As a small business owner, you know that protecting the financial state of your company is paramount to keeping it alive and running. If you need to increase your cash flow, it’s time to look into your business expenses and see where you can cut costs.
Of course, you can’t get rid of the necessities like lighting and electricity, or let go of your employees—unless warranted—to save a couple extra bucks. But have you considered negotiating costs with your vendors to add additional savings?
If you can get your vendors to cut you a break to get the same amount of product for less, you instantly increase your profit margin, putting more money in your pocket.
Of course, you shouldn’t run to your vendors and demand they lower your prices, as you don’t want to damage your relationship. But there are a few ways that you can go about it without creating tension. Try these four tips and tricks to negotiate with your vendors for lower rates.
1. Be Prepared and Research Costs
It doesn’t matter if your vendors are providing you with clothes, food, or office supplies. If you want to negotiate material costs, your first step should be to research what these items are costing your vendors. Of course, your vendors need to make a profit as well, so there will be an upcharge from what it costs them. But you want to make sure that what they’re charging you is fair and they’re not ripping you off.
Negotiations require a great deal of preparation and strategizing, so the more prepared you are going into your meeting, the greater your chances of having a positive outcome. You can’t simply go into the meeting and ask your vendors to lower their prices. Go in with a goal in mind, staying focused on your bottom line.
2. Get Multiple Quotes
Before settling down with one vendor right off the bat, get quotes from multiple companies. If vendors want your business and know you are shopping around, they may be more willing to negotiate in order to secure your account.
Even if you have a preferred vendor, getting multiple quotes you can show your vendor of choice what other companies are offering and, in turn, they may be more willing to lower their price in order to keep your business. Of course, if a vendor is offering you an extremely low cost from the beginning, you want to make sure it’s not because their materials are of lesser quality.
3. Become an Asset to Your Vendor
If you’re already working with a vendor, are you paying your bills on time? Are you placing orders on a regular basis? Ultimately, the more worth you provide to your vendor, the more they’ll want to keep your business and the more willing they will be to lower their prices.
Remember that prices are typically based on volume of purchase. So if you’re a small company and don’t need a large quantity of one item, consider using the same vendor for all of your supplies. The bigger of an asset you can be to your vendor, the more valuable your account will be to them, so they will be more willing to negotiate.
You may also consider what in-kind value you might offer your vendor in exchange for lower rates. Do you provide a product or service that your vendor may need? Or could you market your vendor to others in your industry in exchange for an affiliate discount? Don’t be afraid to get creative here—you never know unless you (respectfully) ask!
Keep in mind that as much as you’re an asset to your vendor, they’re also an asset to you—so make sure you build a relationship with them and always be fair with your demands.
4. Pay Upfront or Early
Don’t be afraid to ask your vendors for a discount for paying upfront or paying early. They may need the money to speed up their cash flow, and may be willing to offer you a discount in order to do so. Of course, you only want to offer to pay upfront or early if your company can afford to do so.
Your main goal is to create more cash flow and a higher profit margin for your company, so go into your meeting knowing your objective. Have your goals prepared and know what your bottom line is. The more research you do in advance, and the more you know about your vendor, the better chance you’ll have of getting the outcome you are looking for.
Before you get too pushy, though, keep in mind that maintaining a good relationship with your vendors will help foster future opportunities for savings as well. But if the vendor you’re working with is costing you too much and unwilling to lower their prices, it may be in your best interest to walk away from the deal and find a new vendor that is more willing to meet your needs.
Meredith Wood is the Head of Content and Editor-in-Chief at Fundera, an online marketplace for small business loans. Prior to Fundera, Meredith was the CCO at Funding Gates. Meredith manages financing columns on Inc, Entrepreneur, HuffPo and more, and her advice can be seen on Yahoo!, Daily Worth, Fox Business, Amex OPEN, Intuit, the SBA and many more.