The way in which a business negotiates deals with their suppliers can make a huge difference about how considerable their profits will be. It is imperative that when a supplier is sourced, a value for money deal is acquired. Before negotiation happens, suitable suppliers should be tracked down.
How suppliers can be found
Finding the right supplier can be time-consuming but your efforts will reap dividends. Before sourcing a supplier, you should have a clear objective and be fully prepared. By looking for a supplier without having formulated a concrete plan does not make good business sense. Here is where suppliers can be commonly found:
- Trade journals
- Directories which can be accessed online or in libraries
- The Chambers of Commerce
- Suggestions from friends, family and colleagues
Before you approach suppliers, you should know what your requirements are. You must also be aware of what your budget is. Therefore, when suppliers send a price list to you, you’ll know about whether your means will be surpassed if you do choose their services. Telling suppliers that you are contacting other companies means that they may lower their prices due to competition.
When many suppliers have responded to your enquiry, you should then determine whether their services meet your own needs and demands. Telling them about how quickly an order should be processed will enable you to know whether they are capable of meeting strict deadlines. Although not asked directly, you could ask about their other customers. If you find out the names of their clients, you could ask such companies about their opinion of the supplier who you are talking to.
If a long term supplier is needed, you should arrange to see their premises. When a supplier states that they have ample room to handle large orders, seeing evidence of substantial storage space will confirm whether they were telling the truth. When visiting such premises, you could enquire about their clients and whether they are able to fulfil the type of contract you have. Many suppliers have gone bankrupt over the past few years and you should ask about whether they have many clients or not. If their client base is minimal but they have lots of free space in their warehouse, this may indicate that they do not have sufficient capital to fund their means.
What to do before sourcing suppliers
As you will forge a close relationship with a supplier who will become an integral part of your business, you must know what makes them tick. Often, businesses will want to deal with a supplier who runs a similar business model to their own. Building partnerships with suppliers before signing a contract with them is recommended. Why not invite suppliers to meetings which are held in your head office? Getting suppliers involved in your company, such as in the decision making process, means that they will become a valued member of your team.
Even when you have found a supplier, they may still go bankrupt even though you checked their background. Sourcing additional suppliers is highly recommended, especially when the supplier who you have signed a contract with is not able to fulfil a substantial order.
Getting the best price on a deal
When a supplier has been located, a value for money deal should be sought. The best possible deal does not automatically indicate one which is cheap. When contacting a supplier, you must inform them about your budget and the many key aspects which are attributed to manufacturing and delivery, such as:
– How items are paid
– The quality of the items which will be produced
– Is a particular product essential for your business?
– Is a supplier able to offer effective delivery?
Before negotiating with a supplier, you must know what your hopes are. If you don’t know what your personal expectations are of a supplier, vital information will not be found out. Therefore, you may make a poor decision. As with the Boy Scout motto, you should ‘Be Prepared’ when holding discussions with suppliers. By formulating a plan which both you and your supplier are happy with, a more harmonious working relationship will happen.
When making a presentation, have a team with you
Any meeting with a potential supplier shouldn’t be held between yourself and the supplier. In fact, it is recommended that you take along with you a team of employees who can deliver the information which you want to tell suppliers. During a meeting, your team may pose questions which they suddenly think of which weren’t mentioned when you were preparing your pitch. By taking along a knowledgeable team will also convey the right message to your supplier because they will want to know that you too are legitimate. After all, they are also making an investment. When every single member of your team is fully aware of your negotiating strategy, no confusion or hesitation will occur amongst the ranks.
The importance of negotiation skills
There are many negotiating skills which you must know of:
1) If a supplier starts applying pressure, you might be otherwise forced into agreeing to something which you do not want to be associated with. If the pressure starts to build during a meeting, request a break in order to clear your thoughts.
2) Don’t agree to the first offer which is made by a supplier. As humans have discovered throughout the generations, the art of bartering is a vital tool which we can all use in our daily lives. You could ask about any ways in which a price can be lowered such as ongoing costs or removing features which you don’t need. After all, why pay for something which you won’t be using?
3) Before a deal is signed, carry out credit checks on a potential supplier. Therefore, you will know whether they are being truthful about their financial situation.
Sourcing suitable suppliers means that a good working relationship can develop.