Negotiation Master: Saving Money On Business Operations

Jun 13, 2020 by

Why Small Business Owners Need To Negotiate Service Costs

When we talk about negotiation in the context of business, it’s typically to address issues with salary negotiations and how to ask for more money. That’s an important conversation, but it’s not the only aspect of business that can and should involve negotiation. Rather, the fees for many common business services are  negotiable, as long as you know how to ask. 

Negotiation Basics: The RFP

Consider this situation: your business is in need of a particular service. How do you proceed? If you’re like a lot of businesses, you reach out to providers and ask them what their price is. It doesn’t matter if you need business cards or mailing equipment or need to rent an office – this is the usual pattern. But what if you approached the process a different way?

Instead of soliciting baseline costs from providers, your business might be able to save money by creating a request for proposal (RFP). An RFP essentially outlines your company’s needs and, from there, requests that recipients file a proposal, outlining how they can meet those needs and at what cost. An RFP makes it clear to service providers that they are in competition with other companies for your contract, and this is the first step towards placing your business in a strong negotiating position. These proposals equip your business with all the information you need to choose the best offer, or to try to negotiate for even lower costs.

Know What’s Negotiable

You can use an RFP for just about any business success, but if you want to be a successful negotiator, it’s important to be clear about just how negotiable any given service is. For example, a lot of people don’t think that costs like rent and utilities are particularly negotiable, but don’t give up on these expenses just yet. Depending on market conditions, rent can certainly be negotiable – with companies dropping their leases because of COVID-19, landlords are eager to fill empty offices, and you can afford to drive a hard bargain.

As for utilities, many companies assume utility companies won’t negotiate with them because there are relatively few providers in any given area – and unless you’re a multinational corporation, how valuable is your contract, really? That may be partially true, but it’s also not that simple. Sometimes, you just need an ally like P3 Cost Analysts to help you navigate the process by auditing your utility bills and then approaching your utility provider with the hopes of reaching a new arrangement that will save your company money. 

What other major business expenses are negotiable? One commonly overlooked, yet highly negotiable cost is employee healthcare. You can basically guarantee that no two businesses are offered the exact same deal on healthcare, just as no two people end up paying the same thing for medical care. Take advantage of that to get your team a strong healthcare plan without driving your costs through the roof.

It’s All About Interest

Any time you’re trying to negotiate a business cost, you need to set yourself up for success, and the best way to do that is by identifying not just your negotiating position, but what the other person’s interest is in this exchange. In other words, you need to look beyond the outcome to identify motivations. It may, in fact, be the case that there is some common ground between your needs that can help you reach an outcome you both find favorable.

Negotiating can feel uncomfortable if you haven’t done it much before, but you need to release that anxiety if your business is going to succeed. Asking for what you want won’t get you blackballed in the business community – it will just demonstrate that you’re a savvy professional and you’re here to play the game.

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