MOQ, Lead Time, Unit Cost, or Payment Terms: Which Comes First in Negotiation?

Hey there,

Negotiating with suppliers can feel like juggling priorities—minimum order quantities (MOQ), lead times, unit costs, and payment terms all demand attention. But here’s the secret: not all priorities are created equal. The key is knowing when and how to prioritize each one based on your product, cash flow, and business stage.

Here’s a step-by-step strategy for successful negotiations:

1. Start with Unit Cost: Know Your Numbers

Unit cost is the foundation of every negotiation—it determines your margins and sets the tone for everything else.

Why It Comes First:

• If the unit cost doesn’t work, the deal doesn’t work.

• It gives you a baseline to evaluate the supplier’s competitiveness.

Tips for Negotiating Unit Cost:

• Do Your Homework: Research competitor pricing and gather quotes from multiple suppliers. Believe me, competitor pricing works 99% of the time when negotiating.

• Leverage Volume: Offer projections for future orders to negotiate lower costs. Even if uncertain, sharing forecasts builds vendor confidence.

• Focus on Value: Don’t just chase the lowest price; consider quality and reliability.

Example:

I negotiated a 12% reduction in unit costs by providing a 12-month order projection for a new brand. This not only improved margins but also built supplier trust.

2. Align on MOQ: Strike the Right Balance

MOQ can be a deal-breaker for many brands, especially startups. Negotiate a balance that works for both sides.

Why It’s Second:

• MOQ determines how much cash you need upfront. Your budget, cash flow, and P&L mean everything—understand how to adjust them smartly.

• It impacts inventory levels, storage costs, and shipping efficiency.

Tips for Negotiating MOQ:

• Ask for a Test Order:Start with a smaller quantity to prove demand. I call this first order “ Marketing test order” and it always works!

• Highlight Long-Term Potential: Emphasize growth and future orders to encourage flexibility.

• Bundle SKUs: Combine multiple SKUs to meet MOQ requirements.

Example:

For Vivere Journey, we negotiated a lower MOQ for new packaging by committing to reorders within six months. This allowed us to test the product without overstocking inventory.

3. Nail Down Lead Time: Timing Is Everything

A great price means nothing if your products don’t arrive on time. Ensure the supplier can meet your timelines before finalizing a deal.

Why It’s Third:

• Lead time affects your ability to fulfill orders and plan campaigns.

• Misaligned timelines can lead to stockouts or wasted marketing spend.

Tips for Negotiating Lead Time:

• Confirm the Full Timeline: Include actual production, raw material sourcing and delivery, scheduling production, Quality Check and other specific tasks in your calculations.

• Build in Buffer Time: Account for potential delays in production or transit. I use 10%

• Ask About Expedited Options: Negotiate fast-track production for urgent orders.

Example:

A DTC brand I supported faced repeated delays due to vague lead time agreements. After adding specific checkpoints—like raw material procurement timelines—they reduced delays by 50%. Be precise: go line by line with your vendor. Don’t accept “total lead time” as an answer.

4. Secure Favorable Payment Terms: Protect Your Cash Flow

Payment terms often come last in negotiations but are critical for managing cash flow effectively.

Why It’s Fourth:

• Terms don’t affect immediate production but have a significant impact on finances.

• They’re easier to negotiate after building supplier trust. Try negotiating payment terms first and you’ll find it very hard to win, this requires a good relationship.

Tips for Negotiating Payment Terms:

• Start High: Ask for Net 60 or Net 90, even if you expect Net 30.

• Offer Trade-Offs: Agree to larger MOQs or earlier PO placements in exchange for better terms.

• Suggest Partial Payments: Split payments (e.g., 30% upfront, 70% after delivery).

Example:

A home goods brand secured Net 60 terms by agreeing to pay a 10% premium on their first order—a small price for the cash flow flexibility it provided.

How to Prioritize These Factors

• New Brands: Focus on unit cost and MOQ to minimize upfront investment while ensuring profitability.

• Growing Brands: Prioritize lead times to align with sales growth and marketing campaigns.

• Established Brands: Negotiate payment terms to free up cash flow for scaling and diversification.

Lara’s Pro Tips for Negotiation Success

• Do the Math: Always calculate the impact of each factor on your margins and cash flow.

• Be Transparent: Share your challenges (e.g., tight budgets, testing new products) to build trust with suppliers.

• Negotiate in Stages: Finalize unit cost first, then tackle other factors—it keeps discussions focused.

• Have a Backup: Always have alternative suppliers in mind—you negotiate better when you’re not reliant on one vendor.

Ready to Negotiate?

Whether you’re starting out or optimizing an existing supply chain, knowing what to prioritize can make all the difference. Need help figuring it out? Hit reply—I’d love to help you strategize.

Here’s to smarter deals and stronger partnerships,
Lara