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Vendor Negotiations

Updated: May 17, 2019

An example of a negotiation strategy is in The Godfather. The story of Johnny Fontane,

(supposedly the story of Frank Sinatra), asking the Godfather for a favor. To help him get the lead

part in a Hollywood film, Johnny tells him that the Hollywood executive won't give him the part and they start filming in one week. Then the Godfather (negotiator extraordinaire) gives the famous line, "I'll make him an offer he can't refuse".

We all struggle with low costs, and making ends meet. Small businesses always have start up costs. If you make or sell a product, chances are that if you could get a better deal on the inventory you need, that you would be able to get a higher profit margin. But how can you change numbers without "new math" or get a better deal when you’ve already done the research and found the best option? Well, there is a way to get a better deal, and without a LOAN SHARK or a shady figure in a dark alley. Think collaboration.

In the school of negotiating, a Win/Win is where you win and the vendor/other party wins as well.

It’s the best situation for both of you. It's less about "hustling" someone into giving you what you want, and more about knowing the value you possess, finding out what the vendor needs and working together. In order to get that outcome, you need to commit to do a few things ahead of time.

  1. Research your vendor.

  • What are their costs, what are their needs? You don’t have to ask them (that could tip them off before you are ready to negotiate). Do some price comparisons on the types of costs they have associated with bringing your product to you.

  • Pay attention to similarities. Can you take care of any of their needs? What can you offer to make life easier for them? Is there a way for them to get the product cheaper?

  • What “extras” can you offer to sweeten your deal?: Can you pay them more, is there anything non-monetary that you can offer as a trade?

  • Write up possible scenarios: Include any “extra” things you might be willing to offer or ask them for, and think about what might happen:

  • Best Plan: This plan needs to have what you want the most, what you can’t do without.

  • Meet in the middle plan: Both of you gain something but its a “wash” as to who benefited.

  • Some of you want, none of what they want.

  • Lots of what they want, none of what you want.

  • Okay Plan: Not your favorite option, but better than the current state.

  • Settle Plan: If the negotiation goes south, would you be willing to leave with what you had before?

  1. Meet with the Vendor:

  • Email or call the vendor to let them know what you want to do generally. “Hi Jim, When can I schedule some time to talk with you about the prices of our inventory? I’ll only need (30/45 mins) Would next Friday at 1pm work? Is there another time that would work better for you?”

  • This gives them a chance to prepare. You don’t want them to be caught off guard. You want them to know you are thinking about things and coming up with options.

  1. During the Negotiation:

  • Build the relationship: Start by talking about how much you love the relationship you have with them and are grateful for the product you get from them (whatever positive aspects of the business you want to mention).

  • Voice your concern: State why you want the agreement to change. Start by explaining your side but bring in aspects of what you understand their side to be. Continue to build the relationship though this part as well.

  • Let them answer back. Listen carefully to see if you were right about your assumptions. Let this be a time when you also assess your plan to see if it could be better for you/them.

  • State your proposed plan: (this may change after you find out more about what’s actually going on on their side). Build the relationship again and let them answer.

  • Allow the conversation to flow but remember the things you won’t settle on. If you decided going in that if there was no change made, you would use a different vendor, let them know that but be careful. They might let you!

  • Keep calm the entire time. This shows professionalism and that you do care about the relationship.

  1. After the Negotiation:

  • Get it in writing

  • Thank with a personalized card

Good Luck!

For a One On One Negotiation Session

We will find current market pricing comparables for you, align a customized negotiation strategy for you to follow, role-play the negotiation and scenarios ahead of time with you, and coach you on any questions you might have.

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