How to renegotiate small business services

How to renegotiate small business services

Small companies often get comfortable with their vendors, allowing service providers to raise rates or avoid improving their offerings for many years. For example, once a company has an insurance policy, ISP, utility provider, printer, copy machine lease or other contract, that contract might remain in place for many years.

It’s important for an office manager, bookkeeper or purchasing person to conduct an annual review of all office contracts. Doing so not only helps your company find the best suppliers, but also makes your current suppliers think twice about raising prices.

  1. Create a list of vendors and suppliers

    The first step in making sure your company is not overpaying for services is to keep a current list of all of your providers. Services might include:

    • Internet
    • Tax preparation
    • Copy machine
    • Postage meter
    • Phones
    • Water cooler
    • Coffee machine and supplies
    • Office supplies
    • Office furniture
    • Insurance
    • Graphic design
    • Printing
    • IT support
    • Cloud service provider
    • Office cleaning
    • Security
    • Utilities

    These vendors might be local suppliers, catalog companies or go-to e-commerce websites your company has used for years. Even with utilities, some states allow multiple gas and electric companies to compete for customers.

  2. Keep a contracts file

    Keep all of your vendor and supplier contracts in one drawer to help make the process of locating and reviewing your current contracts easy. Your bookkeeper might want a different filing system to help with accounting; consider making a second, duplicate file for whoever handles purchasing or reviewing contracts if it’s not your bookkeeper. Your file should help make it easy to conduct an annual review of vendors, even those that have been providing excellent service. Comparing the service of a favorite contractor to other potential providers will help you spot areas where you can ask your current vendor for service that its competitors are offering.

  3. Decide on your criteria

    Price should not be your only consideration when comparing vendors. Customer service, support, speed of delivery and quality of performance are other important factors. Negotiating payment terms, for example, can help you get up to 90 days to pay bills, rather than a 10-day turnaround requirement. Some vendors also offer credit or financing terms. Check out our post on How to choose a new office supply vendor for tips to help you develop your criteria list.

    One important part of your process will be talking to your office staff. Your current vendors might offer a level of knowledge, customer service and expertise that make paying a higher price worth it. Remember, your coworkers will have to work on a regular basis with new vendors, so even if they are willing to change, make sure you include vendor capabilities they want (such as fast response to customer service calls, online user manuals or other benefits). Long-time vendor relationships can also be come to be seen as friendships, and staff who work with established vendors should be asked their opinions. The price you pay vendors is not the only factor in determining a bottom line impact on your business. Consider such things as how does each vendor improve productivity and efficiency, reduce errors and waste, and increase revenues (if applicable).

  4. Look for new suppliers

    To find potential new suppliers, use a variety of sources, such as trade association sponsor or advertiser directories, employee suggestions and referrals from your professional contacts. Let people know a few specifics about what you’re looking for when you ask, “Can anyone recommend a good graphic designer?” or “We’re shopping IT support services.” Make sure to request each potential supplier’s online reviews.

    When you contact potential new suppliers, they will ask you a variety of questions about your needs, and may ask for a copy of your current contract or pricing structure. Don’t volunteer this latter information—knowing what you’re currently paying for services or supplies can help a potential supplier raise their prices and still bid below your current contract. Be prepared to create a more detailed list of needs for vendors after a first phone call so they can create the best offer for you.

  5. Start negotiating

    Our tutorial, How to negotiate the best deal with a product vendor, will help you get the optimal combination of prices and service from vendors and suppliers. Wait until you get bids from new potential suppliers before you contact your current partners. Switching suppliers can create service, delivery and quality hiccups, and require some re-training on the part of staff. For these reasons, it’s a good idea to give your current suppliers a chance to meet or beat new offers. In some cases, you may switch suppliers regardless of price because of the quality of the products or services the new vendor offers.

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