David Grinberg
August 23, 2024
How Should I Negotiate With My Suppliers?
The Common Supplier Negotiation Trap
Struggling to negotiate with your suppliers? They'll argue that their costs have increased or that the market conditions have changed. You'll try to correct them by saying it's their problem, not yours, and it blows up in your face.
Suppliers will claim that you are not meeting their MOQ or that you are a credit risk… It goes on and on, back and forth, with no end in sight.
The Cost of Capital Focus Strategy
There is only one thing you should focus on when it comes to a standstill with your suppliers: Cost of Capital. I'm an alternative investment manager and CFO for digital and e-commerce businesses.
People often pay me to show them how to negotiate their contracts like a smooth operator. We want our clients to focus on managing their businesses.
Three Critical Mistakes to Avoid
You will see more progress with your suppliers if you stop doing these three things: Ignoring the Macroeconomic Environment: Executives choose to negotiate at the wrong time. They burn their relationships thinking, "Now's a good time to get a deal since everyone's hurting." You should be trying to add even more value to your business partners during this time!
Avoiding Credit Agencies: Credit agencies show your suppliers your word is your bond. Not negotiating early payments: Early payment clauses improve your bargaining power.
Building a Culture of Strategic Iteration
These are a few of the strategies our firm advises our clients looking to increase their free cash flow. We ask over 500 questions within our first 90 days of working with a client. It's about having a lean culture that's eager to grow through iteration.
You won't be good at playing the piano the first time you sit down…managing your capital is no different.
