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Investor's Business Daily and Yahoo News
Featured Article:
Check Your Emotions in Vendor Negotiations
By Morey Stettner, Investor's Business Daily
Featured on:
 Back to main Michael in the Media Page
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As your company grows, you'll spend more time and money dealing with vendors and suppliers. Negotiate favorable terms by keeping your emotions in check.
"Once you reach a verbal agreement, beware of getting so excited that you overlook the details," warned Michael Sloopka, president of NegotiatingCoach.com, a training and consulting firm in Reno, Nev. "It's not enough to say that you'll work things out later."
Sloopka advises entrepreneurs to address ambiguities and tie down loose ends before completing the negotiation. If you brush aside issues for later, you may dig yourself into a hole.
For example, define delivery dates with precision. Instead of verbally agreeing to "prompt delivery," clarify the time frame. If you want the vendor to commit to three-day delivery, do you prefer business days or calendar days?
Three Smart Steps
After you finalize terms with vendors, they might ask you to sign their contract. But the advantage goes to the party that drafts the agreement, Sloopka says, so beat them to the punch.
It's better if you originate the contract. That way, you can protect your interests and ensure that you understand every clause. From the outset, let vendors know that you will draft the supply agreement for them to sign. That eliminates surprises down the line and signals to them that you will be paying attention to detail.
Whether shopping for raw materials or finished goods, begin the process by asking for a proposal from a supplier. Then use it as a starting point to haggle over the terms. "When you've finished negotiating, draft a document based on what you've both agreed to," Sloopka said.
Because of similarities in most transactions, Sloopka suggests establishing a boilerplate vendor contract that your attorney reviews and approves. Then for each deal, tweak it on your own until it fits your legal requirements.
That saves you from paying lawyer fees each time.
Savvy Negotiation Ploys
During the dickering stage, look for chances to secure terms that give you maximum flexibility. For example, strive to work within wide parameters that fit your changing needs.
Rather than commit to purchasing 80,000 units of a vendor's product, for instance, propose a range of buying 60,000 to 80,000 for the same price. If your business hits a rough patch, you won't be forced to overbuy at a time when you want to scale back.
To wring concessions from vendors, use questions rather than statements.
Sloopka coaches entrepreneurs to begin with the words, "Under what circumstances ..."
Instead of declaring to a vendor, "You better not sell this to our competitors," it's wiser to ask, "Under what circumstances would you sell this to us exclusively?"
"Most people are too confrontational," Sloopka said. "If you start by arguing, it intensifies others' desire to prove they are right."
Copyright 2000-2008 Investor's Business Daily, Inc.
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