How to get better deals with suppliers?

DBE Series 3

How can we get better deals with our materials suppliers?

Just like the GCs or general contractors, your suppliers are also looking for trust and capability. They’re looking at your reputation too because they’re taking a risk on selling to you – you might not pay them back.  

If you’re struggling in business – perhaps if you complain about the economy or tell them how individual customers aren’t paying you back, that makes them nervous. You might want to do this to make your customer the bad guy for messing up your cash flow but really, no matter what, your suppliers need to be paid.  

If you want to get a better deal, know that the cycle might look like this. 

At first, your price will be competitive because they want to win your business. But then any sign of cash flow issues – paying late, giving excuses, dodging bills, that makes them worry. As a result, when they quote you again, your prices will likely shoot up slightly because of the risk of selling to you.  

Not to be cynical here, but I’ve worked with my materials suppliers for over 17 years. They need to trust you too. They can’t be afraid to sell to you. And suppliers talk. Because your suppliers also supply your competition and sometimes your customers. 

Everybody talks in the construction industry.  

So to answer your original question, how do you get better deals? 

#1, pay them on time or early. If you can’t pay a bill in full, pay ½ before the due date and ½ on the due date. Explain to them the cash flow issue but be brief and optimistic about it. 

Don’t get long-winded about complaining about the customer.  

#2, work closely with your top 3 leading suppliers and enfold them into your business. Don’t just call just to place an order. Invite them to your place, give them a tour – your back office too, and update them on upcoming projects so they can get a heads up on your needs.  

#3, track their on-time delivery – is it regular? Thank them for that because they work hard at it.  

#4, talk with the customer service person and determine how you can streamline your ordering process with them. Is it helpful to give a PO number? Is it beneficial to call on Mondays? Make it easy for them to work with you.  

#5, don’t ask for price breaks until significant time has gone by. If you do ask for price breaks, give them a snapshot of your upcoming jobs that you’ve won. Show that the volume is absolutely there.  

How can we get better prices from our subcontractors?

This is very similar to our article about getting better prices from the materials suppliers. For everyone, it’s all about trust.  

For subcontractors, lots of times, it’s about time spent on your projects. 

They’re looking at you, judging you, to see if you’re easy to work with, if you’re a clear communicator, and if you pay on time. Your financial capabilities are a big deal for everyone who judges your business.  

I don’t know why but lots of small businesses like to create a rapport with their vendors, suppliers, or subcontractors and talk about how hard it is to get good contracts, how hard they get squeezed, and how hard it is to work with the big general contractors. The latter supposedly don’t care about them.  

That’s the worst conversation to have, especially with subcontractors, because it makes you vulnerable – you’re showing your warm, soft underbelly. It’s terrible because it makes you look less in control than you actually are.  Subcontractors can work with anybody, so why should they choose you over your competition? And how can you get great prices from them?  

#1. Be easy to work with. Come up with a checklist of everything you need to provide to them before the job starts. 

Fulfill that checklist and hand the full package to them. That includes blueprints, due dates, material lists, significant phone numbers, addresses, anything they need to get their work done efficiently.  

#2. Be a clear communicator – give them your numbers – your cells, and the direct line to your back office. Tell them the hours that your back office is open. 

Be available on facetime or on text for questions but use that checklist at the beginning of your work to address any problems that may come up.  

#3. Pay early or on-time. Don’t hide from any bills. That won’t make them go away. Pay ½ now and ½ in 2 weeks. Be open about this but don’t dwell or complain about your customers paying you late for any length of time. Remember, this makes them nervous.  

#4. Give them a heads up on upcoming jobs that you’ve won that includes them so that they can see exactly how much time to allot to your business. The higher volume of work, the more likely you will get a price break. Above all else, be easy to work with and pay on-time or early.  

Published by Janet Johnson | Financial Coach for Small Businesses

Janet Johnson is the author of My Money Pivot: An Entrepreneur's Guide to Finding & Making More Money. Before becoming a coach, Janet gained seventeen years of experience in a family-owned manufacturing company. She also trained small business owners in Financial Management and Lean Enterprise for seven years through contracts with the State of Connecticut and the Small Business Administration for seven years.

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