Whether securing raw materials or manufacturing equipment, most small businesses must deal with large suppliers. These big companies cover entire regions, buying up or pushing out competitors before they compromise the market.
Dealing with these near-monopolies presents many challenges for small business owners. Entrepreneurs who require long-term deals may feel like they have little to no leverage in negotiations. Thankfully, a few clever tactics can help small businesses avoid overpaying for the materials they need and build a healthy business relationship.
Large companies may respond to these four tactics
Massive corporations can seem like faceless monoliths that rule over local businesses. The following four tactics can help entrepreneurs and their lawyers negotiate with these companies to produce better deals:
- Increase one’s value to the supplier: Becoming more valuable to a large company can help create a business relationship, rather than a transactional exchange. Large suppliers will offer better deals to clients who can help them break into new markets, obtain more clients or reduce the supplier’s risk.
- Change purchasing habits: Smaller companies can send a message to a supplier by changing their purchasing habits. Reducing orders to the essentials may inspire the company to offer a better deal, while expanding orders horizontally across products can help secure higher value purchasing bundles. Some small companies find success banding together with other local entrepreneurs into buying consortiums and purchase their supplies together.
- Find or create a new supplier: If prices become unfeasible, clever entrepreneurs will court a new supplier. Generous offers of guaranteed business can entice competitors to enter the market. Ambitious business owners may see this as an opportunity for vertical integration and begin the research required to enter the market as a competitor. Even powerful suppliers would instead offer a better deal to a client then have to handle a new competitor.
- Legal hardball: As a last resort, business owners can get tough with threats of litigation. Small businesses can join together to fight against price hikes, teaming up with legal professionals familiar with antitrust laws. Powerful companies fear government regulation almost more than anything — one financial review might undo their entire way of business.
Find more answers with an attorney
Business owners bullied by powerful suppliers can bring their questions to a local lawyer familiar with business litigation and contracts. An attorney can help explore negotiation tactics, review existing or proposed contracts and work with government regulators.