Why you should never share your purchasing budget with suppliers
Here's just one example why you shouldn't.
Sheraz, one of my good suppliers a while back shared one of his experiences.
He went to see a client about a project. He found out the budget shared for this project, through the company's internal newsletter i.e., 400,000. He priced his proposal at 425,000. The client negotiated terms and settled at 399,995.
Once a supplier knows a budget, two things can happen.
- They only give you what you can afford for that budget.
- They don't always focus on the client's brief, instead they focus more on the budget.
It would have been interesting to know what Sheraz would have quoted had he not known the budget and only had the detailed brief.
Sometimes the business wants to count pennies and you have to play a little hardball with vendors by not giving them the full picture and by beating them down on price and/or getting them to give concessions.
Push for ballpark figures upfront, don't tell them your budget, but do qualify so you know beforehand that they're not going to slap a quote in front of you for 1,000,000 when you know you only have 400,000 to play with.
The only exception is if the supplier is strategic to your business, or if you have a really good relationship with an existing supplier and understand their costs and the margins they're making.
Hence, never share your budget with a supplier or even disclose it in internal publications available to suppliers.
Hope this purchasing tip helps you when you next speak to a supplier.
Cheers
Shehroz