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Construction, Business - 4 min read

5 Psychology Tips to Negotiate With Suppliers

David Cartwright

Senior Marketing Manager - Software

Jun 15, 2018 2:58:00 PM

Looking for a little breathing room in your cash flow? Would you like to be able to spend more on hiring or marketing your construction business? Whatever the reason for seeking more cash, you might have a cash source right beneath your nose: lower prices on the supplies you regularly purchase and use in your construction projects. 

If you haven’t renegotiated pricing with your suppliers recently, you might be missing out on savings for your business. With decreased expenses, you can realise more profit, which can be reinvested or used as you see fit.

In this blog post, we’ll look at five psychology tips you can use in your supplier negotiations. A little effort in negotiation can go a long way toward reducing your expenses and freeing up cash on an ongoing basis.


1. Shop Around

Just because you’ve been doing business with a supplier for years, doesn’t mean you’re getting the best deal on the market. Shop around from time to time so you can keep your options open and ensure you’re getting the best supplies for your investment.

When you ask for quotes, let suppliers know that you’re shopping around. This will encourage them to offer you the very best prices they can. Try to get at least three quotes and keep quality in mind as well as price.


2. Don’t Accept the First Offer

One of the most basic rules of business negotiation is to never accept the other party’s first offer. Instead, you should plan on issuing a counter offer or asking them to get back to you later with a lower price. 

Strengthen your request by explaining that you want a long-term business partnership with them, that the price they’ve offered includes features or services you don’t plan on using, or that a lower price is justified by the amount of business you’re giving them.


3. Offer Larger Deposits in Exchange for a Discount

Suppliers have to carefully manage their accounts receivable, so you can make their lives easier by offering a larger deposit in exchange for a bigger discount. For example, if you offer an upfront deposit of 60%, you will increase your bargaining power, and the supplier will be more likely to grant you a bigger discount.

Tender tips, marketing tips, technology for builders.


4. Negotiate Factors Other than Price

When trying to decrease expenses, many business owners become overly fixated on the actual price of each item, but there are other factors you can negotiate that will accomplish your overall goal of improving your bottom line. 

For instance, you could negotiate to reduce your down payment, to receive a discount for a bulk purchase, to get faster shipping without any additional expense or to secure an improved warranty. You could also negotiate longer terms if your cash flow has been problematic or seek additional discounts for paying early. Depending on your current financial situation and your long-term goals, these alternative negotiations could improve your bottom line.


5. Approach Suppliers as a Bulk/Long Term Buyer

Just like any other business owner, a supplier wants to sell as many products as possible, and long-term customers help them to do just that. Therefore, when you negotiate with suppliers, remind them that you are looking for repeat business over the long-term.

If you’ve worked with a supplier before, remind the supplier of how much you have purchased from them in the past. Provide the track record of your past purchases and let them know that they can expect similar volume in the future. If you’ve never worked with the supplier before, provide them with sales projections based on valid research. This kind of evidence can give a supplier the confidence necessary to offer you a great deal on the supplies you need. 

Keep track of all of your pricing details in your estimating software. With all of this newly negotiated pricing information at your fingertips, you’ll be able to produce accurate estimates quickly and confidently.

5 Supplier Negotiation Tips at a glance:

  1. Shop Around
  2. Don’t Accept the First Offer
  3. Offer Larger Deposits in Exchange for a Discount
  4. Negotiate Factors Other Than Price
  5. Approach Suppliers as a Bulk/Long Term Buyer

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