Creating successful relationships with vendors is every bit as important as the relationships you build with your customers. It doesn’t really matter if you sell a product or provide a service, most small business owners’ work with suppliers who either provide the goods you sell or products that help you deliver the service you offer.
Every business needs quality relationships with vendors in order to succeed. What’s more, your vendors and suppliers want to see you succeed almost as much as you do. Many vendors also offer simple win-win ways to make your relationships more profitable for you—and for them. One simple way to improve your bottom line and make your vendors happy at the same time is to take advantage of the vendor discounts they offer to encourage you to pay invoices quickly (there are also other discounts many vendors offer to their best customers).
According to Entrepreneur magazine, you might not even need to change vendors if you feel like you need a better deal on goods and supplies. Instead, ask about discounts, which can help improve your bottom line. Just like you, your vendors want to keep their best customers, so before you approach a vendor, evaluate your relationship with them. It’s important to position your business as the good customer you already are, or become a better customer so your vendors have a reason to offer you a special discount or let you in on a super deal. These financial breaks are a large part of the business-to-business relationships vendors want to create with their best customers. Of course, vendors don’t offer discounts unless it meets a business need they have; and usually some conditions apply.
Those often include:
• Length of contract – Similar to a loan, a longer term can bring about reduced interest rates and lower your monthly costs. However, this option requires a bit of math on your part. The extra interest you pay over the long term to get the smaller payment can add up and dramatically increase the price of your goods. Make sure you understand how the long-term interest payment will impact your cost of goods and if the ROI makes sense. Thinking in terms of cost per dollar in addition to interest rate and monthly payment can make this easier to understand.
• Terms of the purchase – Naturally, the terms of your contract are also important. This will determine how you can pay, where you can pay – online or via mail – when you can pay and other key elements. For example, paying via credit card makes it easy to meet early payment deadlines. Paying online allows you to push that payment date as late as possible and still be on time, and the terms can set that date at a favorable time of the month for your business.
• Quantity of the purchase – The size of your purchase will also affect the costs for you. Some vendors may be open to the idea of buying in bulk. If you can store and save the items, then you could purchase a significant amount to get the price per unit down to a more manageable number.
• Flooring arrangements – This type of option is only available for a vendor’s best customers. Sometimes, a vendor will allow you to purchase merchandise you can stock and display now, but pay for once it’s sold. If you have a good history with a vendor, this is something they will sometimes do to introduce a new product or special promotion.
Here are three additional ways you can get a better discount out of your vendors:
1. Take advantage of early payment discounts
In an article for the American Express OPENforum, contributor Julie Rains wrote that paying early can be a great way to get a discount out of a vendor. Most – if not all – want their money as soon as possible, so offering to pay right away can open up some favorable opportunities (in many industry offering early payment discounts is a standard practice). Of course, this will require calculations on your part to determine if the upfront costs are worth the long-term savings.
For instance, your terms could have two due dates, Rains explained. The early one offers a slightly smaller payment compared to the one at the end of the month. Meeting that deadline can really add up the savings over time. I know of one small business owner who saved enough by taking advantage of early payment terms it was equivalent to one of his employee’s salary.
2. Join the club
There are a number of membership associations, clubs or groups that cater to the needs of small businesses. Rains explained that having these relationships in place can lead to even more discounts. Check around – you could be saving money on office supplies, shipping costs and other expenses, all by using the proper membership card on purchase.
It doesn’t take a lot to join these associations, either. Their websites often have rules to sign up. Often, you don’t have to be in a niche market to go this route. However, there are also opportunities for woman-owned businesses, veteran-owned companies and businesses serving underprivileged areas or markets.
3. Attempt to negotiate
In many cases, discounts are advertised up front. However, there are some that you can get by simply being a strong negotiator. Rains suggested talking with individual vendors about possible deals. It is rarely a bad idea to ask around to see if there are any savings available.
Don’t just hone in on price, either. Negotiate over items like shipping schedules. Vendors may be willing to offer a discount if you plan your deliveries around their slower times of year, or when they can dodge costly shipping charges. Think from a vendor’s perspective in order to find the best discounts.
Often these discounts are available simply by asking about them. As a small business owner, you should always be on the lookout for opportunities to cut your costs and grow your business—taking advantage of the discounts offered by vendors could really be low-hanging fruit.