Cut Costs by Renegotiating Agreements

January 29, 2009
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In today’s economy, almost all business owners are looking for ways to cut costs. Some smaller tenants are taking advantage of the downturn and saving money by renegotiating their supplier contracts and leases.

A survey released last September by the Small Business Research Board polled over 1,000 small-business owners and managers and found that at least 15 percent of the group had recently renegotiated long-term fixed cost supply contracts. Small business consultants are reporting that their clients have, within the past 30 days, successfully renegotiated discounts of 1% to 5%.

Small tenants with a history of paying slow have also experienced cooperative vendors who are willing to lower their monthly obligations. The logic behind the willingness to accommodate is that vendors would rather receive something, as opposed to having to write off the entire obligation.

Some small businesses are even negotiating on behalf of their employees. For example, the owner of a refrigeration service company in Atlanta, GA asked one of its suppliers to take on four of its employees in exchange for an exclusive deal that would give the supplier all of the refrigerator service company’s business. As a result of the deal, the refrigeration service company was able to save more than $250,000 in payroll and benefit costs.

Source: WSJ.com