For any business, irrelevant of their size, saving money in every aspect of their business is simply good financial sense, as the more money you can save initially, the greater your profits will generally be.
However, with larger businesses, they have very often gotten into their stride when it comes to negotiations, not only usually having developed great relationships with suppliers, but also employing a person or a team to ensure the best prices are secured.
With small businesses, they rarely have this luxury and especially for someone who’s new to business, it can be difficult to even know how or where to start.
If this sounds familiar, take a look through the following information which provides five simple steps to better small business negotiations.
1. Know the maximum price you’d pay
As small business negotiations are all about ensuring that you can save the most money for your business and bring the maximum amount in, you need to be sure that you know a figure which you’ll not go over for the products that you’re negotiating for, whether it’s because it’s an unrealistic price or because you simply can’t afford to.
Advertisement: Your content continues below.
2. Have a realistic minimum price in mind
Although you should understand the maximum price that you’d pay for the product, it’s also important that you have a realistic minimum price in mind.
The reason behind this is that if you go into the negotiations with the aim of paying the least amount of money possible with no bottom limit, you’ll have no idea of whether the price you’re agreeing on is a good price or not.
Do your research, find out an approximate base price and use this as your minimum price.
3. Always start lower than you expect to pay
One of the golden rules of small business negotiations is to always start negotiations at a lower price than you’re willing to pay.
If you’ve taken the time to carry out research, you should have an approximate figure of how much the product is sold for from the manufacturer or wholesaler to the supplier and therefore you want to be aiming at around this price to start with.
Should you not have this figure, try taking two thirds off the initial price and start from here.
4. Be careful not to insult the supplier
If you want to develop a long-standing relationship with the supplier, it’s imperative that you don’t insult them.
Although you should start negotiations at a low price, if you’re willing to pay $100 and you start negotiations off at $5, only increasing slowly by a few dollars until you get to an agreed price, apart from taking a substantial amount of time, it will make you look like a poor businessperson and annoy and insult the supplier tremendously.
5. Be willing to walk away
If the supplier that you’re in negotiations with gets a hint that you’re desperate, you’ll find it almost impossible to walk away with a great deal.
No matter whether you need the product or not, you need to give off the air that you’re willing to walk away – you need their business more than they need yours and so it’s important you find the perfect medium between desperation and not caring.
Getting the prices right in every aspect of business is imperative for small businesses and by following this information, you should be able to ensure that you enter small business negotiations in a confident way which will see you get the best price possible for the products you’re buying.
This post was originally shared on May 24, 2011.