In today’s economic climate, many suppliers looking to maintain or gain market share are open to giving remodelers discounts or offering special deals.
Though remodelers don’t buy in volume like production home builders, they can still employ tactics to get more competitive pricing and improved service, especially when trying to win a specific job or when purchasing a product that is new to their market. You may not get everything you ask for, but you won’t get anything if you don’t ask.
Here are a few techniques you can use to make sure you’re getting the most competitive pricing from suppliers.
Use multiple suppliers.
Roland Valois, president of R.P. Valois & Co., in Dartmouth, Mass., says that using two to three suppliers “keeps them all pencil-sharp. They know they are always competing for your business.”
Monmouth Custom Builders, in Deal, N.J., asks for quotes from at least two suppliers and subcontractors. Vice president Jon Levy encourages new project managers to maintain relationships with their previous suppliers, which expands the pool of options. If one supplier doesn’t quote a good price, a project manager can ask a peer for a quote from their contact.
Tony Callahan, managing partner at Callahan Consulting Group, in Kennesaw, Ga., says remodelers with a history of accurate material lists that are completed in one order can use that as a negotiating tool. Suppliers might be willing to lower prices if they know they won’t have to deliver to your site multiple times or pick up extra materials. “Get to know their cost drivers. Figure out ways you won’t waste their resources,” Callahan says.
Ask for discounts from suppliers, especially for large orders.
“Don’t be afraid to ask — if you don’t ask, the answer’s always no,” says Mike Gervais, president of Prime Construction, in Burlington, Vt. He prefers to call his salesperson for the initial conversation, and then continue the discussion in person.
The owner of a lumberyard offered Valois a 7% discount if the remodeler committed to purchasing the entire materials package for a custom home if his company won the job. If Valois gets to the second round of bidding for a job where the competition is tight, he will ask his suppliers and trade contractors what they can do to help win the bid.
Gervais says that smaller suppliers are sometimes willing to lower the price by 2% to 3% if you pay cash instead of using a credit card. “They have to pay that on the credit card anyway,” he points out.
Also, if you’re using a new dealer, ask for a new-customer discount. Gervais sometimes purchases staple items in bulk for a discount, such as tile installation products, but then has the issue of inventory control and not charging those items to a specific job.
Avoid making a purchase-volume guarantee.
Rather than promise to purchase a specific volume, give suppliers an idea of your previous year’s volume or how much you spent in a specific product category the previous year. “We’re not 100% loyal to anyone,” Levy says, which makes it difficult to ask for a volume discount. “Once they have a commitment, you lose negotiating power.”
Suppliers are more likely to respond to remodelers with a history of on-time payments, Gervais says, than a volume order.
Build a relationship with suppliers.
The stronger your relationship with suppliers, the more likely they are to work with you when you request a discount. But save those requests for when you really need a discount — if you ask for one every week, it might damage the relationship and the supplier might lower its level of service.
A supplier that understands the range of needs of the remodeling industry is invaluable. [See “Beyond Price.”]
Pay on time or earlier.
“I usually can’t make an early payment,” Levy says, “but I pay within 30 days. When a lumberyard sees someone paying on time, they go above and beyond to make [them] happy.”
Many of Valois’ suppliers offer a 1% or 2% discount for payment by the 10th of the month. Gervais took advantage of his lumberyard’s 2% early payment discount (now defunct) when he could. “If I had cash flow at the time, I took advantage of that. It’s a nice incentive, but it’s not a deal-breaker for us.”
Ask for a “guinea pig” discount.
Because a new product involves a learning curve for your crew that adds time to the schedule, it’s a good time to ask the supplier or even the manufacturer for a discount.
In exchange, Gervais says, offer to let them use your project to promote the product by inviting other local contractors to the site. He recently requested a break on two new products, and not only did he receive a discount — the manufacturer also sent representatives to train his crew to install the products.
Buy wholesale or consider becoming a dealer.
For a multifamily commercial project, Valois purchased cabinetry for 18 kitchens and baths directly from the manufacturer.
Gervais used to have a kitchen and bath franchise, and though he is no longer a franchisee, he maintained the relationships he built with the franchise’s cabinet, countertop, and plumbing wholesalers.
“I sent them letters saying we were no longer part of the franchise but would like to continue purchasing from them with the same terms,” he says. “They were all very agreeable.” He is also a dealer for a few products and says that most manufacturers do not require a large showroom to classify a company as a dealer.
Callahan points out that remodelers can also join a buying group, which offers the advantage of “pooling your combined leverage for lower prices.”
A common production-builder practice is to lock in lumber prices for a span of time. “Nothing prevents remodelers from doing the same thing,” Callahan says, and the December-January traditional dip in the market is a good time to do this.
Some suppliers call Gervais if they anticipate that prices might go up. “If drywall will double in two months, that might prompt me to buy now, especially if I have a large project coming up,” Gervais says.
Though Levy’s supplier sends him a monthly price list, his needs are so varied that he just works on a quote-by-quote basis.
Callahan says software that tracks job costs by construction stage will help you find savings opportunities. You can compare costs on multiple jobs and review where you have pricing leverage. Remodelers should review leftover materials so they can improve estimates and create more accurate orders.
—Nina Patel, senior editor, REMODELING.
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For the supplier’s perspective, here is an article from our sister publication, Prosales:
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