6 Vendor Negotiation Tactics to Save You Money

6 Vendor Negotiation Tactics to Save You Money

Before discussing a new service or supply contract, review these negotiation tactics for a deal that satisfies both you and your vendors.

Negotiation tactics

Vendor costs are one of the biggest expenses for many small businesses, so it's important to actively look for ways to save money or get better services from these relationships.

When your contracts come up for renewal, try these vendor negotiation tactics:

1. Do Your Homework

Improve your chance of success with some negotiation pre-planning. Research rates from other suppliers, then ask your vendor to match any lower competitor offers. Even if they're reluctant to lower their prices outright, negotiating like this may prompt them to give you extras or more favorable terms elsewhere, such as speedier delivery.

2. Ask for an Early Payment Discount

Your vendor may be willing to offer a discount if you agree to pay on a shortened timeline. For example, you might offer to pay within 10 days instead of the usual 30 in exchange for a 2 percent discount. The vendor may eagerly accept in order to help improve their cash flow. However, make sure your own cash flow can handle this change in terms. If all your bills come due at once, you may not be able to make all your payments on time, so only use this option if you can spread out your payment obligations and maintain a healthy cash cushion.

3. Ask for a Service Bundle Discount

Signing up for a second (or third) service with that vendor may net you a bundled discount. Maybe the company providing your internet service now also offers local tech support for your hardware, or a full-service plan for all your employees' mobile devices. Or maybe your website developer now also offers social media management and website content services. Consolidating your business with one service provider helps you save money and can streamline operations.

4. Suggest an Affiliate/Referral Arrangement

Are you willing to tell others about the vendors you use for your business? Your supplier may pay referral fees for new customers you send their way. Without pressuring your peers, tell them about this vendor; if it looks like one of your contacts may go into business with the vendor, be sure they mention your referral. You can also post an affiliate ad on your website or write a testimonial your vendor can use in their own advertising to help them gain customers who value your endorsement.

5. Suggest a Long-Term Contract Discount

Especially if you have a good existing relationship with a vendor, they might be willing to lock in low rates if you agree to a longer-term contract — for example, committing to two years instead of one. Being able to count on your business can be a source of assurance for them. If you've been happy with their services, it might be a risk worth taking. However, make sure you only venture this if you trust your vendor to continue providing excellent service even after you've locked in the contract.

6. Buy in Bulk

Look at your buying history to see how much of certain items you've purchased. If your typical order lasts for three months, offer to buy a six-month supply at a slight discount. That saves you money, as well as the hassle of having to re-order as frequently. If your vendor doesn't offer bulk discounts, their competitors might — do some research to see your options, and go with another vendor if need be.

Honing your negotiation tactics takes time and practice. Keep at it, and you'll become more comfortable and successful in making a deal that satisfies both you and your vendors.