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How to negotiate in business

I am trying to improve the way to do business and a friend says I need to think about bartering and negotiating harder with my suppliers, even my banks, but I am not great at that kind of stuff. What do you think about barter and tough dealing with suppliers?

Being a tough negotiator is crucial to doing business professionally. Consider this – if you had a million dollar business and your costs were $500,000 and you could cut your costs by 10 per cent, then you would drive up your cash balances by $50,000. And if your costs were $100,000 in a much smaller business, the $10,000 saving would be just as important to you.

If you aren’t good at the emotional battle of wits and will to get a discount, come in with a raft of information and data. Ring around rival suppliers, get on the internet and get an idea of prices that could be used to get some leverage with your bargaining. Tell your supplier that you don’t want to change suppliers but your accountant has insisted that you have to cut costs. Of course, if your supplier won’t budge and his or her service is not exceptional and worthy of overpayment compared to rivals, then you use this research to switch.

On the subject of bartering, this can be formal or informal. If you use a service such as Bartercard (and there are others out there), you can use this to help bolster sales. For example, restaurants might accept barter on quiet days such as Monday and Tuesday. This means the restaurant receives barter dollars, which they would pay tax on, but you can use the barter dollars to buy supplies from others in the barter group.

In my business, one barter group wanted to advertise in our magazine Grow Your Business and we received barter dollars. The group provide a big book like a telephone directory with other businesses that will accept barter dollars.

As a consequence we spent our barter dollars with a service station, which serviced our business cars. Ideally, if you can earn business barter dollars and then spend on business costs, the tax effect can be cancelled out. There are problems such as you might not have enough businesses that will accept barter dollars and often the businesses that get involved don’t use the directory well.

Informal barter could be where you approach a business that might supply you paper and you might be a publisher of magazines. You could give the printer ads in your publication valued at $10,000 and this could reduce your printing bill. This involves a bit of lateral thinking.

Finally, even as a consumer I have learnt to ask shopkeepers if they will give discounts for payment in cash. Lots of businesses will give up to 10 per cent price reductions for cash payments and so it pays to be bold and ask for a discount.

I loved Woody Allen’s take on trading when he once explained: “The biggest sin in my family was to buy retail.” 

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

 

 

Published on: Friday, June 04, 2010

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