In the current fiscal and political climate, school leaders must prepare themselves for budget freezes that represent a very real fall in funding.
With ever tighter budgets comes the need to conjure up some savings – which is where successful contract negotiations with your suppliers can help you manage budgetary restrictions.
Here are our five suggestions for cutting your costs, not your cloth.
1. Create a list of contracts with costs and renewal dates
This list will ensure that you never again face a contract that lapses and pricing that falls back onto standard rates (with the extra margin added and often overlooked until some months down the road).
Read each contract and list any penalty clauses or changes in pricing that may happen when the current contract lapses.
Early contract renewals will sometimes give you access to a greater level of discount, and changes in pricing when a fixed-term contract lapses can be punitive.
If a company representative can renew current client contracts early in the sales cycle, they will have more time to look for new clients and potentially earn a higher level of commission by beating their sales targets.
Take advantage of this and push for greater discounts by being a loyal customer.
2. Regularly assess your suppliers and don’t allow it to become personal
Sales representatives can soon become your key purchasing staff member’s best friend, and become indispensable for personal reasons.
Yet it must be remembered that they are, after all, employed to generate revenue for their organisation.
If you have a long-standing supplier who provides a good service, gathering quotes and presenting them for their review to see whether they can match other suppliers’ pricing is essential.
Any personal friendships must be put aside when negotiating a new contract.
3. When purchasing a broad array of products, don’t just consider your most used items
When working with suppliers of stationery, facilities management or printing supplies you may receive a quote with detailed pricing only for your most used items.
Yet quoting in this way can be misleading, with some suppliers offering high levels of discount on your top 20 (for example) items but inflating the prices of the remainder of their product range.
Whilst you’re under the impression of getting a great deal, the company’s profit is being made up multiple times over on the many other items that you purchase that aren’t on the list.
Take the time to compare a selection of your less-used items to see which suppliers depend on this loss leader tactic to secure your contract.
4. Nominate your calmest and most personable member of staff for negotiations
Negotiations really needn’t be defined by making demands or being aggressive – there simply needs to be a meeting of the minds when it comes to pricing.
As a school, you’re in an enviable position of having plenty of purchasing power. Many companies want your business, and nominating a cool, calm and collected negotiator who doesn’t easily feel pressured or intimidated nor, on the other hand, as though they must be short and sharp, is the optimal way of driving down prices.
Building a successful personal relationship works both ways: the salesperson can rely on an annual contract renewal and the purchaser can leverage the friendship to achieve a greater level of discount.
Negotiating prices can be a case of each party suggesting an appropriate level of discount and then meeting somewhere in the middle. However, you can sometimes get a greater discount by asking for more at the first stage of negotiation.
By suggesting a much higher level of discount than you actually expect, you have weighted the negotiated middle ground so that it will benefit you.
E.g. if you suggest a discount of 20% and the supplier suggests one of 10%, you may agree on a final discount of 15%. If you suggest a discount of 30% and the supplier’s first offer is still 10%, the middle ground is now 20%, not 15%.
5. Always read the small print
When committing to a provider for any length of time you must ensure any contract is read in full – there could be any number of caveats in there, such as a rate alteration later in the contractual period.
It may be a dull task, but it’s one that could save you thousands in the long term.
And if the contract is complicated enough to warrant getting legal advice, do so. The relatively small legal fee could be repaid multiple times over when punitive clauses are excised from a contract.
Have you used any negotiation tactics to secure a better deal for your school? Share the secrets of your success in the comments below!
