Small firms could save up to £10,000 by negotiating with suppliers

Around three quarters of SMEs in the UK say they don’t negotiate with their suppliers, according to a new survey.

Those that do negotiate report saving an average of £2,800 over a 12-month period while the most successful negotiators saved up to £10,000 a year.

The report, commissioned by npower Business and carried out by YouGov, looked at energy supplier costs as well as for other suppliers. These may represent unavoidable overheads, but they are not always fixed costs.

Negotiation can often result in reduced costs and there might also be other measures that can be taken, such as instituting policies that reduce the amount of energy you use. For businesses operating on narrow margins, reducing supplier costs could potentially mean the difference between survival and company administration.

Over the last 12 months, the amount saved by SMEs who did negotiate was estimated to stand at £511 million. Almost all (93%) of those that do negotiate said they saw the value in doing so.

More than half (59%) of successful negotiators put their success down to being well prepared and doing thorough research up front. This could, for example, involve obtaining a range of quotes before sitting down to negotiate a contract. Some 46% also believed that flexibility allowed them to negotiate a better deal.

SMEs in London were the least likely to negotiate energy bills and other suppliers, with only 23% saying they did so last year. Elsewhere in the UK businesses were slightly more willing to enter negotiations, although they were still in the minority.

Less than a third (29%) of SMEs in Yorkshire negotiated last year while 30% of those in the North West said the same.

Energy supplies are a prime area for negotiation. Small businesses can tell their suppliers they want to switch deals or suppliers at any time before the notice period. This can help prevent businesses being ‘rolled over’ onto more expensive tariffs if they forget when a fixed-term deal is coming to an end.

By Phil Smith

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