By Mike Shirley
A conference room within a hotel negotiated from £200 for three hours down to £40; £5,000 off annual office rent; courier costs reduced by 15%: these were just a few anecdotal examples from the research we conducted among small business owners and managers* into their negotiation habits. They show the breadth of areas where businesses can get good deals, as well as the extent of savings that can be made through liaising with suppliers.
Despite these impressive claims, T-Mobile research into the negotiation practices of 1,000 small business owners and managers found that while many (38%) expect suppliers to quote an unreasonably high first price, 63% have walked away from a supplier who has quoted such a high figure without trying to negotiate. The research also found that over a quarter save less than £500 a year through negotiating with suppliers. With a strong focus on tightening the purse strings amongst the business community, it seems surprising that many are prepared to miss out on good deals through not negotiating with their suppliers.
What’s stopping business leaders from negotiating?
When asked why they don’t negotiate, small business leaders stated saving time and other business priorities as key reasons. One in ten of those surveyed said they only try to negotiate when they have cash flow problems. A belief that negotiating won’t make any difference was also cited by one in ten business leaders as an explanation. Of course, it makes sense that time-poor business leaders need to prioritise their tasks and shaving a few pennies off may not always be the most efficient use of their time. However, the research sheds more light on this conundrum, bringing up some surprising reasons why small businesses do not always get good value from their suppliers.
How do they feel about negotiation?
When it comes to how business leaders feel about negotiating on an emotional level, it was found that one in three (32%) feel uncomfortable or stressed when trying to clinch a deal. This suggests that negotiating with third parties isn’t something they enjoy and they therefore shy away from it when they can. While most (77%) agree that negotiation skills are either essential or very important for a business manager, three quarters have never had negotiation training, which goes some way to explaining their hesitance in this area.
And what do they think of suppliers?
Perhaps more pertinent is the fact that the research showed there is some distrust amongst small businesses towards their suppliers. Less than one in ten believe suppliers are always transparent over costs and a fifth find their bills from suppliers are often higher than anticipated. It is also commonly assumed that suppliers offer better deals to large enterprises, again asserting a level of suspicion that suppliers need to address.
Why should business managers have to negotiate?
Whatever the reasons, it is naturally frustrating for small business leaders to feel that they are missing out on the best deals available. This begs the question: why should business managers be expected to negotiate? Wouldn’t it be simpler if the supplier offered a good value, straight forward price in the first place? If we can sidestep the negotiations process by offering better upfront value, it relieves managers of this additional pressure.
What do the experts think?
The Institute of Directors also acknowledges this viewpoint. Alexander Ehmann, Head of Enterprise Policy, Institute of Directors, explains: “UK commercial growth remains fragile and small businesses continue to face serious pressures. In order to survive and grow their companies, business leaders need to keep control of their costs, which often involves negotiating with suppliers. If this is not an option, then it is up to suppliers to offer the best deals possible to support small businesses, which form the backbone of the UK economy.”
Looking at the broader landscape, the Government is also taking measures to support small business growth, cutting tax and supporting their access to lending. Suppliers should take their queue from these efforts, helping small businesses as much as possible to find their feet as the economy continues to shift. This means taking a transparent approach to costs, helping small businesses to thrive and grow and freeing them from the time and hassle negotiating requires.
*Opinium Research carried out the survey of 1,069 UK SME Business Owners/ Senior Managers from Thursday 18th to Wednesday 24th March 2010 on behalf of T-Mobile.