You want to open that store or small business you always wanted to own. You have clearly defined your concept, and identified your ideal customer. You have tested your concept and the feedback is positive. You know what you want to sell and what price. Now you have to find the suppliers who can supply your products. Sounds easy, Right? Nope. Sorry.
Maybe the supplier has an exclusive arrangement with one of your competitors. Maybe the price you thought you could get your products for was a ‘tad’ off compared to your projections in your business plan; and that ‘tad’ forces you to raise your prices; and that increase may not ‘fly’ with your customers. Maybe you are not sure that the supply will be consistent. Ouch! Having a great product at a great price NOT arrive at your back door when you need it is not good for business.
So what do you do? The first thing you have to do is make up a “spec” for each item you want to buy. Let’s take a sweatshirt as an example. You have to know the following:
- What sizes do you require?
- How about colors?
- Blend? 50/50 cotton/poly or 100% cotton?
- Weight? Lightweight or not?
And you have to have a “spec” for each and every item you want to sell. How can you get a quote from a supplier if he doesn’t know EXACTLY what you want? Think of looking for a car. You want it with this and that and in this color with this type of interior. The easier you make the supplier’s job the more likely he is going to want to work with you.
Once you have found the supplier, you now have to negotiate price and terms and although the two are mutually exclusive, the one has impact on the other.
Let’s talk price first. You are the customer here. You can refer to your financial forecast and give the supplier an idea of what sort of volumes you are projecting in your business plan. That will give the person a measure of confidence to see that you have really thought things through. Talk exclusivity. You may not get it; but it’s worth a stab. Ask for a limited geographic exclusivity so the store down the street can’t carry the same products you feature. Try and get the price that you need and be honest. Don’t pretend to be the ‘big’ guy. Be humble. Tell him your price point and make him meet it if he wants the business. Don’t be afraid to say “no”.
Secondly let’s talk terms. The price is one thing. The time you have to pay for the product is something different. The earlier you pay the better price you should be able to negotiate. Net 15 will garner a discount over net 30. Use your power. Use your ability to pay to your advantage. If you have budgeted properly – and you will have in your business plan – you’ll have money set aside for initial purchases and you will use that money judiciously to ensure you get the price and terms you need to keep your costs in line. Well done.