Negotiating With Vendors: 7 Tips for Women Business Owners
Negotiating in business, whether you’re a woman or not, is crucial to being competitive in the marketplace. It gives you leverage to drive down costs, receive benefits and take your business to new heights.
Women owned about 20 percent of all employer businesses across the country in 2016, amounting to 1.1 million businesses and up 2.8 percent from 2015, according to the U.S. Census Bureau.
But a recent study by MagnifyMoney, a LendingTree subsidiary, found that women still have a long way to go before reaching entrepreneurial parity, or equal founding and ownership as men — and research says that preparation is one factor to blame.
Women are less likely to initiate negotiations than men, especially when the appropriateness of bargaining is unclear, according to a 2016 study by psychologists at Ludwig Maximilians University in Munich, Germany. Additionally, research in 2016 shows that aggressive tactics from men are better received than they are from women.
When it comes to negotiating, the prevailing narrative describes men outperforming women, and women setting lower goals than they are capable of achieving.
That may sound discouraging, but one study shows that those conclusions were thrown when women entered the discussion with knowledge of the negotiating range and when they negotiated on behalf of another individual.
Women outperform men when they are negotiating for others by 14 to 22 percent, according to research by Margaret A. Neale, a business professor at Stanford. Essentially, the fighting instincts turn on when women are vying for the betterment of their companies, businesses or employees, as opposed to just for themselves.
The confrontational nature of negotiation lends itself to the perception of being greedy or demanding. But when women advocate for their team, group or organization, social restrictions loosen their grasp.
“It’s not that women can’t negotiate,” said Neale. “It’s that there are social norms that make it difficult for women to negotiate.”
But negotiating is an imperative tool and a practical way to save money for your business.
“It’s really about paying attention to all the pennies and the nickels because they all add up to dollars,” said Sandy Stilwell Youngquist, who owns the Captiva Island Inn and several restaurants on southwest Florida’s Captiva island.
Here are seven tips to ensure you are getting the best deal at the negotiation table.
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7 vendor negotiations tactics for women
1. Understand your counterpart
Before walking into a negotiation, figure out your counterpart’s motives, interests and problems. Your vendor will not rationally accept a deal that doesn’t leave him or her better off, just as you shouldn’t.
The more knowledge you come in with, the better. Kristen Bach, owner of Treehouse Kid and Craft, a toy and gift shop with art classes in two Georgia locations, recommended attending trade shows to “see, touch, feel the product” and to ask questions directly. Be able to establish why your counterpart would say yes to your offer. If you aren’t convinced, they won’t be either.
2. Plan your alternatives
Stilwell Youngquist receives a price list from a few seafood purveyors on a weekly basis. From there, she evaluates the market cost of her biggest food item.
“You need to be able to shop one against the other to keep everybody on their toes,” said Stilwell Youngquist.
Alternatives are your source of power in the negotiation. If you have another choice for a product, it is easier for you to walk away. There is confidence in having alternatives, Neale stressed.
3. Know your bottom line
Before leaving a negotiation, ensure that you are coming out better off than your alternatives and your status quo. Know the worst possible deal you are willing to accept, so you don’t end up in a situation that hurts you financially.
For some businesses, the bottom line refers to a quality standard which cannot be compromised. For example, the quality of the food is the root of the restaurant business, and cost isn’t always the determining factor.
“If they don’t give you a good quality product, the chefs all know, and they’re not gonna put up with that because we want a fresh product,” Stilwell Youngquist said. “You can’t just buy the cheapest steak out there.”
If this seems like a low bar, consider how many times you have said “yes” to a deal simply to establish an agreement. Don’t sacrifice the quality of the deal because you are set on reaching an agreement.
“For many of us, we see the only criteria for success in a negotiation is that ‘I got a yes and if I get a no, I have failed.’ And that is short-sighted,” said Neale.
4. Set an aspiration
Having already set your lowest expectation, it’s time to optimistically assess your potential outcomes. If you go in expecting the worst, you are most likely to get that outcome. Raise your expectations about what is possible, because for women, “we have systematically lowered our expectations of what we can get,” said Neale.
Setting those expectations starts with being informed about your cost of doing business. Stilwell Youngquist gained knowledge about food, labor and liquor costs by attending a Cornell University summer program about the hospitality industry. She also conducts an menu analysis to determine the amount of food she needs per dish. For example, if she is serving filet mignon with potatoes, she looks at how many ounces of meat and mashed potatoes are needed, as well as garnishes.
“You know what your cost is and you know ultimately what your cost wants to be, and then it helps you negotiate,” she said.
5. Propose your offer as a solution
Presentation is key — when it comes time to make a proposal, frame your offer in a way that feels like you are solving your counterpart’s problems (if you aren’t familiar with their problems, refer to the first point).
“When we frame our problems as a solution to a problem our counterpart has, the likelihood of getting a backlash drops precipitously,” said Neale.
Bach said she feels like she is supporting small companies just as they are supporting her, creating a mutually beneficial relationship. Logically speaking, how can you refuse someone who is trying to help you out?
6. Practice, practice, practice
Preparation is critical. In a study published by the American Psychological Association, prior negotiation experience boosts frequency of successful outcomes for women. Stilwell Youngquist owes her preparation to training at Cornell and a number of mentors, although she admitted, “I really did jump into it.”
The more practice you have, the easier it is to tell when you’re getting played.
“I’ve been around long enough now to know that too good of a bargain is too good of a bargain,” Stilwell Youngquist said.
7. Understand your worth
Bach understands the value in fostering a relationship with her vendors. By being a long-term customer with a good credit history, she has been able to negotiate favorable credit terms with her vendors. For example, she has been able to secure net 30 or net 60 terms — the span of days she has to sell the product before paying the bill — with long-term partners.
Clients may be hard to keep, but they are even harder for companies to gain. You might find that a vendor will go to great lengths to hang on to your consistent business, rather than start at square one.
At the end of the day — or negotiations — be OK with walking away.
“Sometimes, the best deal that’s available to you is what you had before you started,” Neale said.