How Much To Discount (Rebate) Million Dollar Contract With National Retaier?

Question

I am negotiating a service agreement with a national retailer. They want a discount (rebate) for a multi-year deal. What is, if any, the standard rate for such?

Thanks.

Blake

Answer 1

there is no standard.  they just want a lower price.

I always tell them 5% extra each year for multi year deal to account for inflation.

Answer 2

Depends on your costs, projected cash flows and other risks. The standard price you're quoting should include an assumed profit margin that you intend to make.

In addition to making your profit, you should also be earning enough to generate a return on any invested capital that is greater than the cost of that capital.

If you have a 10% bank loan but only making 8% on your business, you won't be in business long.

You should make sure you know the numbers you're working with and any additional investments you need to make to serve the needs of a national retailer (increased travel costs, new office space, extended hours to be able to serve all time zones, etc.)

While you could over-analyze the problem, my sense is that a discount around 20% per year would be where you'll land.

One other bit of advice - retailers are notorious for stretching out the time it takes to pay their suppliers - look for upfront fees or bill monthly and find a factor to buy your receivables.

Answer 3

If you're managing a million dollar contract, you should be more serious about it than asking on Yahoo Answers. Get your lawyer and accountant in the same room and pay them well to give you the best course. If you don't have either of these, you SHOULD, a million dollar contract is not something to throw to YA.

There will never be a standard discount anyway. It depends on the niche, the product, and usually is resolved by negotiation with the other party. See LAWYER.

Answer 4

1. Be careful as to the size of the "discount" (extortion) as they will ALWAYS negotiate for more next time.  The big companies don't care that your costs go up, they just want "savings".

2.  From my experience the rebate/discount is somewhere between 3-10%.  

There are no "standards" and these stupid "rebates" are a big reason that American jobs are leaving the country.

Good luck.