Choosing Suppliers

How to boost your bargaining power with suppliers post-Brexit

3 min read

01 November 2018

Deputy Editor, Real Business

At a time when business costs are rising, here’s how you can renegotiate contracts with suppliers to protect your profit margins.

The EU is the UK’s largest trading partner, with UK imports from the EU accounting for 53% of all UK imports in 2017. Bring Brexit into the picture and a balancing act of doing what’s best for you and incentivising potential suppliers to stay begins.

This makes re-negotiating a contract tricky. While this is common practice with suppliers, Brexit uncertainty means companies will need to do so tactfully, so as not to damage the relationships they have worked hard to build.

But if done correctly, negotiating with suppliers can benefit both sides. Here are three strategies that ensure you both get a good deal.

Offering to pay in advance

One route SMEs can take is to offer to pay for goods in advance of them being shipped by the supplier. Some 27% of global trade transactions involve cash-in-advance payment to suppliers, according to the IMF and the Bankers Association for Finance & Trade.

Talking about the results, Phil Tobin, managing director of trade finance, explains that in the current economic climate, suppliers are reliant on early payments. It’s no surprise that more suppliers would like to go the cash-in-advance route.

However, it isn’t easy to convince companies to part with needed finance ahead of time. Doing so will make suppliers more willing to negotiate though – and some even offer unique discounts to companies that pay in advance.

Talking yourself up

Throughout the negotiation process, try to think like a supplier. What would make them stay if you want to pay less?

If they see your business as a high-growth company with a good track record, they will be more willing to partner with you and offer favourable rates to ensure they benefit from your future growth.

Focusing on the long-term can therefore be a useful way to encourage the supplier to invest more in the relationship. However, be careful not to over-promise, or it could cause difficulty further down the line if you don’t deliver.

Proving how reliable you are before asking for a renegotiation might help.

Is it worth asking for a better price?

Research the cost of goods beforehand. You might already be getting a better price. By knowing the prices offered by your supplier’s competitors, you can work out roughly how much room there is for negotiation, putting you in a stronger position.

Try to avoid mentioning how much other suppliers charge for the same product, as this could damage the relationship you have with your existing supplier by undermining your loyalty to them.

Ultimately, suppliers are more likely to offer discounts and favourable rates if you work to establish your business as a trusted and loyal partner.

Provide a win-win solution they can’t afford to turn down and you’ll be well on your way to securing a strong relationship post-Brexit.