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Office Space / small business advice / Virtual Office

How to Negotiate for Lower Business Expenses

How to Negotiate for Lower Business Expenses

Every expense that your small business has, ends up adding to your overall cost of doing business and can eat away at your bottom line. What is the answer? Lower your re-occurring costs by negotiating discounts and lower rates with your vendors.

While small businesses have been cutting back on their spending over the past number of years, according to one report, costs for goods and services togrther can be has high as 28 percent of your small business’ budget, making those costs the second largest expense after payroll.

It is true that some fixed expenses such as rent, office equipment and utilities can be more difficult to negotiate, but with the right amount of knowledge, you might find some alternatives or ways to get these expenses fixed. Knowing what your big expenses will be each month will make it easier to budget and allow you to focus on negotiating other expenses that you have to deal with.

One way of better budgeting your office rental and equipment expenses is to rent office space at a serviced office business centre, where furniture and access to office machines like network printers, photocopiers, fax machines and a telephone system are included in the rent. You only need to pay for what you consume and not have to worry about the cost of maintenance and supplies. This can be a considerable saving over having to rent a traditional empty office space and having to purchase or lease equipment that you are not always using.

Another alternative to expensive offices is to rent space in a lower-priced area and utilize a virtual office service to give the appearance of having a downtown office. For $30 per month, you can have a mail service that gives you that prestigious address and forwards your mail at no additional charge each week. Or, you could have a telephone and mail service for $75 per month that handles your mail and saves you a payroll expense of having a live receptionist at your location.

Do not be afraid to negotiate with your vendors for the prices of products that your business regularly consumes, or that are an intricate part of your products or services. The fact is that many set their prices in anticipation of their clients haggling on the price or getting a volume discount.

Most of your vendors know that they are not the only supplier for the products you purchase from them, so do not be afraid to ask for deals. A vendor may be more inclined to negotiate on price if you send them a bid request form. This tells them you are asking around for prices. The bid request will also allow you to shop around and get prices from other vendors. The resulting competing bids will give you a little bit of leverage in negotiating with your vendor of choice.

Remember that the more information you can provide a vendor with upfront, the more accurate your quote will be. You do not want vendor A pricing for apples and vendor B pricing for pears, so it is important that all competing vendors know exactly what you are looking for and the volume that you intend to order from them.

When considering your ordering strategy, find out from the vendors of choice if they prefer breaking down orders or consolidating them to see if the price might be better if the ordering is done differently. If you are getting one product from one supplier who has the best price for that product, while ordering another product from another vendor because the price is better, you may want to see if the first vendor can give you a better deal if you order both products from them.

If you are paying for many of your expenses with a company card, you may want to see if your credit card provider is willing to negotiate the rate on carrying a balance. Your vendors should also be consulted to see if they would give you a better price if you pre-paid with a cheque or a money order. Vendors who accept credit card payments have to adjust their pricing to allow for the processing cost of accepting credit cards.

Sometimes vendors are steadfast on keeping their rates the same, but that does not mean you cannot negotiate other aspects. One way of maintaining your cash flow is to negotiate better terms and length of interest-free terms. But you can also ask for other cost savings by asking for free delivery, additional free items or even drop shipping directly to your customers. For example, if you were a book publisher and needed to ship 4 cartons of books to 100 bookstores, you could negotiate and have the printer send those cartons directly and save you the cost of handling and re-shipping those books.

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