Increase your advantage by negotiating correctly
Farmers are limited only by their creativity when it comes to negotiating inputs, machinery and cash rents, says Bret Oelke, University of Minnesota farm management specialist.
"If producers took a wider view of the business of agricultural production and processing, it would
be easier to understand the spots where they can give themselves a competitive advantage through negotiating," Oelke says.
Farmers can negotiate costs associated with land, inputs, machinery and production. This includes prices for cash rents, seed, fuel, machinery, basis and labor.
Some negotiations have a bigger impact on your operation and you should spend more time developing those relationships. "You will max out whatever discounts and benefits you get from a seed transaction relatively easily," Oelke says.
He advises farmers to concentrate on negotiating land, machinery and production costs. Land is crucial to every operation. A good relationship with a machinery dealer, he says, can provide timely support for your operation, and even a small increase in basis can provide huge profitability opportunities.
Long-Term Partners. Scott Brees is manager in Rocheport, Mo., for Sydenstricker, a John Deere dealership with 10 locations in Missouri. He says he views his best customers as partners, and vice versa. His goal is to have long-term relationships that are profitable for both parties.
"With some of our best customers, there’s not a lot of negotiating that goes on," he says. "There has to be trust in a relationship and you have to perform and do what you say you’re going to do. When you view each other as partners, the negotiating process really goes out the window."
Brees says if you have to do a lot of negotiating, it makes the relationship adversarial. "Don’t view buying a tractor as going into combat. There’s always going to be a cheaper price somewhere." He says farmers can benefit more from a positive working relationship with their dealer than from a minor price drop.
The first step in laying the groundwork for a strong, long-term relationship with your supplier is opening the lines of communication. "You have to be able to get out and meet people," Oelke says. Let it be known you are willing and available to supply grain when an elevator needs it or help meet a landowner’s goals with his property.
Once a relationship begins, you must know how you want your supplier/buyer to view you and your business, he says. "Position your business in your own mind and others’ so you’re a valued part of the operation."
Brees agrees. He says his dealership can provide much better service and support to farmers who are open about their business and who share details.
Tip for Negotiating Success
To become a customer of choice requires homework and dedication. Bret Oelke, University of Minnesota farm management specialist, recommends following these guidelines:
Your attitude is important. Be thoughtful and purposeful every time you interact with a supplier.
Be prepared to compromise.
Develop trust through effective communication and fair dealings, which will result in the best long-term results.
Good negotiators are patient and consistent in dealing with others.
When preparing for a negotiation, know your costs and the impact of changing costs or prices on your operation.
Be able to justify and back up your position with data.
Always be aware of who you are negotiating with. This can include owners, spouses, heirs, employees and other third parties.
Make sure you understand what the other party is after and how he will benefit from working with you.
- December 2012