Your vendors aren’t rewarding your loyalty.
They’re taxing it.
Here’s how the “loyalty penalty” quietly drains 7-figure businesses
A few months ago, I sat down with Marc Freedman (CERC), a cost-reduction expert who’s audited 25,000+ businesses. His first sentence was a punch in the gut:
“The biggest mistake? Assuming long-term vendor relationships guarantee the best pricing.”
Across industries, his team routinely finds companies overspending ~18% on their top 3–5 non-payroll expenses. Do the math: if your non-payroll spend is $2.5M, that’s ~$450,000 left on the table, money that could fund hires, ads, or simply breathe room back into your margins.
One client, a multi-location dental group, ran supplies on a handshake “cost-plus-15%.” Sounds fair… until someone asked, “Cost of what, exactly?” A quick audit revealed they were overpaying ~18% because “cost” was never defined.
The fix wasn’t switching vendors; it was getting the terms in writing and negotiating like an adult business, not a hopeful friend.
This isn’t about being adversarial. It’s about being a pro:
- Benchmark every 12–24 months. Get two outside quotes. Use them as a reality check.
- Negotiate with precision. Avoid round numbers; ask for 17% or 18%—it signals you’ve done your homework.
- Default to renegotiate, not rip-and-replace. 95% of the time, you can keep the vendor and fix the price.
- Hunt the “fee salad.” Merchant processing, telecom, utilities—those line items are negotiable. Marc’s seen rates moved from ~3.3% down to a flat ~2.68% with junk fees eliminated.
- Lock clarity, not just price. Define “cost,” index increases, service levels, and review cadence inside 2–3-year agreements.
🧠 Key Takeaway
Profit equals revenue minus expenses. You can pull my three favorite levers to grow revenue, but if your cost base is bloated, you’re sprinting in ankle weights.
Trimming 10–20% on your top categories is often the fastest “profit project” you’ll complete this quarter—and it compounds by giving you more firepower to acquire and keep customers.
⚡️ Rapid Implementation
Quick audit for founders who feel stuck:
- Export a vendor spend report.
- Circle your top 5 non-payroll categories.
- Book three calls this week: clarify terms, request an odd-number reduction, and ask for a 24-month rate lock with defined escalators.
Which expense category would you target first if you ran this audit today?