Negotiate Your Way to Lower Business Expenses
Posted in Business Advices

Negotiate Your Way to Lower Business Expenses

Business Advices

Your business’ recurring expenses add up to a significant chunk of your budget. You can permanently lower some of those costs by negotiating discounts and lower rates with the companies you buy from.

Studies show that goods and services are among the top expenses for America’s small businesses. While SMBs have been cutting back on their spending since 2008, according to one report, costs for goods and service comprise 28 percent of a small business’ budget, making them the second largest expense after payroll.

While small businesses can’t eliminate some of their priciest costs and services – like rent, equipment purchases, and marketing – they can take steps to negotiate better deals on these and other expenses, provided that they do their homework.

Although businesses are often hesitant to ask their suppliers for deals, the truth is that many B2B companies expect their clients to haggle for prices. Here are some tips for haggling your way to lower expenses…and a healthier business budget.

Create an RFP

Before attempting to haggle for lower business expenses, take time to draft an RFP, or request for proposal. These documents are used to solicit bids on given products or services. You can then compare the proposals you receive from different vendors to determine which one is best for your business’ unique needs. Be sure to do some research on the cost of the desired goods or services in your area, so you can go into the situation with realistic expectations.

Many small businesses submit RFPs when attempting to choose providers. SMBs might send RFPs to marketing companies, technology developers, or website designers. For best results, create a detailed document that offers information about your company and the project in question. The more information you can provide a vendor with upfront, the more accurate your quote will be. Putting an RFP together is time consuming, and these documents are best used for larger purchases.

Alter Your Ordering Strategy

If vendors aren’t offering the prices you desire, you might consider changing your overall ordering strategy. In many cases, small businesses can cut overall costs by either consolidating orders or breaking them down.

Generally, consolidating orders and buying goods in bulk both increase your value to suppliers and boost the odds of them giving you deals. After all, vendors have cash flow problems, too. If you place a bigger order with a larger initial deposit, the supplier might be willing to negotiate with you on cost per item. As a note of caution, you should avoid purchasing in bulk for inventory that is likely to expire or become outdated. For best results, confer with your sales department and accounting team before buying bulk. You don’t want to tie up cash that you need for other purchases.

If bulk buying is too expensive or poses storage issues for your business, consider dismantling some of your orders to purchase items individually. For example, if you’re currently getting your paper and ink from the same supplier, consider shopping around to see if another vendor offers a better deal for one or the other. Doing this forces suppliers to compete for your business and might give you the chance to secure lower prices on certain goods.

Pay in Advance

If you typically pay your bills at the last minute, you might want to rethink this strategy. In fact, suppliers often give pricing deals to small businesses who send in their invoices on time instead of making the company track them down for payment. Additionally, you can sometimes cut costs by offering to pay by check instead of putting the bill on a credit card. And of course you should never pay a bill late, as doing so can result in added fees and penalties that send your overall costs skyrocketing.

Create Competition Among Vendors

You might be hesitant to tell your current paper supplier that you’re shopping around for a new vendor. However, creating some healthy competition is a good way to keep costs down. In fact, when a supplier knows that you’re pursuing other options, he or she is more likely to offer you the best deal possible—even if it’s not the one stated on the website.x

Say you’re looking to lower the amount you pay for internet access each month but don’t really want to switch companies. Start by calling several local suppliers and soliciting quotes from each. You can then go back to the original company with offers in hand. This tactic can also be effective with insurance sellers, cable companies, and even service providers like office cleaners and plumbers.

Renegotiate Credit Cards

Few small businesses have mountains of cash available to purchase all their products and services outright. As a result, SMBs often wind up charging some of their expenses to credit cards. Unfortunately, choosing the wrong credit card company can result in higher interest rates that send your debt level skyrocketing.

If you’re a good customer who pays bills on time, the odds are good that your card company will want to keep you around. Before approaching your card carrier, take time to gather offers from other cards. You can also research balance transfer services to see what options are available to you. Then, call your carrier and ask to speak to a supervisor about the situation. Let her know you’re thinking of switching card companies, and she might just be willing to negotiate terms, rates, and even payment amounts to keep you as a customer.

Sometimes vendors simply refuse to lower their prices. In these cases, small businesses might want to request other perks, such as faster shipping, longer product warranties, and lower down-payments. You can often work out an agreement that is beneficial to both parties—you just have to ask.

Remember: most suppliers would rather negotiate with you than lose you as a customer all together. Follow the above tips to keep your business in the black for the long haul.

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