This transcript was generated from the episode audio and may contain minor errors.
[Music]
How can you negotiate better terms with suppliers? Welcome friends, welcome back to Side Hustle School. It's the last day of the month. In today's episode, we're gonna help a bakery owner navigate these supplier negotiations. He's got a small bakery, it sounds like.
He'll tell us a little bit about it. And naturally he relies on suppliers and the costs can add up fast. So he's like, what can I do about this? Can I negotiate better terms without straining the relationships that I built here? We had a consignment question about this.
Well, consignment sales maybe 10 days ago from someone who was selling jewelry in a consignment shop. And she was like, I pay 40% commission. That feels like too much. And this is a little bit different because unlike a consignment shop, like she had other ways to sell her business, here the bakery is definitely going to need supplies. Like there's no other way to do that unless there are other suppliers he can go to.
But we'll talk about that in my answer. Thank you for tuning in today. The detailed question from our listener and then my response coming up in just 30 seconds. - Hi, this is Kev from Albuquerque. I run a small bakery and I've been tuning into your show for about a year.
So much good advice. Thank you. Here's my question. I order a lot of supplies like flour and specialty ingredients and the costs add up fast. I feel like there's room to negotiate better payment terms, but I don't want to risk damaging the relationships I've built with my suppliers.
What's the best way for a small business like mine to approach these kinds of negotiations? Are there specific strategies that work better than just asking for a discount? - All right, Kevin, what can be done here? Negotiating with suppliers can feel tricky, especially in a situation like this because Kevin is kind of dependent on his suppliers in a way that another small business might not be. As I mentioned in the introduction, like comparing Kevin's situation to the jewelry maker who was doing consignment sales at a local shop.
Well, she was also selling direct. And so she didn't need the consignment shop. It was additional and it was free customers and that's great. But here in the situation with Kevin suppliers, like he needs the flour. Like if he doesn't have a supplier that's offering flour, he can't operate his bakery.
Now, presumably there was more than one. So that could help with the negotiation. But I think the first thing to do is build on a positive existing relationship rather than trying to be cutthroat and being like, oh, there's somebody else that can provide the same flour for 10% less. Can you give it to me for 5% less? I mean, that can work, but if you already have a good relationship, I would just kind of start with that and emphasize and acknowledge their role in supporting your business and express gratitude to them.
And then you kind of share your current problem, which is like, hey, I would love to continue, but I'm being squeezed on some other things or I need to increase my prices more, but the market can only bear so much. Is there something we can do to work together so that we can continue to work together basically? Like, can we discuss options to lower the price? Or, and this is my next point, focus on terms, not just discounts. So sometimes negotiating is about more than just the price.
The price can be hard to negotiate after it's already been set, right? No supplier is gonna be excited about suddenly taking less money from you, but they can be more flexible with payment terms or some other perks. Consider asking for like a longer payment period before you have to pay. Ask for a bulk discount. Like if you commit to a larger order, then can I get a reduced rate?
And in that case, it feels a little bit different than just a price change because you're offering something as well. If there is shipping or delivery charges or any other charge, like a storage charge, for example, can they waive those fees? Again, it saves you money, but it feels a little bit different than just negotiating on the price. It can be something that's more comfortable or at least more palatable to suppliers. Of course, be open to compromise, like figure out what is really important to you, figure out what you'd like to have, what would be nice to have.
And if you can get what's really important to you, that's great. I always think it's helpful to look for win-win situations where both parties are not just satisfied, but they're happy. They are eager to keep proceeding apace so that both parties' interests are served in the long term. Last but not least, get it in writing. Make sure things are documented clearly.
That just helps everybody. It helps avoid future misunderstandings, keeps the relationship professional. Kevin, thank you so much for calling in with your question. Wishing you well this year, wishing everybody well. I'm excited to hear what you do, develop, grow, change, evolve, whatever you're up to out there.
Let me know. Feel free to write in from the website or I am on social media every day. Chris Guillebeau, my name, or 193 countries on Instagram. And of course, new episodes coming out every day, seven days a week, wherever you get your podcasts, always free. That's all for now.
I'm Chris Guillebeau for Side Hustle School. From the Onward Project.
