As a small business owner, you often have to depend on other companies to provide services and supplies that are critical to your success. Therefore, getting the most favorable terms and rates can have an important impact on your cash flow and profit, and help you to avoid overspending.
Here are five tips for negotiating with vendors and suppliers:
1. Offer Referrals
One way to get the best rates and terms from vendors is to offer to be a reference for them when they're trying to attract other customers. Consider whether other local companies with whom you have a positive relationship might be looking for a similar service provider, and then ask for a price discount or preferred terms on your own account for each successful referral. Are you comfortable mentioning their services on your website, signage or even sales brochures? If so, you can offer this type of discreet mention and see if the business is wiling to provide a discount in return.
2. Ask for Discounts for Paying Early
Smooth cash flow is critical to the financial health of a business. If you're in the position to pay your vendors earlier than required, you might want to discuss whether it's possible to get a discount for doing so. For example, if a vendor asserts that you must "pay within 30 days," you can ask for a five percent discount on payments made within seven days.
3. Make a Long-Term Commitment
Most businesses appreciate a long-term commitment. As such, if you're currently on a month-to-month arrangement with your supplier, consider suggesting an annual contract. If and when you negotiate for a longer period, you can ask the service provider for a reduced rate or more flexible payment terms.
4. Consolidate Your Purchases
By working with one vendor or supplier that offers multiple products or services, you can take advantage of a variety of opportunities to simplify your business needs and save money. For example, you can ask for a discount if you consolidate software installation, hardware and server backup services with one IT company rather than from two or three different businesses.
If the vendor you're dealing with doesn't offer multiple products or services, you can consider banding together with other businesses that also need the same services or products, as Harvard Business Review suggests. Approach the supplier or service provider as a group and ask for their best collective rate.
When you plan ahead, you can have ample opportunities for negotiating with vendors to improve the terms, rates and conditions offered. By doing so, you can help shave precious dollars off of your expenses and help contribute to a healthier cash flow for your small business.
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