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Increased prices across most industries are inevitable, with an annual inflation rate of 3% in the United States. How you deal with rising prices for your business is up to you. For contractors, navigating supplier price increases can be a challenge.
However, there are effective strategies to mitigate the impact on your bottom line. Here’s how contracting professionals can handle supplier price increases.
Communicate with Suppliers
The first step in dealing with supplier price increases is discussing them. Establishing and maintaining open lines of communication with your suppliers is crucial. Without open communication, understanding and handling unexpected price bumps can be difficult.
Information and knowledge can be powerful negotiation tools. You must arm yourself with as much information about the situation as possible.
Ask your supplier to explain why prices have increased. Is it due to higher raw materials costs, upped labor costs, or other factors? Understanding why the cost has risen can help you know how to handle it.
Negotiate Lower Prices
Don’t unquestioningly accept price increases without an in-depth discussion. Here’s how to negotiate with suppliers.
Leverage Loyalty
If you’ve been a long-time customer of your suppliers, remind them of your loyalty. You may be able to leverage your loyalty for a discount.
Offer new terms for your supplier that include lower prices for your business. You could also ask for a grace period with the old prices before paying the updated prices.
Buy in Bulk
If you cannot negotiate lower upfront prices, you could look into purchasing larger orders. Often, buying in bulk leads to lower prices per unit. If this is a feasible option for your business, consider buying in bulk to save money in the long term.
Flexible Payments
While the price itself may not be up for discussion, you could always try to negotiate better terms. You can ask your supplier for extended payment periods or early payment discounts. This could ease your business's cash flow problems due to the price increase.
Evaluate Your Options
If negotiations don’t yield the results you were hoping for, it might be time to explore other options. You can look for new suppliers if you can’t budget for the price increases. It’s important to consider the following factors as you shop around.
Evaluating the current market is essential before you decide to jump ship with your current supplier. Conduct a thorough market analysis to see if your current supplier's prices are competitive.
If the market has shifted and prices are rising across the board, you might not want to switch suppliers. However, if your supplier's rates are significantly higher than others, it might be time to switch.
Look for new suppliers who can offer better rates without compromising on quality.
Expand Your Business
While negotiating price increases or shopping around for new suppliers is an effective strategy, it’s not the only thing you can do to combat rising costs.
Diversifying your revenue streams can help lessen the blow of supplier price increases. You can offer services in addition to your main service, like roofing. Consider adopting secondary services like gutters, siding, solar, or windows to boost your business.
You can also expand your business into new geographic areas or market segments. This expansion can increase your customer base and reduce your business’s dependency on fluctuating market conditions.
Building a Strong Contracting Company
Building a solid foundation for your company ensures it can withstand recessions, price increases, inflation, and any other challenges life may throw your way.
Leveraging the right software tools can help you build a stable business. SumoQuote helps you create better quotes and improve operations so you can optimize processes and maintain profitability.
Taking a proactive approach can help you manage supplier price increases effectively. Implementing the right strategies can safeguard your business against economic uncertainties.
Book a demo to learn how SumoQuote can help you build a resilient and successful contracting company.
