How to negotiate with large suppliers

| Jun 9, 2020 | Construction Law |

Florida entrepreneurs, especially contractors, understand the challenges of dealing with large suppliers. These massive companies hold near-monopolies over regional supply chains, giving local businesses little competitive choice. Sometimes, these emboldened companies increase prices to take advantage of their clients.

Dealing with suppliers like this can be intimidating, leaving smaller companies to feel helpless. However, savvy business owners can get the upper hand with a few clever tactics.

These tactics help small businesses secure leverage

With a thorough understanding of the industry and strong community connections, local businesses have a few advantages that large, powerful suppliers may not. The following tactics can help small businesses with their negotiations:

  • Create more value: Suppliers become successful by taking advantage of opportunities. Clients who present new paths to profit via untapped regions or overlooked sales opportunities may use data to leverage better deals or price breaks. Clients can also secure better pricing by agreeing to longer-term contracts or cleverly bundled orders.
  • Alter purchasing habits: Many suppliers offer bundled products to their clients to reduce shipping costs. Careful analysis of these purchases may reveal overpriced products that buyers can find elsewhere. Clients can send a message by reducing their purchases to the products only available through that suppler, finding a cheaper alternative elsewhere. Additionally, clients with similar purchases, like several construction firms, can bundle their orders together in purchasing consortiums to reduce overhead.
  • Find or create supplies: Though expensive and time-consuming, entrepreneurs can create their supply source. Once a supplier sees their client seriously researching a vertical integration strategy, they may be willing to renegotiate. Most suppliers would rather lose a little with one order than deal with a new competitor. Introducing a new supplier to the region by clearing obstacles can shake up the local industry, too.
  • Legal hardball: Sometimes, local businesses take on these large suppliers in court. Though fighting through a corporate legal team is a costly endeavor, many powerful suppliers only respond to government oversight. Often, the mere threat of a legal petition to access financial records for cost analysis can inspire these suppliers to negotiate in good faith.

Secure a legal perspective

Local entrepreneurs with questions about the above tactics or other legal options can consult with a local attorney familiar with construction suppliers and business litigation. A lawyer can draft legal documents, work with government regulators and contribute legal expertise to negotiations.