Entrepreneurs have their work cut out for them. Small business owners work hard to carve out a place in a community, forging relationships with fellow business owners and local lawmakers to create opportunity and profit. Entrepreneurs must also deal with large regional suppliers to secure manufacturing equipment, raw materials and imports necessary for their business operations.
These powerful companies often overlook the small business perspective in their dealings. Many corporations will leverage their near-monopolies to force buyers into bad deals that take advantage of smaller companies. Fighting against these giants is a difficult task, but not impossible. Local business owners can use a few tactics to increase their negotiating power and reap higher margins.
4 strategies for negotiating with powerful companies
Small businesses looking for leverage in their negotiations with powerful suppliers have found success employing these tactics:
- Introduce new value to the supplier: Often, the easiest way to negotiate a better deal is by increasing one’s value. Entrepreneurs can serve the supplier as a gateway to new markets or reduce the supplier’s risk with more profitable ordering.
- Change purchasing habits: Changing purchasing patterns may send a message but can also have detrimental consequences if not properly researched. Consider grouping with other small businesses into purchasing consortiums to take advantage of price breaks and bundling.
- Bring in a new supplier: Often, suppliers hold control over a region because they continue to buy out the competition. Introduce a new competitor from a nearby locale by offering greater value or introducing them to new clients. Some ambitious entrepreneurs may even attempt to manufacture the needed products themselves. If a large supplier sees a client begin to transition to a competitor, they may offer a better deal to keep the supply chain consistent.
- Play legal hardball: Business owners can always threaten litigation if battling blatant price-fixing or market manipulation. Often, even the threat of a subpoena into a large supplier’s financial records will inspire them to reconsider unfair terms.
An attorney can provide more options
Small business owners looking to get a leg up on a forceful supplier can reach out to a local attorney familiar with business and commercial litigation. A lawyer will help work with government regulators and draw up business contracts.