Mitigate the risk of losing a vendor: More vendors in danger of going under

The coronavirus pandemic reinforced lessons that experienced CFOs knew but might have taken for granted. For example: You’re better off not relying too heavily on one vendor for critical company needs.

You never know when a vendor may be in danger of changing hands to an owner you don’t know or going out of business altogether.

During COVID, many small businesses were forced to shut down due to government mandates or employees becoming sick. That left the companies that relied on them high and dry for the duration, and scrambling to find short-term solutions.

Some financial forecasters predict an increase in businesses already struggling since the pandemic started to go under over the next year. Companies need to be prepared for it so they’re not dealing with supply chain nightmares and disgruntled customers.

Vendor shopping? Timing is everything

Staying loyal to a reliable vendor is important, but it’s never a bad idea to check out what the competition is offering. A better deal may be just around the corner.

When it’s time to talk to other vendors, treat the three steps in the deal-making process a bit differently for a successful negotiation:

1. Before the proposal

Hold off on asking for a discount at this time.

If the vendor thinks you’re just after a bargain-basement rate, it’ll inflate the initial asking rate, then likely lower that.

That means your “discount” rate will be the price everyone else pays.

If you’re not completely satisfied with the price, ask for a discount after the vendor gives you the proposal.

2. After the agreement

Don’t re-open negotiations after you’ve got an agreement.

You’ll put the vendor on guard so it’s less likely to offer discounts or service perks later.

3. Before the contract expires

If you’re interested in negotiating price or service before the contract expires, get the conversation started sooner rather than later.

Giving the vendor notice allows you more time to find a replacement if needed, and it helps increase your chance of getting a better deal.