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How small businesses negotiate with regional suppliers

On Behalf of | Sep 17, 2020 | Business Contracts |

Owning a small business comes with considerable demand. The tumultuous 2020 has redefined the small business landscape in fundamental ways, demanding that entrepreneurs manage new risks and adapt to a changing world. Clever entrepreneurs look for creative ways to save money in these difficult times, including revisiting business contracts with suppliers.

Small businesses often work with powerful regional suppliers to secure necessary raw materials or manufacturing equipment. These negotiations can challenge many entrepreneurs who have difficulty securing impactful leverage. What can a small business do against these powerful corporations?

Business tactics available for entrepreneurs

Small business owners are no strangers to creative solutions to complex problems. This same problem-solving mentality can help executives negotiate with large companies that may hold near-regional monopolies. The following four tactics can help small business owners find success in their business dealings:

  • Increase value: Even massive companies will not overlook an opportunity for profit. A small business can earn a supplier’s favor by adding more value to their interactions. Smart negotiators identify where a company takes on risk and then offer a deal that mitigates that risk. These deals offer longer-term contracts or higher volumes.
  • Modify purchasing: Small businesses can send a message by changing their buying habits. Slimming orders down to the essentials can communicate dissatisfaction while bundling products together for efficient shipping can save cash on each order. Additionally, small businesses that work with the same supplier can form buying consortiums to combine their orders.
  • Discover a new supplier: When suppliers offer untenable deals, their clients may look elsewhere. Owners can entice outside competitors with attractive prices or exposure to other clients in the region. Some ambitious entrepreneurs research vertical integration, hoping to become a supplier themselves. Many regional corporations will accommodate a client to prevent a new competitor from entering the market.
  • Hardball: Sometimes, large companies will not listen without provocation. Canceling all orders can send a message, but many small businesses consider legal recourse. When researching price hikes, a well-times subpoena into a company’s finances can inspire positive action. Powerful suppliers are very responsive to government regulation.

Entering new negotiations? Consider legal assistance

Most businesses find more success in dealing with powerful suppliers alongside a local attorney familiar with contract law and business litigation. A lawyer can assess a lawsuit, confer with government regulators and draft equitable contracts.

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