Important Tips for Negotiating with Vendors

Important Tips for Negotiating with Vendors

No matter what you are marketing, knowing how to successfully negotiate with vendors is key to any profitable concern.

Make Eye Contact

My first recommendation for entering into negotiations with a vendor goes against today’s norm. There are many novice entrepreneurs who believe that selling their product or service through social media such as Facebook is sufficient to bring in clients. I have always believed that the first thing any businessman or businesswoman should do when promoting his or her wares is to meet on a one-on-one basis with the seller or buyer. Nothing replaces direct eye contact. And although, with the introduction of Skype we can see and speak to a possible vendor, it is not as easy to read a person’s reactions and moods on a computer or TV screen as it is when sitting across a desk or table.

I realize of course that in our international marketplace where business is contracted across oceans and continents, it isn’t as simple as it used to be to meet someone in the flesh. However, assuming the contract is lucrative enough and the negotiations important enough, hoping on a plane and traveling thousands of miles to clinch the deal may not be at all superfluous.


When it comes to writing up the contract, there are several points worth mentioning.

  1. Be precise when deciding on payment terms. Will it be ‘on demand’? Every 30 days? 60 days? Never assume that every contract will be the same.
  2. Is there an escape clause? Or is there a penalty if you want to pull out early? What if the vendor wishes to end the contract before it is due? How much notification is required by either side?
  3. What about the future? Is there an option for phasing-in additional business down the road? If you plan to expand your relationship with the vendor, be certain that he will be able to meet increased demand in the future, or suggest some sort of introductory system to ensure a smooth expansion of the relationship.
  4. When it comes to performance metrics, make sure to be as specific as possible. Delivery of the goods or services is important of course, but so is professionalism. If you wish to maintain a certain standard, it should be worked out and noted beforehand so there are no surprises later on. Are you seeking perfection? Makes sure the vendor is as well. Is timeliness important to you? It should be. Tardiness is off putting and businesses can be broken when deliveries are late and promises are not kept in an orderly fashion.
  5. A practical contract will always discuss the issue of price fluctuations. What if there is a significant fluctuation in the acceptable price for the good/service in question? How will this be dealt with? Will rates automatically rise in proportion to the fluctuation? Will it be incremental or based on the market? Some businesses designate a calendar date which, when reached, will call for a reassessment of the contract and will deal with the issue of prices at that time. Does the vendor have the right to call for a price readjustment if necessary? And what about fluctuations in different currencies when dealing with international vendors?
  6. Can the vendor bring in another partner after the contract has been signed who will be part of future negotiations? Will a new contract be drawn up at that point with the agreement of the original owner?

Negotiating a good contract between the two parties of a transaction should be done in a pleasant and unquestioning environment and should be mutually acceptable to both sides. If you don’t trust the vendor, don’t enter into a contract with him no matter how much you need his business. It will only lead to fights and accusations and no one will come out ahead in the end.

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