When is the last time you negotiated a better deal? I know, I know, you don’t like haggling because it makes you uncomfortable and creates tension - so you avoid it like the plague. Would it spark your interest if I told you that your discomfort with haggling has cost you thousands (if not more) of dollars? It is true. Every time you fail to negotiate you lose an opportunity to save money that could add to your bottom line. And, you are more likely to get a better deal if you ask for it than you are to be rejected. So, pay attention folks as we explore ways to negotiate your business into savings some serious money.
First we will focus on typical negotiations that any business could use. Towards the end, I have a special tidbit for my healthcare friends.
Whenever you make a purchase - ask for a discount. Train your staff to do the same. Making a supply purchase at Office Depot, ask if there are any coupons or discounts that they could apply. 90% of the time they have something to apply to save you money. Regardless of what you are purchasing or where you are making the purchase - you will discover that asking for a discount will result in a reduction of your expense, even if a discount doesn’t exist, more times than not. I have had sales clerks take 10-25% off my purchase just because I asked.
Prepare a list of your vendors and include the amount you have spent with each of them over the previous 12 months. I recommend annual vendor negotiations. You should speak with your vendor at least once per year to discuss pricing and service options that will best suit your business. Now that you have your list, call each vendor and ask for a discount. They may ask you what your projections are for the next 12 months, tell them - it’s okay, they are really trying to help you save money while helping their company make more money. If they cannot offer you a discount moving forward, ask for special services that would benefit your company. Maybe free shipping, expedited shipping, bonus items when a certain amount is ordered, or an added label or barcode to make your internal operations less time consuming. If you don’t ask, you will never receive and your vendor won’t know they best way to service your needs.
Big project coming up? Anytime you anticipate a big project, move, expansion or event, make sure you predict the needs you will have from your vendors. This is a great time to make a call to tell them what will be coming their way if they can arrange special pricing or services to help you make it happen. Depending on the size of your company, these negotiations can go a long way. A project that I worked on with reduced their cost by only $2.50 per service, but saved them over $1.2 million their first year.
Did you negotiate a great deal? Find ways of shifting your internal operations to benefit the most from this vendor’s service. If it is a supplier, see if you can order all your company's items from this vendor and have them distributed to the proper location by the vendor instead of having each location order independently. If it is your payroll or HR service provider, see if you can have employees contact them directly to save your internal people time. Always think of ways to maximize your savings by way of dollars, time, and productivity.
Get your staff excited to find you the best deals. Offer your staff a reward if they find a way to save you money through purchases or services. One company I worked with gave employees 10% of the realized savings after six and twelve months. A single employee received a bonus of $9,811 at twelve months after suggesting the company use washing machines and dryers to wash their linens and uniforms instead of a laundry service. Again, scenarios will be different based upon the size, needs, and unique services of your company.
Use these tactics personally as well. I ask for discounts every time I go to the grocery store, tackle school shopping for the kids, make a large purchase, hire a contractor, establish or elongate a contract with a service provider. I paid 65% of what I was originally quoted from a contractor because he was aware that I was price conscious and because I asked for a discount. 65%! I get an additional 5% off my cell phone plan, $10 per month off my tv programming, and even $2.75 per month off my garbage service - just because I asked.
A discount here and there adds up quickly to huge savings.
Chances are that you will be denied a discount at some point. This is a great opportunity to find out how you can become privy to discounts that are given in the future. Whether it is a text coupon service, email signup, website, quantity based criteria, or rewards program, find out and use it. The great thing is, that you can usually use your coupons or discounts provided by the company in addition to the discount you receive by asking. Even if you don’t get a discount that time, make sure you ask every single time, because getting that discount could be dependent on who you are working with on the deal.
If you are purchasing items to resell, most states that charge sales tax will exempt those items from sales tax if you tell the vendor up front it is a wholesale purchase. If you did not already know, you could even negotiate wholesale pricing (40-65% reduction from retail pricing) if the vendor knows it is for resell.
Finally, for our health care friends out there. Negotiate your insurance contracts. Most providers are not aware of this ability. Negotiating your contracts with insurance providers on an annual basis will always keep your income levels at the top. I have worked with clients that never negotiated their insurance provider contracts and they were automatically renewing at the same rate or incremental increases for years. When they finally negotiated, they were able to increase their income by $20 - $170 per service offered depending on the level of service and how it was coded. Just at $20 per service for a part-time physician the increase to income is over $62,000! Chiropractors have a more difficult time achieving these same results, but it is still worth a try.
April Salsbury, MBA is a strategist, an analyst, an operational guru, a recognized leader and C-suite global healthcare executive with drive and focus for competitive markets. Co-host of The Business Forum Show and regular contributor to various business journals, she possess multi-functional and multi-national competencies with more than 15 years experience in business and healthcare. Her expertise is in invigorating revenue growth and infusing value of lean practices in growing companies through improvements to cash flow and operations management.
Fueling revenue, growth and profit, Salsbury & Co. is a consultancy firm focused on helping businesses and healthcare organizations achieve excellency. Our specialists have executive experience combined with deep functional expertise to provide our clients with services that drive real impact and results.
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