As a solar company owner, you have to partake in a variety of business functions including negotiating with the equipment supplier. Most solar business owners believe that negotiating with the equipment supplier means obtaining quality solar products at an affordable cost.
However, negotiating the right deal with your equipment suppliers doesn’t necessarily mean you will get your hands on solar products at the cheapest possible rate. You will have to negotiate other factors such as appropriate payment terms, delivery time, and quality of the solar product.
Most solar business owners would look for a deal that meets all of their requirements – quality, price, timeframe, and more.
However, for traction, they should consider a future business with the supplier. Whether they would want to do further business with a particular equipment supplier again in the future.
8 Tip on Negotiating with Solar Equipment Suppliers
In the end, both the solar business owner and equipment supplier should be content with the negotiation deal and agree to proceed with the next process. If any of the parties feel forced to consider the terms and conditions of the deal, it will only result in an unsuccessful negotiation.
In this guide, you will understand how to negotiate a deal with a solar supplier that can benefit both sides.
1. Setting Objectives
Negotiation doesn’t necessarily mean you have to focus on the price factor. As a solar business owner, you have to bear a countless number of things in your mind when negotiating with an equipment supplier.
The prime focus during the initial phase of negotiation should be setting clear objectives. Setting objectives for solar purchase negotiations may include but not limited to these factors:
- Value for money
- Delivery time
- Payment terms
- After-sales service and maintenance requirements
- Product quality
- Lifetime costs (for solar product or service)
- Essential requirements
Before initiating a negotiation deal with your solar equipment supplier, create a list of factors that requires your attention and is essential for your business. Conclude what factors can be and cannot be compromised based on your requirements.
For instance, if you require tier-one quality solar panels, batteries, or any solar product at an affordable rate, you might want to find a supplier that will offer you such a discount.
The key should be to understand your preferred factor and act upon it. You also have to be prepared with your preferred choices when compromising on negotiation.
If you are not prepared to compromise, the negotiations will remain the same with no further intentions. Additionally, you should also consider what will be the expected negotiation deal offered by the supplier and how you will respond to it.
If you want to do more business with the equipment supplier in the future, then aim for a deal where both of you are satisfied and happy with the negotiation. For future business deals, getting the best possible deal should be a secondary objective.
Instead, you should focus on maintaining a good relationship with the supplier as it will offer you several perks including cheaper price, priority delivery, and after-sales services.
2. Understanding The Supplier
As a solar company owner, you would want to deal with an equipment supplier who understands the value of your business. By conducting some general research on your potential equipment supplier, you can easily conclude their credibility.
Your negotiating chances increase in direct proportion to your potential equipment supplier’s need for your solar business.
The supplier might not entertain your negotiation deal if they have enough business already or you have only a few sources to choose from. However, if the equipment supplier is new to the market or has a good amount of competition, you may take the lead for potential negotiation.
Some equipment suppliers might already be offering good deals to other solar companies to increase their market share. Additionally, the supplier might also offer you a good deal to sell their old stock or to fill in the gap of spare production capacity.
If you are a prime customer of a small equipment supplier, your negotiations may be taken into consideration.
However, you should avoid using pushy tactics for negotiation as it may gradually take a jab on the goodwill, resulting in poor service in future. There are also high chances of suppliers discontinuing their service with you or may even go out of business.
Determine where and when you can negotiate with the supplier and on what basis. For instance, if their average supply of solar batteries is relatively low, you can take your chances for negotiation.
Also, you might want to avoid pitching your negotiation deal to a junior staff member who doesn’t have the authority to grant them. Additionally, consider the right time for negotiation.
Most suppliers have a monthly sales quota to complete, meaning they have to close deals quickly. As a solar business owner, you can take advantage of such scenarios and obtain a good deal.
3. Developing a Supplier Negotiation Strategy
Before initiating the negotiation deal with the solar equipment suppliers, plan your strategy according to your needs.
Planning strategy beforehand will help you set a clear goal and focus on critical factors that require negotiation. Developing a strategy will also help you understand the limit of negotiation and the correct time to walk away from the deal.
One of the best ways to plan a supplier negotiation strategy is by understanding your priorities. Do you want to buy solar panels at a cheaper rate? Are you looking out for high specification and quality in the solar product? or do you want a specific delivery schedule? Get your priorities straight and work on those aspects.
In addition to setting goals, you should also consider the different types of offers the equipment supplier might make and whether you are fine with compromising on those negotiations. For instance, you both may agree upon full payment for the timely delivery of solar products.
Pen down all of the possible negotiating offers that a supplier might make and use them to get the best possible concession. Additionally, you should also focus on the weaker parts of your argument and how you can tackle them to obtain the best deal.
4. Build Your Negotiating team
Once you have decided on your negotiation strategy, start preparing your own negotiating team. Your negotiating team should have all the skills required in the necessary areas. When initiating a negotiation, make sure you match the seniority of the supplier’s representatives.
For instance, your solar company’s senior account manager should have negotiation talks with the managing directors of the supplier. Additionally, you should also ensure that all the members of your team are aware of the negotiation strategy and act accordingly.
Remember that confidence and the right skills are vital for closing a profitable negotiation deal.
5. Conducting Negotiations
Now that you have set your objectives, developed a powerful strategy, and built a team, it’s time to conduct negotiations with the supplier. Before initiating the negotiation, propose the key factors you can deal with and the point you would want to discuss with the supplier.
The proposal should be a two-way thing where you should ask the supplier to do the same. Both parties need to be satisfied with the deal to obtain successful negotiation. Ask the supplier about any discounts offered and preferred payment terms.
Make sure you jot down this information and keep it handy to avoid future clashes. If the equipment supplier is new to the market or has a good amount of competition, you have enough bargaining power to insist on using your own terms of conditions related to purchasing.
Do not express your opinion about compromising on the aspects way too early during negotiation. Instead, try to indicate you are looking out for a positive outcome from the negotiation without revealing your actual plan.
However, if you buy a particular solar product in bulk, you should suggest setting out the key points of the negotiation deal in writing. For instance, state your clear requirements such as make, year, size, and delivery times.
You should also consider using common negotiating tactics. Often suppliers mention having urgent deadlines or are already having negotiation discussions with some other company.
When suppliers keep on referring to such topics, they are likely using pressure tactics to close the deal. However, you should be aware of such pressure tactics and tackle them professionally.
Don’t fall into the pit of pressure deal as it will only result in a forced and unsatisfied negotiation. During such cases, ask for a break if needed.
Recollect all your thoughts, objectives, aspects and head back towards the deal. Make sure you clarify that you have understood the agreed points and write them down.
6. Negotiating on Price
As a solar business owner, you might be familiar with price negotiating techniques and how they work. Don’t accept the first offer – make a low counter-offer in return. Applying such price negotiating techniques will push the supplier to offer you a revised figure.
However, before you accept the offer, ask your supplier what else is included at the offered price. Sometimes, suppliers may offer you a cheaper deal without staying adamant.
In such cases, consider questioning yourself about all the aspects – quality, value for money, delivery time, after-sales service, and more.
To avoid being obvious, you can try to make the asking price look high by mentioning to the supplier your ongoing costs. By doing so, you can ask for extra information such as repair costs, consumables, and other expenses.
If your supplier’s market status is falling, mention that as well. If the negotiation price includes a feature you don’t need, mention the same and get them removed from the deal to obtain a lower deal.
Ultimately, it all comes down to your bargaining power. Using your bargaining power you can close the best possible deal. For instance, if you are one of the primary solar customers of your equipment supplier, ask them for bulk discounts.
However, you should avoid being pushy about the lower price or using unnecessary tactics that may result in a poor negotiation deal. In such cases, your equipment supplier may cut costs in certain areas such as customer service, which may cost you in the future.
Being the supplier’s main customer, you should make the most out of the bargaining power. However, avoid forcing the deal to meet prices as it can affect your company’s reputation and the relationship between you and your equipment supplier.
7. Running Check on The Supplier
Now that you have successfully negotiated a deal, it’s time to sign a contract with the equipment supplier. Before signing on the dotted line, you should take reasonable steps to avoid committing an offence and check whether everything mentioned can fulfil the agreement.
Check the credit history of your potential equipment supplier to ensure they have enough cash flow to deliver your needs and meeting ends.
Running a check on your potential supplier is imperative in case of a long-term contract. In case the supplier is the only available supplier in your installed Customer Relationship Management (CRM) software, you need to ensure there is no potential business risk.
The supplier may also run a check on your solar company to ensure you can pay for the ordered products. You might as well ask for references for the supplier from other customers. Most suppliers usually help you get in touch with their previous clients for further business.
However, you should know that the supplier may not offer you suggestions based on their previous experience with the customer.
Also, check who will be handling your account. Sometimes, the supplier company’s manager bids for contracts and then passes the account to someone else, mostly a junior.
Make sure that you are happy with the designated person handling your work, and you can deal with the manager in case of any problems in the future.
8. Drawing Up a Contract
Once you and your potential equipment supplier have covered all the aspects of negotiation and agreed upon the deal, it’s time to draw up a written contract. Verbal contracts might be acceptable and legally binding, but the court will not rely on them.
Both parties need to agree on the factors that will be covered in the contract. A typical contract will include:
- details of price, payment terms and delivery schedule
- a provision stating the supplier’s right to ownership of the goods until fully paid
- a provision limiting the supplier’s contractual liability – consider the purchaser’s statutory rights
You should consider getting legal advice from a law expert when stating your standard terms and conditions. Cover all the necessary aspects of the negotiation on the contract to avoid future clashes.
Ultimately, it all comes down to setting clear objectives, developing strategies, building a team, conducting negotiation, and mentioning all the clauses on your contract. Use these tips and close the best possible negotiation deal with your solar equipment supplier.
In the fight against the climate crisis, Willie Jiang believes that content marketing can push the energy revolution along at a faster pace. Having helped countless brands grow their organic traffic by 10X and became the CMO of SolarFeeds.com, he is sharing his insights with the solar energy industry. If you want to publish your articles on SolarFeeds Magazine, click here.