Bargaining Leverage in Small Enterprises

The Supermarket–Supplier Problem This week, I saw report by The Daily Monitor Newspaper indicating that Diageo is exploring the sale of 65% of its EABL shares. Just this July, Del Monte (a 138-year-old Amercian brand) filed for bankruptcy. Late last year, news came out that Unilever shut down its Zimbabwe plant. One of the big reasons? Shrinking market share and late payments from supermarkets. Now, before you roll your eyes and say “but that’s Zimbabwe,” let’s bring it closer to home. Recently, Mr. Ngabirano the founder of Sumz Snacks was painfully explaining this same problem faced by his business with no clear solution in sight. You deliver goods, they sell them for cash, but when it’s time to pay you… excuses start. Here’s the irony: ☑️ Supermarkets receive cash upfront from customers. ❎ But they push credit terms onto suppliers (30, 60, sometimes even 90+ days). Meanwhile, you are left hanging - unable to pay staff, reinvest, or even buy raw materials to make the next order. It’s like being forced to give your landlord rent in advance, while your boss tells you, “We’ll pay you when we feel like it.” Why does this happen? ✅ Cashflow Power Dynamics - > Supermarkets know suppliers are desperate for shelf space. That desperation gives them leverage to dictate unfair terms. ✅ Consolidation of Retail Power - > A few supermarkets control the market. That means fewer alternatives for business owners, and more “take it or leave it” deals. ✅ Lack of Collective Voice - > Each supplier negotiates alone, making them weak. Imagine boda guys trying to fight Uber one by one instead of striking together. 📌 What can be done? ✅ Supplier Unions & Coalitions - > Small manufacturers must start thinking collectively. Alone you beg, together you bargain. ✅ Tiered Payment Systems - > Enforce mandatory shorter payment terms for SMEs (say max 14 days). Big corporates can maybe handle 30 days, but not the young businesses trying to scale. - > In one of my previous corporate roles, I introduced a payment SOP that guaranteed all suppliers with invoices below UGX 3M ($1,000) were paid within 7 days. The goal was simple: protect small suppliers’ liquidity and keep their businesses alive. ✅ Tech & Direct-to-Consumer Channels - > Don’t give supermarkets monopoly over your products. E-commerce, TikTok shops, subscription models can help you to minimize dependence. ✅ Policy Pressure - > Just like we lobby around tax, manufacturers need to lobby around fair trade practices. Because if giants like Unilever can’t survive, what chance does a local manufacturer have? Supermarkets should be partners in growth, not predators in disguise. (But we all know that, it is what it is 🤣 ) So, dear Ugandan entrepreneurs: if your cash is always trapped in supermarket shelves, it’s not business. It’s charity. 📌 Don’t let supermarkets be your first dream.

The Dynamics of Negotiation Power The task of the negotiator, Lax and Sebenius reminded us, is to create and claim value. While the former requires collaboration to increase joint value, the amount of value we can claim depends on how much bargaining power (leverage) we have. How much power we have depends on the extent of our dependence on the other party to satisfy our interests. The more we value the outcomes or resources we might receive from the relationship with them, and the scarcer the alternatives from where those same resources can be acquired, the more dependent we are on them. Conversely, the less we need to rely on others for valuable resources, the greater our leverage. Leverage is not static but is relative and situational. It evolves as the negotiation progresses and can change dramatically, eg when the value of one’s own preferred no-deal option diminishes or the other party's improves. Bargaining power broadly falls into two categories, ie coercive ('hard') and persuasive (‘soft’) power. Hard power can derive from eg our level of authority or hierarchical position, access to superior resources, legal power, the ability to use force, etc. People's perception of power in negotiation is often skewed towards this kind of power. Of course, coercive power can achieve immediate favourable results. Yet, it can damage the very relationships we need to sustain the result or ensure smooth implementation. It also tends to damage reputations, hinder future cooperation, diminish overall value and lead to unintended consequences, including potential retaliation as victims can easily turn into aggressors. Those who exercise coercive power don't always realise that while they can only control the exercise of their power, they cannot control its consequences. Soft power fosters collaboration, respect, and reciprocity. Examples include being perceived as a trustworthy counterpart, having a strong relationship with them, having the ability to provide unique solutions to their key concerns, and the strength of one's alternatives both within and outside a negotiation relative to that of the other party. An often-neglected form of soft power is process power, i.e. the ability to lead or at least influence (not dominate) the negotiation process. Examples include being well prepared, setting the tone (creating the right ‘mood music’ for the process), standing up to the other person’s unacceptable behaviour, proposing ground rules for the negotiation or creative options to integrate interests, being patient, asking open-ended questions and practising active listening. Al Capone reputedly said, 'You can get much further with a kind word and a gun than you can with a kind word alone.' While this might appear to be the case judging by how some in high places behave, research and experience show that although reliance on coercive power might work in the short term, it stands in the way of long-term value creation.

If you're still negotiating based on just the price tag, you’re leaving value on the table. Cost Breakdown Analysis isn’t a luxury. It’s a strategic weapon. Why It Matters: Vendors will rarely tell you what drives their prices. But when you analyze the cost structure, you gain leverage. This means: 1. You know where the margins are padded 2. You can challenge vague fees or inflated logistics costs 3. You negotiate smarter — on facts, not feelings What to Break Down in a Supplier's Quote: 1. Material Cost – raw inputs, local vs. imported 2. Labor Cost – wages, time per unit 3. Logistics – transport, warehousing, handling 4. Overhead – admin, power, rent, tooling 5. Profit Margin – reasonable markup? Or too much? ✅ Real-World Example: While procuring greenhouse materials at Subati Group, I once broke down a supplier's inflated quote into these cost blocks. After some analysis and questions: We negotiated a 15% price drop, without compromising on quality or delivery, simply by understanding their actual cost base. It’s not about pushing suppliers — it’s about creating a transparent, fair conversation where both sides win. Bonus Tip: Use tools like: Should-cost models (basic Excel templates work!) RFQ templates with cost component sections Benchmarking against historical prices or peer quotes 📩 Ready to Negotiate With Confidence? I help SMEs and buyers build negotiation strategies based on data, not guesswork. Always open to consulting, brand/content partnerships, or collaborating with tools that support smarter procurement. Let’s connect. #Procurement #CostBreakdown #StrategicSourcing #NegotiationTips #SMEs #SupplyChainManagement #SpendAnalysis #B2BConsulting #ProcurementWins #ProcurementStrategy #BusinessGrowth

Dealing with a Much Bigger Supplier: Challenges & How to Win Working with a supplier significantly larger than your company can feel like an uneven partnership—but with the right approach, you can still secure strong terms and long-term value. 🔻 Key Challenges 1️⃣ Limited Negotiation Power Big suppliers often set the terms—pricing, lead times, and service levels—leaving smaller buyers with less leverage. 2️⃣ Lower Responsiveness You may not be their priority, resulting in slower communication, delayed shipments, or inflexibility on changes. 3️⃣ Standardized Processes Large suppliers usually operate rigidly; customizing solutions for smaller clients may not be appealing to them. 4️⃣ Internal Dependencies Their decisions often go through multiple departments, making escalations or urgent resolutions harder. 5️⃣ Risk of Over-Reliance A dominant supplier relationship can threaten supply continuity and bargaining power. ⸻ 🟢 How to Win Despite the Size Gap 1️⃣ Build Leverage Beyond Spend Even if you’re smaller in spend, you can offer: • Access to a new geography or market • Long-term commitment and volume stability • A reference client in a strategic industry • Co-development or innovation opportunity Leverage isn’t always about money. ⸻ 2️⃣ Elevate Relationship Management • Build executive-level connections • Create joint business reviews (JBRs) • Align KPIs and performance metrics • Strengthen communication and escalation paths Strong relationships reduce power imbalance. ⸻ 3️⃣ Demonstrate Operational Excellence Bigger suppliers love easy-to-work-with clients. Become their “preferred smaller customer” by: • Sharing accurate forecasts • Ensuring timely payments • Reducing order variability • Being transparent and collaborative Reliability becomes your competitive edge. ⸻ 4️⃣ Diversify to Reduce Risk (Smartly) Create optionality by: • Identifying alternative suppliers • Dual-sourcing critical components • Keeping a flexible contract structure This boosts your negotiation power. ⸻ 5️⃣ Negotiate Value, Not Just Cost Focus on: • Better lead times • Priority allocation • Technical support • Joint inventory management • Service-level guarantees Value-added terms can outweigh discounts. ⸻ 6️⃣ Use Data to Drive Your Case Show: • Cost of poor performance • Forecast stability • Growth projections • Total value of your business Big suppliers respond to clarity backed by numbers. ⸻ 7️⃣ Formalize the Relationship Use: • Master Service Agreements (MSA) • Service Level Agreements (SLA) • Quarterly Business Reviews (QBRs) Formalization ensures accountability and protects your interests. ⸻ 🏆 Final Thought Bigger suppliers may hold more power—but smaller buyers win by being smarter, faster, and more strategic. Focus on value creation, relationship strength, operational excellence, and risk mitigation. With the right approach, the partnership becomes mutually beneficial—not one-sided.

Most small businesses believe that only large corporations can secure the best logistics rates. This is a common misconception I’ve seen many times in my 22+ years in the industry. But the truth is, even small businesses can negotiate better deals, if they understand what logistics providers truly value. It’s not just about volume. There are several other levers you can use. Here’s what I’ve learned over the years: 1. Consistency matters more than quantity →Even if your shipment volume is not high, regular and predictable shipments build trust with your logistics provider. Reliability often wins over scale. 2. Operational discipline goes a long way →Logistics partners prefer clients who are organized - on-time documentation, clear communication, and minimal last-minute changes. Being easy to work with makes you a preferred client. 3. Long-term relationships bring long-term benefits →Rather than negotiating shipment by shipment, propose a longer-term contract. This gives your partner planning confidence, and you more favorable pricing. 4. Bundling services increases your negotiation power →If you need customs clearance, freight, and warehousing, consider giving all services to one provider. Consolidating services often opens doors to better deals. 5. Knowledge is leverage →When you understand shipping terms, cost structures, and the impact of container size or weight breaks, you negotiate from a position of strength. Even basic knowledge makes a difference. As someone who started with a single desk and now leads a global logistics firm, I can confidently say: You don’t need to be big to negotiate better. You just need to be smart and prepared.

5 Essential Tips for Small Businesses Negotiating with Big Developers If you’re a small or minority-owned business considering a lease in a shiny new development, proceed with caution. These large developers are often funded by public money—TIF, Neighborhood Opportunity Funds, and Opportunity Zones— with a smidgen amount of private funds and they need you to meet their community benefit promises. But their leases are usually written to protect them, not you. Here are 5 critical tips to protect your business: 1️⃣ Never Sign a Personal Guarantee Don’t put your personal assets at risk. Developers don’t personally guarantee their financing—you shouldn’t either. 2️⃣ Negotiate Ramp-Up Time It can take 4–5 years for a café or restaurant to reach profitability. Secure free or reduced rent to give yourself breathing room. 3️⃣ Choose Short-Term Leases with Renewal Options Skip 10-year commitments. Start with a 2–3 year lease with options to renew—test the market first. 4️⃣ Know Their Redevelopment Agreement Ask to see the developer’s agreement with the city and understand their occupancy deadlines. Don’t let their funding needs trap you in a bad lease. 5️⃣ Never Invest Your Own Money in Their Build-Out All tenant improvements (TI) should be landlord-funded. Don’t sink cash into someone else’s property. Bottom line: Developers have reserves. They have rentup reserves febt service reserves and non recourse loans…Small businesses don’t. Protect yourself, know your leverage, and negotiate like your business depends on it—because it does. Our businesses aren’t just tenants they’re anchors for community empowerment. #smallbusiness #commercialrealestate #economicdevelopment #communitydevelopment

Enhanced Bargaining Power: Input Procurement: The FPC can bulk-purchase seeds, fertilizers, pesticides, and machinery at a significant discount, reducing the cost of cultivation. Output Marketing: Instead of selling small, inconsistent quantities to local traders, the FPC can aggregate produce and negotiate better prices with large buyers (retail chains, exporters, processors). Access to Credit and Finance: As a registered corporate entity, an FPC has a better credit rating and can access formal loans from banks for working capital, infrastructure, and equipment, which is nearly impossible for an individual smallholder farmer. Value Addition and Increased Income: Instead of just selling raw produce, the FPC can invest in primary processing (e.g., cleaning, grading, sorting, packaging, milling, making pulp). A farmer selling raw tomatoes gets ₹10/kg, but the FPC selling tomato puree can realize ₹50/kg, sharing the added profit. Access to Technology and Knowledge: FPCs can facilitate the adoption of better technology (drip irrigation, soil testing kits, weather advisory services) and provide training on improved agricultural practices. Risk Mitigation: By diversifying markets and creating a stable business structure, FPCs reduce the risk of price volatility and market exploitation.

Most SMEs think the only way to win is by pushing factories to lower their MOQs. They believe “the smaller, the better.” The fact is: Behind every MOQ is a cost structure: batching, labour, and production efficiency. When you only argue for the lowest number, you: → Lose leverage on quality and lead time. → Get shunted to the back of the production line. → Risk being dropped when a bigger client comes along. ✅ What actually works is… Framing the negotiation around value, not just volume: → Show consistent demand, even if smaller. → Bundle SKUs to hit a reasonable total volume. → Offer flexible timelines to fit into their production schedule. Build trust by being a reliable payer. Factories work best when you treat them as long-term partners. Negotiation should focus on building trust and mutual benefit. Strong relationships secure better timelines, quality, and consistency. That’s how you create supplier partnerships that scale with your business. P.S. Have you ever struggled with MOQ negotiations? What worked (or failed) for you?

𝐅𝐨𝐮𝐧𝐝𝐞𝐫'𝐬 𝐁𝐨𝐨𝐤𝐬𝐡𝐞𝐥𝐟: 𝐖𝐞𝐞𝐤𝐥𝐲 𝐖𝐢𝐬𝐝𝐨𝐦 In this weekly series, we distill complex resources into clear action steps. 𝗕𝗮𝗿𝗴𝗮𝗶𝗻𝗶𝗻𝗴 𝗳𝗼𝗿 𝗔𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲 by Richard Shell provides a practical, research-backed roadmap to mastering negotiations, an essential skill to secure funding, partnerships, and growth. Successful negotiation begins well before entering the room. Effective negotiators know their style, values, and triggers along with a deep understanding of the other side's priorities, pressures, and personalities. This dual awareness helps create win-win solutions and prevent costly misunderstandings, whether pitching to investors or closing a major deal. In Shell's perspective, 𝗹𝗲𝘃𝗲𝗿𝗮𝗴𝗲 𝗶𝘀 𝘁𝗵𝗲 𝗿𝗲𝗮𝗹 𝗰𝘂𝗿𝗿𝗲𝗻𝗰𝘆 with three types: · Positive leverage (what you can offer) · Negative leverage (what you can withhold or threaten) · Normative leverage (using standards, norms, or fairness to your advantage) Build your leverage by showcasing your startup's unique strengths and the specific advantages it creates for customers. Shell outlines a 𝘂𝗻𝗶𝘃𝗲𝗿𝘀𝗮𝗹 𝗻𝗲𝗴𝗼𝘁𝗶𝗮𝘁𝗶𝗼𝗻 𝗽𝗿𝗼𝗰𝗲𝘀𝘀: · Preparation: Analyze the relationship and conflict level and plan accordingly. · Information: Listen first, talk second. Gather intelligence and build rapport. You are starting what you hope to be a long working relationship. · Exchanging Offers: Make the first offer when you have a strong position to anchor the deal. However, be aware of the other party's interests. · Closing: Move beyond agreement to ensure both sides are committed and clear on the next steps. Shell emphasizes the role of trust, reciprocity, and relationship-building. Deals built on mutual value and respect yield better long-term results, crucial in the startup world where reputation and networks are invaluable. When you think in terms of cooperation and appreciation, you can creatively design solutions together than benefit both sides. 𝗕𝗮𝗿𝗴𝗮𝗶𝗻𝗶𝗻𝗴 𝗳𝗼𝗿 𝗔𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲 prepares founders to negotiate confidently and creatively, even with limited resources or challenging odds. 𝐅𝐨𝐮𝐧𝐝𝐞𝐫'𝐬 𝐁𝐨𝐨𝐤𝐬𝐡𝐞𝐥𝐟 reviews valuable resources and provides key insights concisely. Look for the book details in the first comment below. 👇 #leaders #founder #adapt #startups

In negotiation, what’s ‘small’ to you might be huge to them. Stop treating ‘small’ issues as irrelevant. We often dismiss issues that feel trivial to us, assuming they won’t matter to our counterpart. In truth, these “unimportant” details might be exactly what the other side values most—making them priceless bargaining chips we should never give away for free. Years ago, I advised Colombia in the U.S.A. Free Trade Agreement talks.     One early suggestion was to concede so-called “minor” matters—tariff nuances, agricultural side clauses, regulatory tinkering—just to move the negotiation along.     The bias? If it’s not important to us, it can’t be important to them.     But that mindset ignores the fundamental rule of negotiation:  ↳ your counterpart’s priorities can differ wildly from yours. The root cause of this oversight: We often dismiss “small” issues, thinking they’re meaningless, and conceding them shows goodwill or saves energy for the “big” stuff. But in negotiation, your throwaways are often their golden tickets—valuable leverage you’re handing over for free. Here’s how you turn “small” into strategic gains: 1️⃣ Label Your Concessions ↳ If you don’t call out your “give,” they’ll assume it’s free. 2️⃣ Demand Reciprocity ↳ Always pair concessions with a request for something in return. 3️⃣ Make Contingent Concessions ↳ Offer them conditionally: “I’ll yield on X if you meet Y.” 4️⃣ Use Logrolling ↳ Trade off items that matter less to you but are crucial to them. These methods helped Colombia avoid squandering key bargaining chips during high-stakes negotiations.     By recognizing that even trivial issues can hold immense value for the other side, we secured more balanced, reciprocal agreements.     That perspective shift is what separates average negotiators from those who consistently strike deals everyone respects. Never underestimate what you consider “small.” In negotiation, every piece can be a game-changer. What’s one “unimportant” concession you regret giving away for free? Let’s learn from each other—share your story below! Negotiation isn’t just for boardrooms. Even at home (like deciding who handles the chores), label your concessions and see how it changes the dynamic. _____________________________ Repost if you have given something "small"... in exchange for nothing ♻️