While bringing in customers is important for your small business controlling your costs is also key to keeping your doors open. This means negotiating with suppliers to keep costs down.
Kevin Moll president of Restaurant Consulting Services, has helped restaurateurs negotiate with suppliers and run various other aspects of their businesses for decades. He recently spoke with Small Business Trends and shared some tips applying to restaurants — or just about any other business.
Tips for Negotiating with Your Suppliers
Create Your Own Unique Mix
There are several different ways to structure your supplier relationships. Some businesses get everything from cleaning products to other items from a single supplier. Others have one main supplier and a few complementary ones. And some just rely on a bunch of local suppliers for different things.
There isn’t one right way to structure this part of your business. It really depends on your budget, your quality standards, your niche, and your market. For example, a farm-to-table restaurant is likely to work with tons of smaller suppliers around town, while a discount store with lots of inexpensive items might depend on one or two suppliers who specialize in low cost items in this niche.
Get Better Rates with a Prime Supplier
If price is a major concern, as it is for many small businesses, you might be able to get more competitive rates with a prime supplier agreement.
Moll says, “With a prime vendor, you have a negotiated buying agreement with them. And usually that requires the restaurant to buy a high percentage of their items from that one vendor. That percentage normally looks like 85 to 90 percent.”
Have Specific Quality Standards
Suppliers tend to have a huge variety of retailers to choose from. So you need to be very specific about what each one offers and what you need from them so you don’t end up overpaying for an item or getting a product of subpar quality.
Get the Specifics on Each Product
Once you determine what you need, you can get the details about what each supplier offers within that specific category, including the size of the product and what state it is in when it’s delivered. You can even request samples of the item so you can check the quality for yourself.
In the restaurant business, Moll used the example of green beans. You might be looking at a couple of different suppliers for canned green beans, but one might quote you a price for French green beans and the other one could give you a price for generic green beans. If you’re using them for a casserole, then the latter option is likely going to be a better value. However, as a standalone side dish at a fancy restaurant, you might want something of a higher quality. When you know exactly what you’re looking for before you start shopping around, you can get more accurate prices from each supplier and make a more informed decision.
Cut Down on Deliveries
One very simple way to get a better price for your orders is to request fewer deliveries. If you order 100 units and have them delivered once per week, it’s going to cost the supplier significantly less in overhead than shipping two deliveries of 50 units per week. So make sure those savings are passed along to you as well.
Bulk Buy When Possible
Suppliers also want to make sure their trucks are filled up when they go out for deliveries. You can usually get a better deal on products when you order more of them. So if you’re able to modify your order a bit perhaps sticking more of a popular item, you might be able to get a better price.
Find a Trustworthy Sales Rep
In order to negotiate effectively, you need a partner who’s easy to work with. After a few interactions, you should get a feel for the person’s ability to adjust your order details and help you get the best detail possible.
Moll says, “Having a great relationship with a reliable sales rep can be incredibly valuable. They can serve as a real partner for your business.”
Ask for a Better Price
This is a fairly simple suggestion. But it’s an absolutely essential part of any negotiating process that sometimes gets forgotten.
Moll says, “You need to acknowledge the fact that you simply can’t get a better price unless you ask for it.”
Get Help from a Professional
Negotiating prices with suppliers can be an especially tricky part of running any business. So especially if you don’t have prior experience, it can help to partner with a consultant or service that can walk you through the negotiations. Moll says that having this type of assistance can sometimes save you around 6 or 7 percent on your orders by comparing different suppliers and having them essentially compete for your business. Over time, those savings can make a big difference for your business.
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