Most local construction firms understand the difficulties when negotiation with powerful regional suppliers. These large corporations made their name by buying up competitors and offering the best deals on raw materials, machine parts and other necessary supplies. Today, these huge companies hold regional monopolies over specific product lines, allowing their executives to strong-arm negotiations to best fit the company goals.
Local construction firms and contractors may feel helpless when dealing with these untouchable corporations, unable to find the leverage needed to ensure a fair deal. Resourceful entrepreneurs are not as helpless as they think — a few clever tactics can help even the smallest business gain the upper hand in negotiations with suppliers.
4 negotiation tips for local businesses
These tactics might offer local business owners a way to pull their weight during negotiations with larger companies:
- Increase the company’s value to the supplier: The easiest way to increase one’s value is by turning a customer-patron relationship into a strategic partnership. Offer opportunities for the supplier to reach new markets by exposing new clients and markets to their products. Customers can also change their purchase orders to take on more risk, providing the supplier with a much more lucrative contract.
- Change purchasing habits: Small businesses can send a message to these suppliers by purchasing fewer products or decreasing purchasing. Some entrepreneurs form buying consortiums with other local companies to reduce extraneous costs and secure high-volume price breaks.
- Locate or create a new supplier: Clever dealmakers can gain leverage by enticing a neighboring competitor to break into their local market and take on the supplier. Ambitious business owners may investigate creating the supplies themselves with vertical integration. Many large companies may reconsider their terms if they see a motivated client begin to research taking them on directly.
- Consider legal action: When peaceful negotiations fail, entrepreneurs may have to play hardball. Canceling big orders can send a message, but so can a subpoena into the financial reasoning behind suspicious price hikes. The threat of government regulation may inspire these near-monopolies to play nice.
Wary of a new contract? Consider hiring a lawyer
Local business owners concerned about a new contract with a large supplier can find help with a local attorney familiar business litigation and contract law. A lawyer can explore negotiation tactics, provide a legal review of contracts and work with government regulatory bodies.