- Gather all relevant details of your suppliers and contractors.
- Negotiate with your suppliers, taking into account the levels of your concern for the result and for the relationship.
- The optimum negotiation style to have is that of ‘principled negotiator’, so that you get a good result as well as maintain a good relationship with your supplier.
- Negotiation is about the problem and not the person.
- Set yourself a timetable and stick to it.
How often do you look at invoices for supplies, utilities or maintenance contracts and think, ‘By gum, we’re paying quite a bit for that,’ but then forget about it, or don't get around to looking at it further – and then the next bill comes in?
This article will provide you with some hints and tips on negotiating with suppliers, together with a workable framework to monitor your suppliers and contracts over a 12 month period. By the time you have worked through the steps of this framework you will definitely have saved practice costs and hence increased profitability.
Make a list of all of your suppliers and contractors; the best source for this will be your monthly bank statements (and cheque book stubs, if you still use cheques to pay your invoices).
Categorise your list into the following, and note the monthly/quarterly sum spent on each:
- suppliers of dental materials
- dental laboratories
- providers of utilities such as gas and electric
- telecoms providers (including broadband etc.)
- software suppliers
- equipment maintenance contracts
- building maintenance and cleaning contracts
- waste management
- printing and stationery supplies.
Where you have contracts for items, add to your list the date on which the contract is due for renewal and also the notice period you have to give to cancel. Also consider awarding, on a scale of 1 to 5, a service level rating for each supplier. (You can use the form in the Toolkit to help you.)
To be able to ensure that your practice is getting the best possible deals you do need to negotiate well with suppliers. As this can sometimes be a little daunting, here are some tips to help you to hone your skills.
There are five main negotiating styles, which centre on the level of concern for the result and the level of concern for the relationship.
The grid below will help you to understand the negotiating styles currently used by you and your suppliers. Look for the signs when you have your conversations with them.
The optimum style to have is that of ‘principled negotiator’. The four key elements of a principled negotiator are:
- Separate the people from the problem.
- Focus on interests not positions.
- Invent options for mutual gain.
- Insist on objective criteria.
|Negotiating style||Level of concern||Often perceived as being|
|Concessionary negotiator||Very low||Very high||A push-over, oversensitive, a nice person|
|Principled negotiator||High||High||Confident, sensible, reasonable|
|Formula negotiator||Reasonable||Reasonable||Rehearsed, unchanging, involved|
|Indifferent negotiator||Very low||Very low||Passive, cold, low in assertiveness|
|Positional negotiator||High||Very low||Pushy, insensitive, inflexible|
You want a good result, and you also want to be able to maintain a good relationship with your supplier. To achieve this, be prepared; know what it is that you want and have a good idea of the goal that you wish to achieve.
For example, know that you want to save x% on the cost of your dental materials. Know what materials you buy (e.g. a list of the ten most common items), what quantities you use over a three-month period and what price you are currently paying. Then you can have a conversation with an alternative supplier in a confident way. You know what you need and you know what you want to achieve in cost savings.
Be honest with your suppliers. Tell the new supplier you are approaching that you are looking to make savings, but also let your current supplier know that you are looking elsewhere. Don’t be shy about it, although don’t be aggressive about it either. You may have longstanding relationships with certain suppliers but that doesn’t preclude you from asking them if they are able to negotiate on their prices. Remember, this is about the problem (the need to reduce costs) and not the person (the supplier).
Set yourself a timetable
Trying to tackle costs savings in every area quickly is likely to be very difficult when you also need to ensure that you continue with ‘business as usual’. So on your spreadsheet of suppliers allocate a month in the year when you are going to look at them. Some types of spend will take longer than others to review, such as equipment maintenance contracts, so take care that you don’t try and do too many in one month.
Remember, though, that maintenance contracts will usually have within the contract a period of notice, so be sure when you diarise them that you are giving yourself plenty of time to research alternative providers.
It’s not always about price
It is essential to judge suppliers from a ‘value for money’ perspective. Always consider the service levels that you need and receive. Often it is worth paying a little more if you know that the supplier is going to provide you with the top-quality service level you require. The last thing you want is for a supplier to be unreliable and for you to be spending unnecessary time chasing them up for non-delivery or for bad workmanship.
Similarly, when it comes to dental laboratories, receiving the right level of quality is essential; and that level may depend upon the type of treatment that is being carried out. For example, there is usually a difference between private and NHS requirements. Your dentists will have preferred laboratories and may not wish to change, but that doesn’t preclude you from negotiating on price.
Things to watch out for
Your practice software is critical to your operation. Examine your contract in detail and ensure that you not only need everything that is listed as being provided but also that you are in fact using everything that is provided.
Utilities and telecoms
It can be confusing, to say the least, to analyse and identify whether one provider is cheaper than another, although steps have been taken by suppliers to try to simplify pricing structures and make them more transparent. So examine the pricing carefully and don’t be rushed or persuaded to go into an agreement over the phone without having written comparison information.
Take care that the specifications of a cleaning contract are based upon the national specifications for cleanliness in the NHS primary care medical and dental premises and that there is the right level of supervision on operatives and good communications available for you to report any inadequacies.
Take care not to be drawn into the mindset of ‘We have always used so and so.’ Suppliers often become complacent and increase pricing on an annual basis, thinking that they are not at risk of losing your business. Remember, this is not about the person, it is about the problem.
Make it a habit
If you have set yourself a timetable, keep to it and also keep a tally of the savings that you have made (annualised) so that you can calculate at the year end just how much difference you have made. That in itself will be very satisfying and a great achievement to report when you have your annual appraisal.
But don’t just leave it there; continue to be vigilant throughout the year and watch out for suppliers increasing their prices without warning. It is useful to monitor the key performance indicator of materials costs ratio (i.e. income to materials spend).
If you are setting up a new contract (for example, arranging for the redecoration of the practice) always get three estimates; that way you will know better whether you are getting a good value for money deal.
Whilst it is unlikely that you will be able to make comparable costs savings year on year, if you review your list every year you will be able also to review the service levels you are receiving, and that in itself can be a reason for investigating and negotiating with new suppliers.
Remember at all times, though, that negotiation is about the problem and not the person; that way you will always maintain good business relationships with your suppliers, which is essential.
Use the items below to put the ideas in this article into practice:
About the author
Carol Groombridge is a leading dental business consultant who, as a qualified banker, has an expertise in finance and a special interest in performance management.