How does your business approach negotiations? Do you negotiate with your suppliers? What about with your landlord or utility company? Many small businesses overlook this process, assuming that they don’t have the necessary bargaining power to negotiate successfully – but don’t give up just yet.
In reality, any business can try to negotiate, even if they’re not ultimately successful. To get started, focus on these 3 areas where many businesses overspend. You may discover it’s not so hard to cut costs.
Drive Down Rent
Rent is probably one of your most significant overhead costs, and while you surely shopped around for the right space with an affordable lease, you shouldn’t accept the first price a landlord offers you. Instead, do your homework and go in ready to ask the right questions.
If you’re trying to negotiate a great lease, be prepared to ask the landlord not just for the rent, but whether it’s a gross or net lease and whether you have the right to sublet the space. Depending on the type of business you operate, as well what renovations your landlord will cover going forward. If you’re renting space in a strip mall or large complex, you might also want to negotiate for a restrictive covenant to prevent similar, competing businesses from opening in the same space.
Manage Your Merchant Fees
In order to operate a successful business in today’s environment, you need to accept an assortment of credit cards. Straightforward, right? Not exactly. Merchant accounts, which allow you to process credit cards, may charge exorbitant fees, canceling out a lot of your profit margin. You can try to negotiate lower credit card processing fees, but this is a process you may not want to tackle alone.
While it’s often possible for small business owners to negotiate major costs themselves, when there’s a lot on the line, it’s a good idea to have backup. That’s why, rather than cold-calling your merchant account holders on your own, you might want to consider partnering with a company like P3 Cost Analysts that can audit your merchant accounts to determine what you’re being charged and work to reduce those fees.
Strategizing With Suppliers
Just as you need your merchant accounts to run your business, you also need a good relationship with your suppliers – but from a negotiation standpoint, it’s worth remembering that they need your business as well, even if you’re a relatively small account. That means that if you want to try to negotiate with your suppliers, you have several options open to you.
The first and perhaps the most obvious strategy for small businesses hoping to negotiate supplier contracts is simple to ask for a better price. This works best if you have a long, well-established relationship with your sales rep, and it works even better if you have something to offer in return. This strategy, sometimes known as the friendly gesture, is a kind of win-win; maybe in return for a lower price, for example, you offer to increase your orders. Another negotiation strategy is to ask for more than you want – an even deeper price cut or benefit – and then working your way back to the (more reasonable) point you’re actually aiming for. The best case scenario is that you get an even better deal than you hoped for and, worst case, the price at least doesn’t go up.
Small businesses overspend in a lot of areas, and in many cases, it holds them back from achieving the success they’re capable of. If you’ve been underestimating your negotiating power, consider this an opportunity to push your limits. When you give yourself a financial buffer by learning to negotiate, you can take your business to the next level.