Partnering with your vendors can help grow your business. There are different ways to approach negotiations and building relationships. What is your approach?
Here are 3 different ways to look at your vendors, which fits your outlook?
- Commodity Provider,from whom you try to gain the lowest price possible (think: buy low, sell high)
- Logistics Support,helping you organize your workflow.
- Business Partner,to help you gain a competitive advantage in your market place.
Some businesses still use the commodity approach “lets squeeze every penny we can, in order to make our budget.” This trades off short-term wins for long-term gains.
More entrepreneurs look at their vendors as logistics support, a more holistic approach, but in my experience this still leaves money and opportunity on the table.
The most strategic approach is to consider your vendor as a business partner. Back in the day, the supplier I was most strategic with was Marty Silver (r.i.p.) the owner of the largest pool supply wholesaler in my area. I would call him every spring and he would share with me what was going on across the pool industry, in all the different quality segments, in commercial and residential markets, and with start-ups and the big players. His insight was priceless, and because I treated him as a partner he reciprocated with knowledge, training, great terms, etc.
Here are some tips to use when approaching your vendors:
- Share with them your growth plans. Get them excited about your future
- Present yourself as a leader, because everyone wants to follow a leader
- Let them understand how competitive your market is, how thin your net profit margins are
- Discuss your annual purchasing needs
- Ask your supplier what they can do to help you, don’t just ask for discounts, let them make suggestions to you. Think outside the price box, and look for help with terms, deliveries, referrals, introductions, priority service, new product ideas, and even training your staff!
Here are three specific negotiation tips:
- Use “we” language, to create a feeling of win-win, so they are more prone to want to help you.
- Use engaging body language. Lean in, like you would if you were on a date, or listening to a great storyteller.
- Share your concerns, and ask them how they can address them. Your vendor can’t read your mind and doesn’t know what is most important to you.
Remember George Ross? He sat at the elbow of Donald Trump during The Apprentice (that was my favorite reality show back in the day; now it is Shark Tank.) George wrote two good books on negotiations, and I still remember his biggest tip: Keep asking for concessions, even after you have received concessions, until the other side says, “No more, that is as far as we can go.”
His approach may be extreme, but the lesson here is valid: Don’t be afraid to advocate for yourself.
For example, when margins are tight on a specific job, and you have already received good vendor pricing, don’t be afraid to ask for additional pricing support.
Lastly, find out what your vendors want and need from you. Are they cash strapped and want money upfront? Or are they looking for something else? It is a partnership, so find how you can help them.
Jeffrey’s Breakthrough Idea: Partner up with vendors who think and act at a higher level, and you will both do better.
- At a minimum, speak to your suppliers about how the market is performing from their perspective. Learn what they know.
- Meet your vendors for lunch, find out which ones think strategically, and discuss your business plans and needs, and ask them how they can help.
- Train your staff on negotiations and “advocating for oneself.”