How To Play (& Win) When There’s Only One Game In Town

by drjim on October 27, 2009

Sole-Source Suppliers Pose A Special Problem For Negotiators

Sole-Source Suppliers Pose A Special Problem For Negotiators

Having a single supplier for something that you want is the best thing in the world. “What?” you say, they’ve got me over a barrel , they can dictate any price or any conditions on a deal that they want because I have no other alternative.

Well, ok, that’s one way to look at it if you want to be all negative and such. However, there’s a different way to see things and when you look at the situation this way you’ll see that it’s you who has them over a barrel. Let me explain.

How’d You Get Into This Situation?

When we are starting a project, creating a new product, or we just find something that we just HAVE TO have, we can suddenly discover a big BLAM! This occurs when there is some component of our plan that is controlled by someone else. When that thing is the ONE thing that we must have to make our plan succeed. They are a sole supplier. Sure looks like we’re in a bind here.

Options, Options, Options

The first thing that you need to realize is that you are only in a pickle if you think that you are. This type of situation calls for some problem solving. What’s the one thing that all sales negotiators know: it’s all about power , the more that you have, the better the outcome of the sales negotiation will be for you. Feeling powerless is not a good way to start any negotiating relationship!

You always have what I like to refer to as the “nuclear option”. What this means is that if you can’t reach an agreement with the person who has control over the one thing that you need, then you can always chose option B: “make” your own.

In business this could mean that you’d set up a factory to make your own version of whatever part the supplier is controlling. In your personal life, if the seller of the house that you just must have won’t sell to you at a reasonable price, then you can always go out and build your own house that looks just like his.

Build Your Own Competition

Although there may not be other sources for the thing that you want, another option that you can bring to the table is to create competition between the supplier and himself. You’ve got to realize that he’s got both short term and long term goals.

You’ve actually got a lot of control over the deal. You can control how much you are willing to buy, when you’ll take delivery of it, and (most importantly) when you’ll pay and in what amounts you’ll pay. Both pre-paying and delaying payments can have a significant impact on the other side’s tax situation, etc. and you hold the keys to when this will happen.

Creating A Second Source

Negotiation tactics can be used to give you more negotiating power in a single supplier situation like this. One such tactic is to actively create a second supplier. Even if such a supplier does not currently exist, you can approach a potential firm and find out if the offer of some or all of your business would motivate them to become a supplier of the needed item.

If you are able to convince them to do this, then you will have created true competition. However, you will need to make sure that you don’t get locked into this second supplier as your only source of the item!

What This All Means For You

The worst thing in the world that can happen to a sales negotiator is that you find yourself in a negotiation where you have no negotiating power. In a situation like this you’ll end up just having to agree to whatever the other side proposes.

However, you should realize that no negotiation ever has to be like this. Instead, you have to realize that you always have options. Even in a situation where you need to have something that someone else controls, you still have options. You can always choose to build your own option, you can cause the other side to compete with themselves, or you can go out and work with another supplier to create true competition.

No matter how you choose to handle it, you will have taken some of the power that seemed to all start on the other side of the table and then you were able to bring it over to your side. Now doesn’t that make you happier?

What do you think the best way to handle a sole source vendor is in order to prevent them from taking advantage of you?

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What We’ll Be Talking About Next Time

Having some bargaining power when you are involved in a sales negotiation is a good thing. Have super bargaining power is much, much better. Most of us do a few things to prepare for a negotiating session, but are we doing enough? The answer in most cases is no. Let me tell you what you can do to fix this…

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