppliers to make a profit, and vice versa.
As a result, the deal should be a win-win situation for both parties. You can’t be partial to your needs only and should help in realizing your vendor’s business objectives.
If you succeed, your vendor will be more ready to compromise and agree to your terms.
Vendors are mindful of risks just like you. They may not want to compromise unless they spot some signs of assurance. Being a trusted name and having a large order quantity is great to attract your vendor’s attention. However, you may need to provide more assurance to win your terms.
You can refer to vendor testimonials or incidents where you won praise from your supplier. Maybe, you can tell them how your vendors appreciate your timely payments and response rate. You may also show how frequently you place orders to get more interest. Dig up as many stories as you can and keep them ready for the right moment.
Get Many Quotes
This is a no-brainer- you should get several quotes to get the right price. Ensure to collect quotes even if you have made up your mind to go with a certain vendor. The process will be a part of your research, and you will develop a better sense of the market.
Additionally, you can use the quotes to negotiate prices with your potential suppliers.
We all negotiate every day to live in this world. Vendor negotiation comes naturally to entrepreneurs, but some of them may need to brush up on their skills. Adopt your vendor’s mindset to capture opportunities and come to a sweet spot. Be also ready to compromise and look out for your supplier’s needs.