Once you're ready to place your order, this is when it is the optimal time to negotiate your price. Many leads flow into a supplier's messaging pipeline, but not many will actually reach the purchase stage. In the supplier's head, you are a high-intent customer. And they may be willing to adjust some numbers on their end to close you as a customer. Here's what I would do. Use the price that you were originally quoted by and decrease it by 20%.
Give this target price to the factory, and let them know that you would like to order with your 20% reduced price. In many cases, the supplier may not agree to your new target price, but they may reduce it another 5%, which is already pretty nice compared to the original price. And during this time, mention to them that this will be the first trial order. And that if it is successful, larger orders will follow. Once your price is negotiated, you are ready to send your purchase order.
When negotiating, it's important to understand a breakdown of price that they quote and see why the final price is the way that it is. Try to figure out how much they're charging you for the packaging, how much for the materials inside, and be sure to get an itemized list of all the costs associated with your product. This is important information, because you can use this price sheet to price match with other suppliers down the line. Here are some tips on how to negotiate with your suppliers, once you have the purchasing power to leverage.
Number one, sell yourself as someone who will give them a lot of business. Suppliers are just like any other business owners. They want to sell as many products as they can, and they appreciate customers who will help them reach that goal. When negotiating with suppliers, make sure they know that you are someone who will give them repeat business. If you have a track record and past purchases, let them know how much business they can expect from you based on those numbers.
If you're just starting out, provide them with a sales projection of your business, letting them know that down the line you may be purchasing more. Number two, think outside of the price box. If the supplier won't budge on price, you can still negotiate for other things that will help lower your expenses. For instance, you can negotiate to reduce the amount of your down payment for a faster production time, without additional expenses to you.
Or for improvements to the warranty, such as its length, comprehensiveness. In addition, if you request and are granted longer payment terms, you'll be able to improve your cash flow. Number three, talk to multiple suppliers. In order to encourage competitive pricing, talk to at least three other suppliers and let each of them know that you're getting quotes from other manufacturers. Explain to them that you'll go with the suppliers that will offer you the most competitive bid.
Don't forget to take quality into consideration when reviewing the bids. Number four, offer larger deposits for a bigger discount. Suppliers are concerned about their invoices being paid, just like any other business owners. So another way to secure bigger discounts is to offer larger deposits on your order. If the supplier knows that they will receive 50% to 60% from you upfront, they will increase your bargaining power, and they may be more likely to work on the prices.
Number five, do not accept the first offer. The rules are the same when dealing with suppliers as they are in any business negotiation. And the most basic rule is to never accept the other party's first offer. Instead, you can issue a counter-offer or ask them to get back to you with a better price. You can justify this with the amount of business you're offering to give them, or the idea that you want to establish a long-term partnership with them over next few months.
Number six, be someone suppliers want to do business with. It doesn't matter how much business you give to your suppliers if you're a problem customer. You may not get the best deal, because sometimes it's just too much work to work with you. It's important to maintain good supplier relationships by remembering that, while they need you as a customer, you also need them, too. So be sure to pay your bills on time and maintain open communication.