In my 16+ years of experience in Procurement roles, I’ve negotiated many contracts for a wide variety of products and services for companies that vary greatly in their size. The most difficult of these negotiations was when I was asked to reopen negotiations with a number of vendors who we already had active signed agreements with. More than one of those had been finalized in the previous couple of months.
This post is not comprehensive about how to negotiate effectively - there are plenty of valuable resources out there - instead, this is about one way I have been effective in exceeding my company’s realized savings goals with a very small team.
No matter what resource you find, preparation is a critical step to a successful contract negotiation. Preparation should include:
- A strong understanding of how your internal stakeholders are utilizing the vendor’s services and software, and how it benefits your company’s revenue, operational efficiency, or some other goal. Done correctly, this will include preparatory calls with stakeholders to collect hard data and anecdotal evidence.
- Up-to-date market data regarding what you’re buying and who you’re buying from
- Understanding of the fiscal calendar the vendor adheres to, which may shine a light on those times a year they may be more motivated to get a deal done quickly
- Overall financial health, including some companies they have as clients and recently signed, among other factors.
These data points are often very hard to find in the public domain so I’d argue that if a company wants to keep contract negotiations in-house, there should be an investment made in the data needed to make Procurement successful. If the same company that has prioritized negotiated savings but doesn’t have an in-house resource, a third party could be very valuable.
Good sales professionals don’t go into a conversation blind. They arm themselves with data about your company, about your product usage (if you’re an existing customer), and market research about where the industry is going.
Preparation is a key foundation for good negotiations. If needed, hire a third party that has the data and in-house experience negotiating with strategically important, high-cost vendors. The more resources you can put into preparation, whether in-house or with a third party, the greater the savings will be.
