Posted on Thursday, 27th May 2010 by Vanessa Miller
Cost cutting is in the air, as the new government wipes the blood from its axe following the first round of public sector spending cuts. But for SMEs also looking to save money, a less painful way to reduce overheads could be staring them in the face.
Throughout the last year most small businesses have had to make tough decisions about staff costs, whether in the form of pay freezes, cutting salaries, moving to short-time working or letting people go. But when it comes to speaking to suppliers about better prices, it seems many are shying away from crucial savings.
Some 31 per cent of owner-managers say they do not see themselves as strong negotiators, while 13 per cent believe bargaining with suppliers doesn’t make a difference, found a recent survey.
These are worrying figures, as they suggest that a large proportion are missing out on securing better deals, something you can be sure their larger competitors are not failing to do. In the current climate (and particularly if the economy takes another turn for the worse) meekness is not a virtue.
But you don’t have to hold a gun to your suppliers’ heads and make them an offer they can’t refuse. Most of the time all it takes is an honest conversation.
Richard Perry, chief operations officer at media company GyroHSR renegotiated deals on contracts by cutting his number of suppliers by half and offering the existing ones more business in exchange for better terms.
He says: ‘From my own experience when clients ask for rate reductions, it’s a lot easier if there’s a dialogue. It’s all about respect and reaching a common understanding, rather than taking an antagonistic approach. I feel we now have much stronger relationships with them as a result.’
Lisa Smith, executive at water cooler company Tana Water, managed to secure a 40 per cent reduction in product costs by entering into a long-term partnership with one of her suppliers. ‘Just dealing with one supplier means they are guaranteed to increase sales over the long-term and so are able to offer the most competitive pricing,’ she says.
It may sound cheesy, but having strong business relationships is more important than ever.
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