3 reasons of WHY you should ALWAYS negotiate with the suppliers. This is a must listen episode before you start any negotiation!
Welcome to the GoodLife Warrior podcast. I’m Yuping. We make sourcing easy, fun, and profitable for your business. This episode was originally aired as a video on my YouTube channel, youtube.com/goodlifewarrior. As always, high-quality, professional sourcing content delivered to you with passion and my unique Chinese accent. Enjoy.
For those of you who are just starting out, you might be intimidated by the negotiation, especially with the Chinese suppliers. So I made this video to take you outside of your comfort zone so you can be the best CEO for your business. Now let’s check out the three reasons that we must negotiate with the suppliers.
Hi, I’m Yuping. I feel like I have been negotiating ever since I was five years old because that’s a way of life in China. Negotiation instinct. It’s in every Chinese person’s blood. On top of that, I was practicing law in China and now worked in sourcing for so many years. I live and breathe in negotiation. The students in my course definitely benefit from it, especially when I comment on their questions. So when I tell you the three reasons that you must negotiate with your suppliers, it’s coming from both a business and a cultural perspective.
Here is the reason number one. Reason number one, earn their respect. This is especially critical if you’re negotiating with a new supplier because you have a zero working history and zero credibility with this new company. So after you received their quote, if you choose not to negotiate, you send a message to them. That perception could be either you don’t know, or you don’t care.
If you choose to engage the negotiation, even though you know this is a good quote, you send another message and that is, I care about my business. That’s why I’m spending time negotiating with you. And I know my business. That’s why I’m asking you these questions. The supplier form their perception of you through the quality of the questions you ask. So if you don’t know what questions to ask, what techniques to use, I highly recommend you use my Master the Negotiation Guide. It should be on sourcingwarrior.com website.
The bottom line is this, choose to negotiate is an intentional act because we want to send a message to the supplier that we care and we know. Believe me, the supplier is more likely to make concessions to the person that they respect. We’re going to earn it through the negotiation process.
Reason number two, discover their hands. Sun Tzu Art of War, know yourself, know your enemy. The supplier is not your enemy, so I prefer to borrow poker’s lingo, discover their hands. It’s impossible to know your supplier’s hands. All you can do is engage the negotiation, get closer to discover their hands.
The first thing you’re going to discover is the power structure. Is the person you’re negotiating always getting permissions from someone, either managers or the owners? By discovering how many layers of power behind this person, you know the degree of difficulty to push for each one of the concession points.
As you go deeper into the specific negotiation, you will discover where they’re flexible, where they’re not. Maybe they’re not flexible with the quantity, but they are flexible with price. Maybe they’re flexible with their lead time. Maybe they’re flexible with the inspection. What about the warranty discount?
When you get stuck at the price negotiation, maybe something great comes out of it. When they cannot agree to the price point you’re asking for, maybe they will recommend a different material or a different design. You see, this negotiation process is all about discovering their hands to make your business better.
Reason number three that you must negotiate is the bottom line. Every offer your supplier sends to you has a margin built-in. When you negotiated with the supplier for a better price, it does not mean you’re taking the profit from them. Because at a lower price, when you send a purchase order to them, you are helping them make more money. At a lower price to them means more money. At a lower price to you means more savings. Savings are profits because, otherwise, you will have to sell more units to make up for this chunk of profit.
This bottom-line approach is often felt like being greedy. It’s not at all. It’s about creating a win-win. Also at the lower negotiated price, the compounding effect of the savings for all your future orders it’s going to make a much bigger impact on your business. So stay cool and focus on that bottom line.
Negotiation is a strategic and objective process. A lot of times we have to remove our emotions and focus on the reasons. In this video, I gave you three reasons: earn their respect, discover their hands and focus on the bottom line. If you are not part of the Sourcing Warrior Mastermind course learning negotiation from me, at least get your Master Negotiation Guide. Negotiation skill is one of those skills, once learned, it gives you so much more power. You want to own your business, then you need to own your suppliers through negotiation.
I wish you a powerful day. I’ll see you in the next video.
Check out the link, the Sourcing Warrior Mastermind link, undertake Sourcing Warrior’s quiz to find out your sourcing IQ. Make it fun, learn something, have a great day. I’ll see you in the next episode.