Every business needs to buy in goods and services and these will often represent a large proportion of costs. So any reduction in these costs will have a significant and direct impact on profits. As this guide shows, there are many ways you can achieve cost reduction, from supplier selection to better negotiation.

When dealing with your suppliers, it is important to remember that you are usually dealing with salespeople who have been trained to get exactly what they want from you. However, it need not be all one-sided. Here are practical tips to help you get what you want from them, get more out of them and put you in control of the relationship.

1. Ask

The first and most obvious way to get a better price is to ask for it, yet few people do. They just accept the list price. Get into the habit of asking, “What is my discount this month?” Some salespeople will just laugh and say “Good try,” but many others will respond: “I can only give you 10 per cent, I’m afraid.” That’s 10 per cent more than you had before.

Alternatively try asking, “What is your best price?” If they ask why, give any excuse: “Introductory discount for new customer”; “Loyalty discount for repeat customer”; or just be brazen and say you need a better price. You have nothing to lose.

2. Show potential

As a smaller business, it is easy to believe you are insignificant. This may be true, but there is no reason why you cannot act like a larger organisation, particularly when it comes to buying.

Almost every business tends to follow Pareto’s Law, with 80 per cent of their trade coming from 20 per cent of their customers. If you are among the long tail of a supplier’s lesser customers, they are unlikely to spend much time wooing you or putting themselves out for you. Unless, that is, you can show you are a professional customer, are easy to do business with, pay promptly and have growth potential. Then you are the kind of customer that salespeople dream about.

3. Prepare

All good salespeople think about what they want from a meeting with a customer well in advance. They will know precisely what they want to achieve and how far from this target they will stray. Most buyers only start to think about what they want when in the meeting itself and so they are often unprepared to strike the best deal.

For a start, get hold of a price list. Then take a few minutes before a meeting to think about the prices and terms you need. Consider the arguments you will put forward to get these. What compromises would you be prepared to make? What can you offer them that they value, but which might cost you little? Can you barter? Even if you are short of time, setting aside just ten minutes to do this will give you invaluable negotiating muscle.

4. Calculate the pay-off

Part of your preparation should include various calculations. For example, if your credit terms are normally 30 days, what would be the pay-off if you were to pay cash on delivery, or even payment or part-payment with order? This may necessitate a bank overdraft. How much would that cost you? What discount rate would make this option viable?

On the other hand, what savings would you make if you were to negotiate 60-day credit terms? If you had to pay a slightly higher price, how much extra could you afford to make this a viable proposition?

5. Understand salespeople

The biggest danger when negotiating with a supplier is to think that the pressure is all on your side; that the salesperson can take or leave your offer, but that you have to accept theirs. Yet salespeople all have bosses to satisfy, targets to meet and jobs to keep. In a sense, they can be more hampered than you!

6. Be realistic

Salespeople know the price they want to achieve. So it is much easier if you too have a specific figure in mind. If they want £100 and you are aiming for £80, then you will probably settle somewhere in between, rather than at their price. But be realistic with your offer, or the salesperson will just think you are wasting time, and walk away.

7. Look for alternatives

It is also easy to imagine that (a) there is only one supplier you can deal with and (b) that supplier is doing you a favour by taking your order. If the former is true, you are in a dangerous position and should, as a priority, seek ways out of that corner.

In practice, though, there is almost always another supplier, and probably a better one. They might not offer exactly the same, but a substitute may prove more than adequate.

Learn about your supplier’s competition. For a start, contact the British Library Business and Intellectual Property Centre. It offers a comprehensive service to help you source products and services around the world. Also, try using the Internet to find alternative suppliers.

8. Use the competition

Salespeople make the best offers when they know they have real competition. So, having established that you have other suppliers who can step in, drop their names early into a conversation with your current salesperson. You may even want to make sure their competitor’s name is on the same page in your visitors’ book if you have one. Or you could be more direct and say straight up: “We’ve been talking to Bloggs & Co and they’ve given us a better offer. But since we normally deal with you, we wanted to give you a chance to improve your offer.”

However, keep the details of this rival offer unspecified as this puts the pressure on them to better an undisclosed proposal. They may start throwing in other concessions that you did not even know existed.

9. Seek other benefits

Things other than just price can be important to you. Before narrowing the discussion down to price, broaden it to find out what else the supplier might be able to do for you. They might be able to hold stock for rapid delivery, give you extended payment terms, or offer you lower delivery charges if you agree to let them deliver when it suits them.

10. Tap the marketing pot

While the salespeople may not be able to give you additional discounts, their marketing department may be able to contribute in other ways. For example, by co-funding an advert or mailshot, putting up a prize for a competition, or allocating space on their stand at an exhibition. Suppliers often have a separate marketing budget and are eager to find good ways to spend it.

The supplier may also be in a position to offer added value for your customers, like give-aways or an extended warranty. Only after you have explored all these extras should you focus on price.

11. Haggle

Never accept the first offer. If you do, you may find that extra charges begin to appear because the salesperson thinks you will just accept them. Start with a low response and trade every concession for something specific that you value: “I’ll do this if you do that.”

If they reject your counter offer, give yourself time to think. Use a calculator to stall for a moment, if necessary. Then amend your proposal if it suits you, but make it tougher for them each time you do this. For example: “OK. I will pay your price if you agree 60-day payment terms.”

12. Keep cool – and quiet

When you sense a salesperson is keen to do business, put the pressure on them. Say, “What is your final offer?” and then shut up. The first person to break the silence will probably be the loser.

13. Find out when they’re weak

Salespeople have needs and targets too. These could be volume or price-based, and could be monthly or quarterly. And the same applies to their managers.

If you can find out when their target dates are, you could get some bargains. At these times, salespeople become desperate to win their bonus. Most sales targets are volume rather than profit or margin based. So, if you call near their deadline, you could squeeze a better discount if the volume of your order will push them over a target threshold.

14. Learn from the past

Think about what went well in negotiating previously with a supplier, and use it again next time. Conversely, remember how you lost out last time, and remember the salesperson’s approach. To stop them always doing the same to you, change your approach occasionally. Arm yourself with figures to rebut the claims they made last time. Rehearse the arguments you should have used then and will use next time. It always pays to take notes of negotiations to jog your memory of whom you dealt with, the prices agreed and the promises they made.

15. Pool your requirements

Don’t negotiate on the basis of one order, but pool as much of your requirements together as possible and negotiate on the basis of your quarterly or annual purchases.

Consider pooling your order with other businesses in your area or even in your industry. Bulk orders generally receive more generous discounts. In many areas, such as buying office stationery, this will not affect your competitive edge.

16. Be a friend

It can’t hurt and it could help to make friends. Salespeople have limited room for manoeuvre and if they are not authorised to give you the discount you seek, they will need to make a case to their sales manager. They are more likely to do this if they like you.

If you can find other ways to help them meet their targets, you can also negotiate better terms. For example, you will have them eating out of your hand if you can introduce them regularly to suitable prospective customers. So develop your network.

On the other hand, if salespeople don’t like you, they will make sure you pay a premium to make it worthwhile doing business with you. And they won’t put themselves out to help you with a rush order.

There’s more to life than price

In many cases, there are other factors that can be as crucial to your business as price. Reliable delivery, expert technical back-up, support for exhibitions and so on. Bear these in mind before walking away from a deal. If you do walk away, never burn bridges – always remain on good terms with former suppliers.

To sum up, remember that the most successful negotiators go into meetings armed with facts and figures. They know what they want, when to bow to the inevitable, what their limits are and what they can trade off. Equally, they leave their emotions at the door and are prepared to walk away if the deal is not right for them. They can do this because they know they have alternatives to turn to.
If you follow these tips all the time, you should improve your negotiating technique and ensure you always get a better deal for yourself.

Useful contacts

• The British Library Business and Intellectual Property Centre can help you source products and services worldwide.
  T: 020 7412 7454.

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