This week's business financing article gives entrepreneurs tips to improve the bottom line when working with suppliers. Many factors go into growing a business and reducing your overhead is certainly one of them. Obtaining the best prices from your suppliers starts with knowing how to negotiate. Here six simple, yet effective negotiating tips to help you get the best terms from your suppliers.
Get quotes from two or three suppliers for the same product or service. Make sure quality and quantity are comparable. Let suppliers know that you are soliciting multiple quotes so their bid will be as competitive as possible.
Understand a Supplier’s Bottom Line
Too many business owners negotiate without having any idea of how much the goods cost the supplier to produce. Before negotiating the price, find out how much the product or service costs to produce. Add a reasonable profit to that amount and you have a target to aim for in your negotiations.
Talk to Other Customers
Do your homework and chat with current customers about their day-so-day experiences with different suppliers. This information can help you decide if you want to do business with them and possibly learn how much other customers are paying.
Focus on Your Common Goal
Some business owners make the mistake of limiting their negotiations to just the price and get stuck when the supplier stands firm. When price negotiations stall, focus on what benefits both parties: new business for the supplier and fair value for you. Beyond price, explore discounts for large orders, reductions in delivery charges or more generous payment terms.
Be Ready to Close the Deal
Demonstrate you are serious about reaching an agreement by being prepared to finalize the transaction on the spot. Let your supplier know that you have a deposit in hand and have full authority to reach an agreement if you get the terms you are seeking.
Let Suppliers Know Cash is Tight
Cash flow shortages can be an issue for small businesses since many suppliers require a certain amount of upfront payment. If you do not have sufficient cash to place orders, you still have options. Suppliers may be willing to extend or renegotiate payment terms to help a good customer make it through a temporary cash shortage. You might also consider accounts receivable financing if you have late invoices. It provides short-term financing by selling your invoices as collateral. You can get up to 80 – 90% of your outstanding invoice within days.
If your business is poised for future growth, leverage every opportunity to improve your cash flow today.
Dan Casey, founder and CEO of purchaseorderfinancing.com, believes every business has a story to tell. He’s been listening and helping small businesses grow exponentially since 2002 using a creative combination of finance tools. He’s been featured in publications including Entrepreneur Magazine, Entrepreneur Online, Small Business Trends Online, The Washington Post, Crain’s Chicago Business & American Express Open Forum.
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