Negotiation is an art that every entrepreneur should have a firm grasp on. Great business deals and offers have been made at the negotiating table or through Alibaba, enabling many firms to grow and thrive. However, like any other art, there are the wrong and the right ways of conducting a successful negotiation. You should know when to negotiate, what to negotiate on and who to negotiate with. Below are seven deadly mistakes you should avoid during a negotiation:
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1. Leaving Money on the Table
A good negotiator invariably looks out for loopholes that they can turn to their advantage. Here are good examples of how clients literally leave money on the table’ for their own advantage:
Sample costs should always be credited back to you during the trial order. This is something that should be negotiated beforehand and can easily save you $100 off the trial order price.
Before placing your initial order, make sure that you are aware of the costs of the products. Stick only to your specific suppliers shortlist while negotiating to avoid wasting time with people who have no direct impact on the outcomes of the negotiation. Basing on your decisions on market price, ensure that you negotiate a price that is equally fair to you as it is to the supplier.
Reorders and negotiations
Your initial negotiation is crucial in determining how your supplier will price subsequent orders. However, as your order volumes grow, it is important that you revisit the negotiation with your supply and get them to reconsider their prices. Keep negotiating as long as you are in business because business situations keep changing.[convertkit form=5145413]
2. Going for the Kill Too Early
A good negotiation requires an ample supply of patience from both parties. Sometimes, a negotiation is not just about negotiating. When you jump into the negotiation too early, you come across as egocentric who is solely after satisfying their own interests. This can be very off-putting, especially in China.
Before beginning the discussion, you need to establish a strong relationship with your supplier. Make them bestow their trust in you. Additionally, you need to have a firm business foundation. Do not engage your supplier before you have something tangible to offer. Patience is a virtue in business. Create meaningful relationships first, then other things will follow.
3. Negotiating Below the Price Floor
The main focus of a great negotiation is to eventually achieve mutual contentment. However, amateur negotiators think that negotiations are all about winning. They may, therefore, try to out-compete by aggressively elbowing suppliers to below their price floor.
Trying to pay suppliers less than what a product is worth is not good and looks amateurish. Factories have to make a living too and you should remember that you are doing more disservice to your business than the supplier. The suppliers also have their own interests and they are not ready to sacrifice them on the altar of your aggressiveness.
The best you can get from a supplier who feels violated by the negotiation is poor quality service or product. It is a rule of business to do all you can to protect your company. Suppliers will not be willing to compromise their business in the favour of yours.
It is a well-known fact that the Chinese are mostly peace-loving, intelligent people. It is not uncommon that they may decide to stay clear of an aggressive negotiation and leave you with the illusion that you have had your way. They will agree to work with you but provide you with poor quality products if you went below their price floor.
Communication is key when working with Chinese Suppliers. It is up to you to make sure that you are clear on what you want and not risk getting what you didn’t ask for.
4. Thinking That Price Is Everything
Keep in mind that eventually, the price alone does not matter. There are other vital factors that add to the prosperity of your business. These factors include, but not limited to favourable payment terms, timely delivery and services of great quality. It is therefore important to remember that negotiations are not just about prices. The prosperity of your business depends on other factors much broader than just the prices.
5. Forgetting to Negotiate Better Payment Terms to Increase Cash Flow
The key driver of any successful negotiation is the promise that, in the end, both parties will mutually benefit. However, you should put more focus on growing your cash flow by negotiating more accommodating payment terms. Make sure that you negotiate payment terms that are considerate of your cash flow. A good cash flow will allow room for your business to scale faster, introduce more quality services and serve a wider customer base.
6. Not Getting the Supplier to Compensate You for Defect Orders
In as much as business is about mutually accommodating each other, it would be imprudent to pay for your supplier’s mistakes. When you make an order, you deserve only what you asked for. Remember that you paid for the services and it’s up to the supplier to deliver only quality goods.If in any case, there are defects in what you have received and the supplier is only to blame for the mistake, they should be responsible for their blunder.
You will be hurting your business by acting too nice and agreeing to take spoiled goods. Your customers do not care and you will simply plunge your business into unfavourable unnecessary loses. You also need to set a precedence to the factory that you are not a walk over and mistakes will be called out.
Do not taint the reputation of your business because you are trying to get the supplier to think you are a nice business partner. Faulty goods attract negative feedback and an opportunity for your competitors to bring you down.[convertkit form=5145413]
7. Forgetting To Negotiate Packaging, Labeling, and Shipping
Sometimes you can get carried away with setting the right price for the product and forget other important aspects of a successful shipment. There are other costs that you should put into consideration apart from the buying price of the product. These include packaging, labelling, and shipping expenses.
While thinking about these additional costs, you should brainstorm different ways in which you can cut them by getting the services done at lower prices. While negotiating with your supplier, do not forget to make every aspect of the shipment a subject of your negotiation. Consider the costs you will incur until the goods are safely in your hands. For example, you can have your labels made in China, where you can pay cheaply compared to when they are made in the US.
Finally, it is important to keep in mind that prices should not be your chief focus when negotiating with Chinese Suppliers. Understand your business needs to stand a chance of making a better negotiation. You should be in a position to know when and how to negotiate. Make sure that every negotiation is geared towards flourishing your business and enabling you to stay ahead of your competition.