The 5 Keys to Winning at Vendor Negotiations

By Todd Liles The 5 Keys to Winning at Vendor Negotiations

You should never take the first offer from your vendor. You should count the first offer as the worst offer. It’s as bad as it’s going to get, and it’s up to you to make it better.

Related: The 3 Benefits to Negotiating with Your Vendor.

You have a responsibility to negotiate with your vendors. Every percent point that you save in buying power can be used to: provide employee benefits, increase marketing, strengthen your warranty, or add to the profits of a business.

The bottom-line is directly impacted by your ability to win at vendor negotiations. This blog post will give you the key to getting the best deal.

The 5 Keys to Winning at Vendor Negotiations

#1. Decide You Can Win.

This is the most important lesson I can teach you. You must decide that you can win. Too many business owners and managers believe that they cannot get a better deal from their vendors. They believe that they have no power and that their request will not be heard.

You must believe that you can win before you start negotiations. Once you believe you can win, you are ready for the next step.

#2. Do Your Research, and Be Prepared.

 Before you start the process of negotiating for the best price, you need to know how your vendor thinks.

Your vendor is going to judge the value of your business based on a few criteria:

  1. Current Purchase Volume. You are in a stronger position when you come armed with your purchase history. Especially, if your purchases represent a significant portion of their business.
  2. Current Purchase Profitability. Your vendor makes more money when you buy at volume, buy high-profit items, or when they make a premium on you because of your higher purchase prices.
  3. Potential Purchase Volume and Profitability. The likelihood that your company is in a growth pattern, and that your growth would benefit them.

You are in a stronger position for contraction negotiations with greater volume, or potential of volume. This is a fundamental law of business.

So, before you visit with your vendor, you need to do some work.

  1. Pull Your Purchase History.
  2. Predict Your Business Growth.
  3. Analyze Your Prices Compared to Similar Markets.

This research will prepare you mentally for the meeting by creating clarity. You will know exactly what you have invested, and have a prediction of future business. After you have prepared the above information, then you need to set a goal for the negotiation.

#3. Set a Goal and Discover What’s Possible.

 After you have analyzed your purchase power, then you need to set a goal for what you believe is possible. In setting this goal I encourage you to think about the following:


You need to go in with 2 types of goals:

  1. Exactly What You Want.
  2. A Creative Way to Get Close to What You Want.

In knowing exactly what you want, you need to set a specific goal that you hope to achieve. It’s rare that you will get exactly what you want, but it can happen.

The other approach is to get creative.

Most people think creativity occurs when there are no limits. I disagree strongly. To me, creativity is enhanced when there is a distinct number of limits and a problem that needs solving.

Let’s say for example that you need to negotiate 2% off of your purchase price for a particular piece of equipment. You know that others are getting that price, but they buy at a much larger volume than you.

So, you can’t get the 2% discount based on volume today. You need to get creative!

When you get creative, you start thinking outside the box. You start looking for other ways to make it happen.

Discover What’s Possible by Asking a Few Questions

  1. At what volume can you get a 1% discount?
  2. 2% discount, 3% discount and more?
  3. What other products are you wanting to grow that are struggling right now? If I help you grow this product line, can you help me with the discount?
  4. What other ways can we get to a reduction? Even if it’s not directly off equipment, can we get there through:
    1. Marketing Share
    2. Training Credit
    3. Utilizing your Finance Services
    4. Other Services or Discounts?

And perhaps the most important question of all:

“Do you find our business valuable, and would you like to grow with us?”

 If the answer is yes, then you are moving forward in the right direction.

#4. Be Bold Enough To Ask.

Most business owners have never even asked for better pricing. What is interesting about this, is that almost everyone can get a small discount by just asking.

Heck, I’d be willing to bet you that you could get a discount now just because you asked. Without preparation, without analysis, without force. I believe that if you asked 10 of your vendors for a discount, then 5 would give it with no questions asked.

 #5. Be Prepared To Take Your Business Elsewhere.

You have to be willing to switch vendors if you can’t get the deal you need. It’s about the deal you need not the one you want.

In negotiations, you will rarely get all the things you want, but you can always get what you need.

If you take this approach, your vendor will understand that you may need to choose a different provider.

#5.5 BONUS Never Burn a Bridge.

Fighting for the best deal is not about destroying your vendor, or your relationship with them. You may need to go back to them in the future, or just move a portion of your business.

Never burn any bridges when it comes to your vendors. Be firm, be demanding, and most importantly be professional.

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