How to deal with price increases from suppliers

What we’re going to do is just talk about the strategy that you’ve got to use when your suppliers increase their prices.

So, at the moment we’ve got cost of living crisis. So a lot of our supplies in our business are essentially sending us letters telling us about price increases. And what I think is important is the right and wrong way to actually deal with that. So really when you think about it, there’s only three things you can do if a supplier sends you a price increase:

  • Firstly, you can leave that supplier and go somewhere else.
  • Secondly, you can buy less stuff from that supplier and try and do more of it yourself or try and get another supplier to do bits of it, which you think will be better value, and then you’d be dealing with two different suppliers instead of one.
  • Or the third thing you could do is essentially stick with that supplier and take the price increase.

So let’s talk about the pros and cons of each strategy and how to deal with that. So first thing you can do is you could leave that supplier you’ve got and go and find another one, or, well the best thing to ask is, “Hey, do we need that thing at all?” And if the answer is, “Yeah, we definitely need that thing,” then what you then need to do is then you’ve got an opportunity to go and find another supplier who is charging less. One thing you got to factor in though is a lot of these costs are being driven by a cost of living crisis, then chances are whoever else you go to and approach them for the same service, they may have had to put their costs up in the same way. So you’ve got to factor that in.

Also, what you’ve then got to do is also factor in the cost of you having to look for that new supplier. You’re going to have to factor in the impact of having to move everything over and build a new relationship. And also, you’ve got to factor in a risk element as well, because if you’ve been working with someone for years and essentially they’ve been getting the job done, and then you move to someone else who’s making all these promises, then there’s always a chance this new person can’t actually do it and then you’ve got a cost of failure in your business. So when you factor all that in, then what you’ve got to understand is that that new supplier can’t just be a little bit cheaper, they’ve got to be better value overall. So there’s literally no point in moving to save a few pounds if the costs and risks involved in that move are so much greater.

One thing you should definitely, definitely not do is tell your current supplier you’re leaving until you’ve found a new one. Because obviously if you then end up looking for a new supplier and you can’t find them at the right price point or you can’t find something that’s going to do a better job for your business, then why burn a bridge you don’t need to? So it’s got to be in an order, find someone new first, and then make sure the risks and costs involved in moving are worth the monthly saving that you’d get.

So option two is really a hybrid of option one and three, but it’s essentially buy less stuff or get another supplier involved to save money with it. And then option three is essentially stay with that supplier. And one of the really important things about option three, if you choose to stay with your current supplier, just don’t bother grumbling about the price changes. There’s just no point in it. It achieves nothing apart from damages your relationship with them. And especially when we’re going into a period of really, really tough times, remember my first part in that, how to grow your business during a recession series, was essentially about how you’ve got to have the right people on board and that includes the right suppliers. So if you’re going to just stay with that supplier anyway, then why damage your relationship by grumbling? Because all that’s going to happen is when you really, really need them, you might just end up at the back of the queue for everything else and they’ll prioritize their other customers who they do get on better with. And then what you’ve actually done is you’re paying extra and then you’re probably getting less value just because you’ve damaged that relationship.

Now’s the time to be in control of your finances like you’ve never been in control of them. So, this is where you need to look at things like cash flows, this is where you need to look at things like how much profit you’re actually making and maintaining your margins. And if you’re not sure how to do that, then we know exactly how to do that. So, get in touch, and book yourself in for a strategy session and we can actually talk about the best way to deal with this.

 

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Why not check out our FREE guide:

6 Secrets to Growing Your Business During a Recession

By reading this guide you will discover:

  • How important systems and a team are in growth 
  • Why knee jerk reactions can cause lasting damage
  • How people will change the way they buy

Why not check out our FREE guide:

6 Secrets to Growing your Business During a Recession

By reading this guide you will discover:

  • How important systems and a team are in growth 
  • Why knee jerk reactions can cause lasting damage
  • How people will change the way they buy

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