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Tips for negotiating with powerful suppliers

On Behalf of | Oct 30, 2020 | business litigation

California businesses, especially those in construction, understand the influence that powerful suppliers wield over the industry. These once-competitive fields supported dozens of different suppliers, but after decades of business, they have since consolidated into a handful of gigantic conglomerates. Many companies hold regional monopolies, leaving buyers few options when searching for a good deal.

Clients of these huge companies are not powerless, though. There are many tactics smaller businesses may employ to find a little leverage when dealing with intimidating suppliers.

Use these four tactics when negotiating with suppliers

Local businesses have several advantages over large suppliers. Entrepreneurs have taken the time to invest in their community by building relationships and creating jobs. This unique perspective gives small business owners access to a few key tactics to gain leverage over suppliers:

  • Increase value: Clients can negotiate with suppliers by offering value beyond spending cash. Look closely at the standard deals made with this supplier for opportunities. Offering to sign a longer-term contract can provide security for the supplier’s cash flow and bundling orders together can create lucrative price breaks. Suppliers might reward clients who bring them leads into untapped regions or connections with other potential clients.
  • Change purchasing habits: Large suppliers often increase the value offered to their clients by bundling other needed products or materials in with the main order. Small businesses can look carefully at the individual products in these “package deals” and shop for alternatives. Reducing one’s business with a supplier reduces the power they have. Additionally, smaller companies can secure better pricing by grouping together into buying consortiums to combine orders.
  • Create the supply: Ambitious entrepreneurs might look for opportunities to create the supplies themselves, bypassing the supplier altogether. Though vertical integration is expensive and involves considerable research, an in-house solution will likely pay off in the long run. The supplier will likely recognize what is happening and offer a better deal to keep another competitor from entering the market.
  • Legal discovery: Though an intimidating prospect, litigation is always an option. Many large suppliers may attempt to bury disputes under mounds of paperwork while protected behind ranks of lawyers but balk at the threat of a subpoena into their spending. Nothing scares a large supplier into cooperating like the threat of government regulation.

Legal counsel can help

Business owners hoping to renegotiate a bad deal with a large supplier find more success with the help of a local lawyer familiar with business law. An attorney can bring a fresh eye to existing contracts, locate potential opportunities and navigate complex legal issues.