Let’s face a plain fact: it takes a real investment of time, attention, and often money to grow your company’s bottom line. Knowing this is true, why then would you or any business owner casually throw away tens or even hundreds of thousands of dollars of easy profits every year?
Think back over the past 90 days – where are all the places you’ve made purchases for your business without negotiating on price and terms?
At a recent negotiation workshop I taught over 60 percent of the participants admitted to feeling intimidated when they were negotiated, which caused them to often just skip it and pay full retail.
To be clear, these were successful business owners, most of whom owned companies with sales in the millions of dollars. Yet they were letting their discomfort with negotiation cause them to overpay by tens or even hundreds of thousands of dollars every year.
Consider how much money you spend with your suppliers and vendors every year. What would it mean to your bottom line profit if you could save 5, 10, 15 percent or more on contracts and purchases with your vendors and suppliers. This is money you are already spending.
Just to put this into perspective, every dollar you save on a purchase your company was already going to make drops directly to your bottom line. This means that if you have a 20 percent operating profit margin, every dollar you save equals five dollars in additional sales.
Imagine you were about to work with a new I.T. vendor at $3,000 a month ($36,000 per year). If you could agree instead on $2,700 a month, a 10 percent savings, that would equal $3,600 of additional profit every year. If your operating profit margin were 20 percent this is the same thing as making an $18,000 sale.
Is the equivalent of an $18,000 sale worth the five minutes of awkwardness as you negotiate with that vendor? Of course.
Here are three questions for you to ask to get yourself that better deal.
Question One: “I’m a bit new to your world Paul, tell me, who in your world is your biggest competition?”
Notice this question gets your counterpart to actually voice who their main competition is, stoking the fires of fear of loss and softening the ground for your eventual request for a better deal.
Question Two: “On those occasions when someone buys from x [the competitor they named] instead of you, why do you think that is?”
Again, you’re preparing to ask your final question.
Question Three: “Considering all you’ve told me Paul, what is the best deal you can make for me that would make me just want to work with you right here, right now instead of shopping around?”
When I use these three questions in this order I’ve literally saved tens of thousands of dollars in annual spending for my companies, which in the equivalent of hundreds of thousands of extra sales. And it just takes five minutes and a dose of courage to ask.