Put All Purchases Out to Bid

Woody Allen once joked that the only real sin in his family is paying retail. In truth, almost everything is negotiable, especially when purchasing from suppliers to your business. In today's Workshop, Jeffrey Moses shows how putting all your purchases out to bid can help keep your costs as low as possible.

Never simply accept the price of equipment or supplies offered by your suppliers. If you have a preferred supplier, you can ask for discounts of 10 to20%, or more. But to get costs down as low as possible, consider putting all your purchases out to bid from at least three suppliers.

First, determine your exact specifications, quantities and frequency of purchase. Then give this information in exactly the same form to at least three different suppliers. Tell each that you're giving the bid to other suppliers, and that you will be buying based on lowest price.

When soliciting bids, don't let the suppliers begin their sales pitch. Let your specifications speak for themselves.

Almost every business purchase can be handled in this way (whether product or service). Often, prices will vary by more than 15%. Computer equipment, computer software (standard or custom) and office services(such as janitorial, phone answering and lawn maintenance),often vary widely in price.

Some types of products, such as office supplies, do not vary as much from supplier to supplier. Even so, it is worth going to bid with at least three suppliers. Specific quantities and the frequencies of purchasing will make all the difference. Remember to give the same specifications to each supplier.

If there is a wide variation in quality of service among the suppliers you select for the bidding process, you're not really comparing apples to apples. To be accurate in your appraisal of price, solicit bids only from companies that supply service that meets your needs.

Call each of the bidders before contract the lowest bidder. Inform the higher bidders exactly why they didn't win your business. If a higher bidder wants to come down in its price to win your business, all the better. You never know when you will catch someone willing to sell at