6 Ways to Negotiate Better Pricing With Your HVAC Suppliers
6 MIN. READ
As an HVAC contractor, a good supplier relationship can help you get components and materials to meet your customers' needs, but in addition to getting the right supplies to run your business, you need to get them at the best possible price. Lower costs for your supplies means you can be more competitive in your bidding, which can lead to more jobs and repeat contracts as well as higher margins on your maintenance contracts.
Unfortunately, not every HVAC contractor understands how to negotiate supplier pricing in a way that preserves relationships with suppliers and still gets you the lowest possible prices. Discover the basics of supplier negotiations and how a digital Marketplace or procure to pay system can help your HVAC business thrive.
1. Understand vendor pricing models
Doing your research can give you a better understanding of the pricing models and constraints of your suppliers. Your suppliers have specific costs that they have to cover, so going into a pricing negotiation asking for prices below what they can manage will not get you very far and can seem like a bad-faith offer on your part. That could then impact the supplier's willingness to work with you on any discounts at all.
Another key part of your research is understanding why prices vary from one supplier to another. You might be able to get a lower price from another supplier, but you can justify higher prices with better quality or other unique features.
Understanding specific benefits only available with your supplier's products can also be a way to differentiate your HVAC business from competitors. When they send out bids with lower prices, you can highlight the higher-quality materials in your bid or other unique value propositions.
2. Compare prices before you go into the negotiation
Do you know the range of different prices for wholesale condensers or thermostats? If you have only purchased from one supplier, you might not know whether the prices you pay are on the low end, high end or right in the middle. Knowing this information, especially if your supplier is charging higher prices for the same products that you can get for less from someone else can put you in a stronger position to negotiate discounts.
It is not always easy for an HVAC contractor to compare prices from multiple suppliers, especially if you have never worked with anyone besides your current supplier. Cold-calling competitors for pricing can be time-consuming and difficult when you are already busy trying to keep up with customer's needs.
Instead, you can use a platform like the one available from Raiven (formerly Qmerit) to compare pricing across multiple suppliers. This digital Marketplace aggregates all purchases from Raiven's customers (contractors, building owners and facility engineers) and uses this buying power to negotiate better prices with suppliers and manufacturers.
3. Counter the first offer
There are two positions you can be in during a negotiation: making the first offer or taking the first offer. Making the first offer sets a reference point for the entire negotiation, while waiting for the supplier to make the first offer gives you a chance to see where they stand.
Conventional wisdom in negotiations is to generally not accept the first offer that comes up. Instead, it is important to evaluate that offer based on the information you have (from your research above) and counter with your own reasonable offer. If your supplier insists that they cannot go any lower, insist that they justify their reason for the pricing.
Another important negotiation tactic to be aware of is having a BATNA: Best Alternative To a Negotiated Agreement. This is essentially a plan for what you will do if the negotiations with your supplier do not work out in your favor. If you have a strong BATNA, you do not need to concede much because you can still get great value buying materials and components from another source.
With advantages like Raiven's digital Marketplace, you do not need to be beholden to your suppliers' high pricing because you have a good BATNA. In some cases, you may not even need to worry about negotiations because you can simply get the best pricing through this platform without all the haggling and hassles.
4. Propose other discounts besides pricing
For some products, there is little to no wiggle room on pricing. Suppliers purchase HVAC components from manufacturers and may not have any way to get them at a lower price. However, not all negotiations have to be about getting the absolute lowest per-item price.
In situations where you cannot get a cheaper cost, ask for other discounts that still lower your total price. Some things you can propose include:
Free or discounted shipping.
Bulk pricing discounts.
Upgrades to faster shipping.
Streamlined supply ordering with a digital Marketplace, eProcurement system or procure to pay platform.
5. Find positive leverage and offer opportunities
In many negotiations, the two parties go in thinking about what leverage they have over the other party. If you are an independent HVAC contractor, you might not think that you have much leverage with a regional, national or international supplier. But thinking about your own lack of buying power can lead to negative outcomes on both sides you might give up more than you were hoping, and power imbalances can leave both parties feeling like they made a bad deal.
Instead, look for ways to offer positive leverage to your suppliers. For example, HVAC contractors that use Raiven Marketplace can include their preferred suppliers and purchase from them through the Marketplace or eProcurement platform. Once one of your suppliers is included in the Marketplace, you can inform them that they could be visible to thousands of other contractors, and they will have an opportunity to expand their business.
It is a win-win because you get the best prices from your preferred suppliers, and even though they offer you materials at a deeper discount, they can make up for it by bringing in new customers.
6. Team up with other HVAC contractors
When it comes to negotiations, there is power in numbers. Medicare and Medicaid are able to negotiate some of the lowest prices for patient services because they are, by far, the largest insurance payor in the country, with almost 63 million people covered. Similarly, union employees can often negotiate higher wages and better benefits than individual employees can on their own.
If you are like many HVAC contractors, you are probably a small business, but that does not mean you have to yield negotiating power to your suppliers. Teaming up with other HVAC contractors to negotiate better pricing can help everyone achieve lower costs.
Fortunately, you do not have to call up your competitors and band together every year for supplier contractor negotiations. You can use the Raiven Marketplace as a tool to strengthen your ability to get lower prices.
Raiven's digital Marketplace brings together HVAC contractors from all over the country into a single place where you can all easily compare prices and buy parts and materials. You can select your own preferred suppliers or shop around to see what other suppliers can offer. It changes the balance of power for HVAC contractors by aggregating purchases from facility managers and contractors together, driving up volume and driving down prices.
Expertise to help you lower your supply prices
As an HVAC contractor, you probably have bigger things to worry about than learning the art of negotiation. While it can be difficult to try and get the lowest pricing from your suppliers alone, there are companies and products that are designed specifically with independent HVAC contractors and small businesses in mind.
Procurement platforms like Raiven Marketplace and the Raiven browser extension give you peace of mind knowing that you are getting the lowest possible prices on all your materials and components. Discover more about Raiven and start lowering your supply prices today.