Negotiating with Your Service Vendors

In today’s tough economy, everyone is looking for ways to save, and operating costs are an obvious place to look. Whether you are entering into a contract for the first time, or renewing one, now is a great time to negotiate better terms vendors want your business, and it’s a buyer’s market. Here are five ways you can negotiate your own contracts and improve your position:
1. VENDOR FINANCING.
Depending on what you are buying, you may have to pay a significant amount up front. For example, if you are buying SaaS, there usually is a sign-up fee in addition to ongoing costs. In order to preserve cash, ask the vendor to finance the payments so you won’t have to go to your bank or another commercial lender. Typically, seller financing is less costly than commercial loans, and you may not have to pay any interest at all.

2. MORE FAVORABLE PAYMENT TERMS.
Ask for discounts for paying promptly. For example, if you pay via electronic transfer from your bank, rather than sending a check, the funds hit the vendor’s account immediately, and this should be worth a discount. A 2% monthly discount for payment within 10 days, rather than the usual 30 days from the date of the invoice, translates into an annual savings of 24%. However, with cash flow tight for many companies, it may sometimes be challenging to pay promptly. You may be able to negotiate a longer payment window (e.g., more than 30 days) without incurring additional charges or damaging your credit rating.

3. REDUCED PRICES.
Ask for price reductions on the services you use. In order to do this, you’ll need to comparison shop so you can be realistic in your request. Ask other vendors to submit bids or estimates per your requirements so you’ll know how steep a price cut you can command. Hopefully, if your request is reasonable, your vendor will acquiesce to retain your business. The leveraging point is retaining your business so you have to be willing to use another vendor if price is the determining factor and your vendor won’t cut the price.

4. GET MORE FOR NO MORE MONEY. 
Ask for more services without any additional charges to you. For instance, if you normally are entitled to five hours a month with a business coach, negotiate for six or more hours at the same fee. With some service vendors, there are numerous hidden costs each month. For example, you may be charged for postage and other similar costs incurred by the vendor. Negotiate to limit your payments only to the services provided, and not to the additional costs of the vendor.

5. CAPS ON FUTURE PRICE HIKES.
Sure, you’re anxious to hold costs down now, but it’s not too soon to look ahead. Ask for limits on when the vendor can increase the price, and by how much, so you can budget for the future.