Why you should always renegotiate with suppliers
By Julian Harlow
Regular renegotiating can help your business and suppliers cooperate to find better-value deals for your business.
Approaching a supplier to bargain over a contract can be intimidating, particularly if your experience of negotiating has usually been combative. However, regular renegotiating can help your business and suppliers work together in order to seek out better-value deals for your business instead of simply fighting over pricing.
Here are a few of the reasons renegotiating with suppliers should be a regular feature in the life of your business.
Your business needs are always changing
While renegotiation brings to mind the opportunity for cutting costs, changes to your business mean that other factors may be even more important. For example, if your business is growing strongly, the need for reliability from your supplier may be at the top of your list when you hold talks with them.
The rewards from renegotiating really emerge when you undertake them regularly
If a supplier knows that you are likely to discuss terms periodically, they will also put some thought into how they can improve the value both parties receive from the deal, and may even provide suggestions.
It's beneficial for long-term relationships
Renegotiating with suppliers regularly also removes the fear among some suppliers that renegotiating is code for a customer making unreasonable demands. Fostering good relationships with suppliers means that if the time comes when you really do have to lean on a supplier for better terms, they will be more likely to work with you to try and create a solution or cut their own margins.
It fosters cooperation
Small businesses have less ability to spend time researching market rates and demanding one-sided price cuts than large corporations, so starting from a basis of cooperation is generally a stronger strategy for small business. Even if you do secure price cuts through a confrontational approach, there is the concern that your supplier will look to regain profit in other ways.
It's a time to discuss possible changes
If your sole aim is lower prices, you can discuss what other changes to the contract you can offer to your supplier in exchange. Obvious changes could include different delivery schedules or changed timing for supply of services, but other changes that might seem trivial from your point of view could be significant to your supplier.
While the interests of your business and those of your suppliers will never be exactly aligned, regular renegotiation will help identify changes that can benefit both parties and provide a better basis for the continued growth of your business.