Do you consider your suppliers to be an asset to your business? You should, because they really are.
All too many SMBs get this entirely wrong. They put so much focus, and rightly so, on their customers ensuring customer service is top-notch and every customer gets value for money.
That’s what your suppliers are doing for you. You’re their customer and they want to be doing right by you and ensuring you get value for money.
Or at least they should be. If they’re not, it’s perhaps not all on them. Some suppliers are a nightmare to work with and if you find that to be the case, it’s likely because you don’t have a good solid working relationship with at least one key decision maker in your suppliers business.
When you’re dealing with suppliers, they’re an extension of your network.
You have a network right?
We’ll assume you do because not many businesses prosper without developing a network of professionals. Some are in the same industry; some are in the finance sector, others in the fundraising, some in marketing etc.
Your business will have connections. It’s key to business growth. Without connections, you’re a standstill and not experiencing growth.
In the supply chain sector, the managerial positions go to those with experience because with the experience they’re networked.
They know the suppliers, they know the industry, and they know the value for money they can get.
The best in the game drive cost savings because they’re able to strike a balance that serves the needs of both businesses – your business and that of the supplier.
Every business needs a profit margin.
The worst customers for suppliers to deal with are the barking mad ones that want stuff at knockdown prices. Always trying to strip the fat away from the bone and eat into the profit margins of their suppliers.
Big companies might be able to get away with this strategy because they have huge volume, but you can guarantee, if the supplier isn’t getting a healthy profit margin, the customer service will be next to none.
You get what you pay for.
So the lesson is this… when negotiating with suppliers, consider the value you can bring to the table. Yes, by all means be a strong negotiator but go to the table with realistic expectations.
Everyone wants profit.
The best deals are met in the middle. Where you get a good deal and value for money and your supplier gets a healthy profit margin. Both businesses keep profits.
To get negotiations off to a good start, you need a good working relationship. It’s the same with your customers as it is with suppliers. Treat them well and they’ll reward you with loyalty.
Loyalty is what you need from your suppliers because without them, you’ll be without supplies and constantly at the RFQ (request for quotation) stage to get supplies and services for your business.
If you consider your business small to medium sized, and lacking the professional networks to get to the negotiating table, partner with someone who is.
At The Procurement Group, our specialists are well connected in a variety of verticals with years of experience networking with those in the know.
If you’re adamant on taking care of procurement yourself, we’ll give you some tips to steer you in the right direction.
1) Before approaching, send a LinkedIn request
LinkedIn is the social network of the established experts. If you’re not known to someone through LinkedIn, you’re at a huge disadvantage.
The first stage of negotiating is not about figures. It’s about getting to know who you’ll be speaking with and the best way to do that is to enter their professional world.
Get to know them through LinkedIn first, follow them elsewhere and find out what they share online.
That’ll give you some insights into who you’ll be speaking with and help you to find some common ground.
2) Extend your network with multiple suppliers
Don’t just target one supplier when you’re researching. Establish who the right people are that you’ll be dealing with. Once you have a few people, you’ll get a feel for who the right person is for you to speak with.
It’ll be the person you feel more confident to pick up the phone and speak to, or to meet up with at a networking event. Even if they’re not the right fit, you can keep the meetings and conversations friendly because each person in your network has an extended network that could help you.
3) Get your pricing right
You can’t go into talks looking to get a rock bottom price. It’s not going to happen. You need to have your maximum and minimum pricing in mind. Minimum pricing for supplies because you need to be supporting your supplier’s margins to ensure continuity of service.
Drive too hard a bargain and you’ll fall flat. The only time hard bargain deals are successful is when there’s multiple thousands in profits at stake.
4) Find the middle ground
Find a good profit margin for you and your supplier and then work out the kinks in any service level agreements. What you don’t want to do is get a lower price because the level of service is reduced so your client can retain as much profit as possible.
Both sides need to be able to consider cuts in the margins. If any party is hesitant, it’s going to be a difficult working relationship when only one side is making changes, and the other making swaps.
5) Keep in contact throughout your agreement
You’re your suppliers’ customer and whilst it doesn’t constitute constant communication, at least keep in contact in some form such as an occasional email to find out how they’re getting on.
The best time to contact a supplier is when you have to buy anything. Even if they don’t supply it, they may know someone who does and give you advice on dealing with them.
Your supplier becomes a part of your network. Nurture them as such and your long-term contracts will see you get better value from them.
Image courtesy of poacpa.com.