Negotiating with Vendors
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A vendor is NOT the manufacturer of equipment; vendors merely purchase, receive, and locally distribute equipment from manufacturers. Vendors are not responsible for equipment quality, pricing trends, warranty guidelines, or the supply chain. They can, however, control the products they choose to carry and the markup on products from the manufacturer. Contractors need to rely on vendors to make their jobs easier, as vendors are the ones who make equipment and materials easily accessible.
It would benefit the contractor to have some traits that are attractive to vendors. Attractive contractors will have more negotiating power than those who aren’t. Contractors that have a high volume of sales are attractive because they can help the vendors to move as many products off the shelves as possible. The vendor’s goal is to move boxes, so they want to work with contractors who will buy or rent lots of equipment from them. Consistent, reliable payment history is also a must on the contractor’s side.
To respect vendors, we must understand what they do and their challenges and responsibilities. When contractors respect vendors, deliver on promises, and have mutual goals, vendors will be more likely to go the extra mile for those contractors. Having respect for vendors doesn’t mean reducing your standards of service; you might just need to show some compassion and be willing to work with vendors. Vendors will also be more willing to do their best for contractors who develop strong relationships with them.
When identifying potential new vendors, contractors ought to consider if a vendor is within their service area, has the right product mix, and has competitive prices. The vendor’s business model should also be consistent with the contractor’s. Contractors should consider is they become priority customers if they start a relationship with a vendor; they need to be able to bring enough to the table to make a vendor prioritize them. It would also be wise to steer clear of vendors who have a poor reputation. Communication can help us identify ideal vendors. We can prevent many conflicts if we provide clear dates as to when we will need certain products.
It’s also worth noting that vendors should make a profit. However, contractors should be skeptical when vendors claim the inflation excuse when they hike up their prices but rake in much larger profits than normal. Vendors must make money, but it should not happen at the contractor’s expense, which can happen if contractors don’t negotiate the pricing.
Negotiating is not easy, and it may require approval from leaders in your contracting business.
To negotiate with vendors, you need to set aside time to have meetings and conversations. These can happen once a year or once every couple of years. These conversations are critical to have with potential new vendors as well. You’ll want to see if those new vendors are competitive, and if they give you a competitive price, you can use that as a starting point for negotiations with current vendors.
If you need to negotiate with vendors, you need to know your products and who you’re talking to. Some people may not be qualified to change the pricing, or they might not be as knowledgeable as someone higher up in the vendor’s company. It’s also great to ask the vendor questions if you don’t understand their pricing choices. You also want to be smart when considering the perks; discounts are worth a lot more to the business than a golf trip or free donuts.
Go into negotiations knowing your budget and numbers so that you can make evidence-based decisions and introduce facts to the discussion instead of making promises that you might not be able to keep. You need to know if your contracting company can bring value to the vendor and what that value would look like for the vendor. If you become close with a vendor, then you must be careful about their prices and not excuse price hikes that happen after rewards like fishing trips or golf trips.
When contractors get good pricing and can save on materials, it enables them to invest in vehicles, employee compensation, and bonuses. Discounts add up and are definitely worth negotiating with vendors. Vendor relationships should be win-win situations, and it’s possible to respect the vendor and maintain a good relationship while keeping the company’s own needs in mind.