Getting the Best Bang for Your Buck: Negotiating Vendors


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August 2010 Brown Bag Seminar hosted by the Greater Springfield Chamber and Community Business Partnership (Springfield, VA)

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Getting the Best Bang for Your Buck: Negotiating Vendors

  1. 1. Negotiating with your vendors Springfield, August 3, 2010
  2. 2. Source: Shopping Centers Today 20.2 sf
  3. 3. The New Normal: down 53%
  4. 4. The Idea – Your Questions <ul><li>What is your business? </li></ul><ul><li>What need does it fill? </li></ul><ul><li>Who is the customer? </li></ul><ul><li>Why is it special? </li></ul><ul><li>Why is it better than the competition? </li></ul><ul><li>How is that communicated? </li></ul>
  5. 5. Two Things Drive Your Decision Making. . . <ul><li>1. Who is your customer? </li></ul><ul><li>2. How does money flow through your business? </li></ul>
  6. 6. Where Do Your Customers Fall? <ul><li>Slam-on-the-Brakes: eliminate, postpone, decrease, or substitute. </li></ul><ul><li>Pained-but-Patient: short-term economization, but resilient and optimistic long-term. </li></ul><ul><li>Comfortably well-off: top 5%, or secure; more selective and less conspicuous. </li></ul><ul><li>Live-for-Today: more stable spending; not savings conscious; younger, experience driven. </li></ul>
  7. 7. Where Do Your products/services Fall? <ul><li>Essentials: Necessary for survival and well-being. </li></ul><ul><li>Treats: Justifiable indulgences. </li></ul><ul><li>Postponables: Wanted or needed, but reasonable to put off. </li></ul><ul><li>Expendables: Gone!! </li></ul>
  8. 8. Low High Low Behavior Change High
  9. 9. Retail Math <ul><li>Volume $ </li></ul><ul><li>Maintained margin % </li></ul><ul><li>Break even (fixed expenses) </li></ul><ul><li>Average ticket </li></ul><ul><li>Inventory investment: Stock to Sales Turn OTB By Dept </li></ul><ul><li>Shrinkage </li></ul><ul><li>Profitability </li></ul>
  10. 10. Talk to Lenders <ul><li>Know your Numbers/Cash Flow </li></ul><ul><li>Renegotiate Existing Debt </li></ul><ul><li>Forbearance </li></ul><ul><li>Interest Only Payments </li></ul><ul><li>Payment Schedules </li></ul><ul><li>Debt consolidation/refinance from Lenders </li></ul>
  11. 11. Talk to Your Landlord . . . <ul><li>Negotiate </li></ul><ul><li>Payment schedule if in arrears (know cash flow) </li></ul><ul><li>Rent adjustment </li></ul><ul><ul><li>Forgiveness </li></ul></ul><ul><ul><li>Renegotiation/escalation over life of lease </li></ul></ul>
  12. 12. Talk to Your Vendors . . . <ul><li>Cancellations? </li></ul><ul><li>Take backs? </li></ul><ul><li>Charge backs current? </li></ul><ul><li>Better pricing? </li></ul><ul><li>Lower minimum orders? </li></ul><ul><li>Special stock holding/lead times? </li></ul><ul><li>Extended terms? (know your cash flow) </li></ul><ul><li>Who to pay first; who to string out? </li></ul>
  13. 13. Vendor Relations <ul><li>Information </li></ul><ul><li>Terms </li></ul><ul><ul><li>Opening </li></ul></ul><ul><ul><li>Normal terms </li></ul></ul><ul><ul><li>Discounts for payment </li></ul></ul><ul><ul><li>Introduce new payment </li></ul></ul><ul><ul><li>Times of distress </li></ul></ul><ul><ul><li>Lead times </li></ul></ul><ul><li>Co-op advertising </li></ul><ul><li>Special promotions and events </li></ul><ul><li>Stock programs and special orders </li></ul><ul><li>Partnership </li></ul>
  14. 14. Create an Open-to-Buy for the Season <ul><li>Planned Sales </li></ul><ul><li>+ Planned Markdowns + Planned End of Month Inventory - Planned Beginning of Month Inventory ---------------------------------------- = Open-To-Buy (retail) </li></ul><ul><li>For example, a retailer has an inventory level of $150,000 on July 1st and planned $152,000 end of month inventory for July 31st. The planned sales for the store are $48,000 with $750 in planned markdowns. Therefore, the retailer has $50,750 to spend on inventory. </li></ul>
  15. 15. Bargaining <ul><li>It is an age-old practice </li></ul><ul><li>Still common in many countries today </li></ul><ul><li>Most US customers want to avoid haggling </li></ul><ul><li>Successful retailers learn how to play the game of give and take with their suppliers </li></ul>
  16. 16. Be Prepared <ul><li>Research the supplier and its product </li></ul><ul><li>How do their prices compare to the competition? </li></ul><ul><li>Set goals to determine what you want and what you can live with </li></ul>
  17. 17. Always tell the truth <ul><li>Deception practices or bluffing may do more damage than good </li></ul><ul><li>Lying is unethical and difficult to maintain </li></ul><ul><li>Be honest, but don’t give away your bargaining power </li></ul><ul><li>It is not necessary to tell them everything you know </li></ul>
  18. 18. Show your Potential <ul><li>When first meeting with a vendor, they may know nothing about your company </li></ul><ul><li>Begin negotiating with some history about your business </li></ul><ul><li>Talk about any expansion plans </li></ul><ul><li>Doing business with you will help them </li></ul>
  19. 19. Ask about incentives <ul><li>The whole idea is to get the best price, payment terms, advertising allowances and even exclusivity </li></ul><ul><li>Ask what you qualify for and start there </li></ul><ul><li>You don’t get what you don’t ask </li></ul>
  20. 20. Mention the Competition <ul><li>Okay to mention competition, but avoid details </li></ul><ul><li>Let them know other suppliers are in good position </li></ul><ul><li>Real or perceived </li></ul>
  21. 21. Find a Fair Compromise <ul><li>The vendor has to make a profit to stay in business, just like you </li></ul><ul><li>Treat as a collaboration rather than a conquest </li></ul><ul><li>As you negotiate a good deal, consider the outcome for the supplier </li></ul>
  22. 22. Think Long Term <ul><li>Establish a solid, trustworthy relationship with a supplier </li></ul><ul><li>Vendors that feel that you will be loyal, may concede to more incentives to create a long term relationship </li></ul>
  23. 23. Take Your Time <ul><li>Never feel pressured by a salesperson </li></ul><ul><li>If you are not satisfied with the negotiation, ask for time to think about it </li></ul>
  24. 24. Get it Writing <ul><li>Make sure the offer is put on paper </li></ul><ul><li>Don’t sign any sales contract unless it matches the verbal agreement </li></ul>
  25. 25. Practice Makes Perfect <ul><li>Not everyone is a natural negotiator </li></ul><ul><li>It takes time to learn when to speak, when to be silent and how to read body language </li></ul><ul><li>The more the negotiate and sharpen your skills, the better you will get </li></ul>
  26. 26. SBDC INTRO and Stamp Review <ul><li>For established firms, emerging companies or aspiring entrepreneurs, the Virginia SBDC is the place where businesses go to talk business. Counseling, training and information resources are the hallmarks of the SBDC program. Business owners and managers can count on professional guidance, experienced insight, practical solutions and respect for confidentiality when they work with a Virginia SBDC. </li></ul>
  27. 27. Virginia Resources <ul><li>      The Business Registration Guide         Virginia Department of Taxation         Virginia State Corporation Commission         Virginia Department of Business Assistance         Virginia Employment Commission         Virginia Government         Virginia Chamber of Commerce         Virginia Department of Minority Business Enterprise         Virginia Economic Development Partnership         eVirginia         Virginia Economic Bridge         Doing Business with the Commonwealth </li></ul>
  28. 29. In-Store Consultations
  29. 32. Thank you for the opportunity to speak with you. May you all have prosperity and good health and a great fall selling season