When it comes to buying goods and services, getting the most “bang” for your buck is critical in today’s economy. Most pet retailers have found their bottom lines under siege just when their suppliers are looking to protect their own profits with higher prices and tougher terms.

For many business transactions, the secret to making the most of your money lies in smart negotiations. Remember, storeowners don’t have to accept their suppliers’ opening terms. Instead, they should continually look for ways to create transactions that are mutually beneficial to them and their vendors.


Give & Take
Successful negotiating is more art than science. The best way to master it is by studying some examples. Consider this common scenario: A retailer wants to create a snappy, modern website for his store. Unfortunately, the really good web designers are in great demand, and the storeowner’s favorite wants a big portion of his fee up front.

“It’s not unreasonable for a website designer to ask for some front money before starting work, but you can negotiate a reasonable amount,” says Phil Marcus, principal of The Negotiation Pro in Columbia, Md. (www.negotiationpro.com).

“Suppose the firm asks for a third of the total up front,” he says. “One good approach is to point out that the vendor does not have to buy any expensive materials,  like a construction contractor does, then offer to pay 10 percent up front. Then ask, ‘Can we set out a schedule of payments to occur when certain portions of the site are done?’”

Many times, says Marcus, project agreements call for payments to be made when work completion reaches 25 percent, 50 percent and 75 percent. Then the balance due is paid upon completion, minus 10 percent of the total bill for a 30-day period. “Holding back 10 percent allows you time to fiddle with your site and make sure everything is working correctly before your final payment,” says Marcus. The idea is to avoid a drain on the store’s cash flow, maintain control over the quality of the service and be fair to the vendor.

A storeowner should let the vendor know that if he is happy with the job, he will order more work, put a link to the vendor’s own site on the store’s site and post a fair appraisal on public bulletin boards, such as Angie’s List, which are consulted by prospects. A vendor will go the extra mile for any customer who promises to help improve business.


Talking Turkey
The approach that works with a web designer can work with any number of suppliers, whether offering services or products. Consider these:


1. A credit card issuer hikes the business’s interest rate.

Suppose a credit card issuer spikes the interest rate, even though the storeowner is a stellar borrower. This seems to be happening more often today as a result of the turmoil in the credit markets in general, and the many personal and business bankruptcies in particular.

In many cases, interest rates are negotiable, says Marilyn J. Holt, a Seattle-based management consultant. “You are in a better position if you have established a personal relationship with your banker,” she says. And the size of the institution matters. “Small banks and credit unions are much more open to negotiation than the big banks, which can be intractable.”

Before talking with the business’s banker, retailers should do their homework. This should begin with talking to other merchants in the region to see what rates they have been getting. Then the store’s banker can be asked to match these for business’s outstanding debt, or for new debt that is incurred. Remember to take in those competing credit card offers that have come in the mail.

Finally, retailers should be prepared to horse trade. “Offer something in return for a better rate,” advises Holt. “Even if you are not in arrears, be prepared to knock the amount you owe down to 33 to 50 percent of the current amount. If you owe $1,000, for example, be prepared to knock it down to $660 or $500.”

Another dealing point: “Some banks may offer a lower interest rate if you set up a monthly automatic payment of a minimum amount.”

What’s not negotiable? Billing cycles, for one thing: They are set by third-party transaction handlers and the issuing bank has no control over them.


2. A merchant account provider hikes its monthly fees.

For many pet retailers, the ability to accept credit cards is critical to their success. Unfortunately, many merchant account vendors take advantage of that fact by hiking their fees.

Take heart: The merchant account industry is highly competitive and the store’s current vendor is likely to be open to counter offers.

“Pricing is always open to negotiation,” says Paul A. Rianda, an Irvine, Calif.-based attorney specializing in the bankcard industry (www.riandalaw.com). “The market has gotten to the point where profits have compressed, and the main way of retaining merchants is through lowering price. Keep in mind that your existing processor knows you can go somewhere else and get it cheaper–there’s always another guy beating on your door.”

Merchant account pricing involves two main components: The first is the interchange rate, or the percentage taken by the merchant account provider of each sale made. There are dozens of these rates, varying by type of card and transaction. The second main fee is the transaction fee, which is paid for each transaction. This generally runs around 25 cents.

“In many cases, your lion’s share of savings will come from negotiating better interchange rates,” points out Rianda. Start by analyzing the store’s sales by category. Generally, focus on the rate for “card present” transactions for a brick-and-mortar outfit, and on “non-swiped transaction” if for a web-based merchant.

Pet retailers should shop around and see what other merchants are paying and what other merchant account vendors are offering. Then they can ask their own vendors to match the better deal. 


3. A storeowner needs to expand the vehicle fleet with limited funds.

“There’s lots of competition in the vehicle leasing field, so negotiations are wide open,” says Holt.
Here are some things that a business owner can offer vendors in exchange for lower monthly fees:

•  An extension of an existing lease into multiple years.

•  Leasing additional vehicles.

•   Inclusion of the leasing firm’s banner with a “leased from XYZ” sign on the vehicles.

•  Paying more months up front. “If you pay them six months of a three year lease, they are better off than if you pay only  two months,” points out Holt.

In addition to lower fees, storeowners can ask for:

•  More frequent, less expensive maintenance work.

•  Less expensive emergency service and the use of replacement vehicles without the vendor’s logo.

•  Lower cost to apply the store name and logo.

•  Installation of security systems.


4. A product supplier starts including surcharges.

Earlier in this story we discussed service providers such as web designers and public relations firms, but product suppliers can pose their own problems. Suppose a pet store is dealing with a vendor that starts adding fuel and delivery charges or other bill-fattening items, or starts requiring COD.

“If this is a vendor with whom you deal regularly, you have more negotiating power,” says Holt. “Tell them that now you have a good relationship and you want better terms. Offer to keep them as a vendor if they move out of the COD and give you a three percent discount if you pay in 10 or 15 days.”

The bigger a retailer is as a customer, the better the negotiating position. Offer to increase the amount of merchandise purchased if they eliminate surcharges.


5. The store needs more space.

In today’s economic environment commercial real estate is a “tenant’s market” in many cities–meaning that tenants have more negotiating power. Established retailers that are looking for more space are important to their landlords because they are proven quantities: reliable tenants that are actually expanding in tough times.

Tenants everywhere are asking for–and getting–free rent. “You might tell your landlord that in exchange for taking twice the space, you are willing to sign a three-year lease, and you want the first three months free rent,” says Marcus.

Or you might ask for more “build-out money.” This term refers to investment in such critical amenities as interior walls, electrical wiring and cabling, attractive flooring and lighting. “All of this is very important to your customers,” says Marcus. “And it can be expensive.”

Other ideas: A landlord might have flexibility to give a tenant more amenities, such as more reserved parking, which do not cost the landlord out of pocket but provide significant benefit or cost savings to the tenant. The tenant may also want to negotiate a cap on common area maintenance expenses. 


6. A customer demands more work for the same money.

Finally, let’s look at the other side of the coin: It’s smart to negotiate with customers, too.
This holds especially true when a pet store offers services. Suppose a customer asks that more service be provided for the same fee. “These requests are happening more often today in the down economy,” says Marcus. “Everyone is looking to get more for their money.”

Again, try to develop a win-win scenario, suggests Marcus. Tell the customer that more must be charged for the additional work, but because their business is valued, they’ll be given a discount after a certain amount. “Offer to give the customer a 20 percent discount after ‘x’ amount of work is done,” says Marcus. “The customer wins because of the discount and you win because of a bigger account.”


Speak Up
Many small business owners don’t bother negotiating because they feel they will be turned down. That is a mistake. Vendors are ready to talk turkey in today’s tough economy. After all, they want to increase revenues and retain accounts as much as their customers do.

But it’s important to take the right approach. “Ask in a non-demanding way that offers the supplier something in return for whatever discount you need to make your project work,” says Marcus.

Pet store owners should try to apply the power of negotiation to all aspects of their businesses. “Practically anything can be negotiated for,” says Marcus. “There is no reason not to ask. The worst they can say is no.”


New York based freelancer Phillip M. Perry negotiates win-win deals with his clients everywhere.