How To Negotiate Your Way to Lower Business Expenses

Studies show that goods and services are among the top expenses for America’s small businesses. While SMBs have been cutting back on their spending since 2008, according to one report, costs for goods and service comprise 28 percent of a small business’ budget, making them the second largest expense after payroll.

While small businesses can’t eliminate some of their priciest costs and services – like rent, equipment purchases, and marketing – they can take steps to negotiate better deals on these and other expenses, provided that they do their homework.

Although businesses are often hesitant to ask their suppliers for deals, the truth is that many B2B companies expect their clients to haggle for prices. Here are some tips for haggling your way to lower expenses…and a healthier business budget.

Create an RFP

Before attempting to haggle for lower business expenses, take time to draft an RFP, or request for proposal. These documents are used to solicit bids on given products or services. You can then compare the proposals you receive from different vendors to determine which one is best for your business’ unique needs. Be sure to do some research on the cost of the desired goods or services in your area, so you can go into the situation with realistic expectations.

Many small businesses submit RFPs when attempting to choose providers. SMBs might send RFPs to marketing companies, technology developers, or website designers. For best results, create a detailed document that offers information about your company and the project in question. The more information you can provide a vendor with upfront, the more accurate your quote will be. Putting an RFP together is time consuming, and these documents are best used for larger purchases.

Alter Your Ordering Strategy

If vendors aren’t offering the prices you desire, you might consider changing your overall ordering strategy. In many cases, small businesses can cut overall costs by either consolidating orders or breaking them down.

Generally, consolidating orders and buying goods in bulk both increase your value to suppliers and boost the odds of them giving you deals. After all, vendors have cash flow problems, too. If you place a bigger order with a larger initial deposit, the supplier might be willing to negotiate with you on cost per item. As a note of caution, you should avoid purchasing in bulk for inventory that is likely to expire or become outdated. For best results, confer with your sales department and accounting team before buying bulk. You don’t want to tie up cash that you need for other purchases.