Tactics for negotiating with large suppliers

Tactics for negotiating with large suppliers

| Jul 2, 2020 | Contracts |

Ohio entrepreneurs understand the challenges when dealing with powerful suppliers. Whether they purchase construction materials, company uniforms, office supplies, or raw materials, massive corporations seem to dominate the market.

Many small business owners may feel helpless when dealing with these large suppliers. How can small businesses more successfully negotiate with these regional monopolies?

Four different strategies

Small businesses can employ a few strategies to gain leverage when dealing with these huge companies:

  1. Add value: Creative entrepreneurs can offer more than money during negotiations. Suppliers may reward clients who serve as a gateway to new markets with price breaks and incentives. Also, offering to minimize a supplier’s price risks by increasing order volume or bundling with other products.
  2. Change buying habits: Since changing purchasing with a supplier can impact all company operations, these tactics require comprehensive research before trying. Small businesses that order many products from a single supplier can consider unbundling those purchases and shopping around for smaller competitors. Crafty entrepreneurs might group with other small businesses that use the same supplier to form a purchasing consortium to save on costs.
  3. Create a new supplier: Finding a new supplier shakes up the local market considerably. Large suppliers enjoy being the only local solution for their clients. When a client can entice a competitor to enter the region with lucrative purchase offers or connections with other potential clients, that original supplier will likely take notice. Ambitious business owners can also consider creating the supply within their operations, vertically integrating the creation of what they need. Many large suppliers may offer a better deal if they see their clients researching these threatening options.
  4. Legal recourse: If necessary, small businesses can consider legal action. A well-timed subpoena into a supplier’s accounts or a simple heads-up to a financial watchdog institution can inspire a supplier to cooperate. Make sure to communicate with the supplier and allow them the opportunity for reconciliation.

Legal counsel can help

Companies may find more success with their negotiations by hiring a local lawyer familiar with business litigation. An attorney can examine contracts, negotiate with the supplier’s counsel and work with government regulators.