Best Practice

Negotiation: Tips for Securing Your Next Contract

“Let us never negotiate out of fear. But let us never fear to negotiate.”— John F. Kennedy

By Nancy Allen

Monica owns a multinational software development company that prides itself on innovation and customer service. She recently told me this story about how she negotiated a large contract in a way that benefitted her company and an existing client.

Monica was called into the client’s office, and she went there thinking the meeting was going to be about extending her existing contract. She had done the work as expected, the evaluations were positive, and she felt confident the client was satisfied.

She was surprised to hear that the reason for the meeting was a request she cut her existing contract by 25%. The client said the shareholders were asking all vendors to cut their contracts by 25% because of downturn in the economy.

Monica said she understood the request and would get back to the client by the end of the week. Monica went back to her office and discussed the request with her team. A 25% cut would mean millions of dollars and the loss of countless jobs in her company. Monica’s team worked out a proposal for her company to reduce the contract by 20%, not the 25% requested. 

The proposal outlined how she could cut costs without compromising the current and expected outcomes for the customer in terms of technical and customer support services she was providing as part of the contract. Monica’s goal was to negotiated the 20% reduction by showing the client how any further cuts wouldultimately affect the client’s ability to retain customers, which would affect the client’s bottom line. The client accepted her proposal, and Monica was able to keep the contract. The key was that she demonstrated she understood the client’s business model and proved she was a valuable partner. 

This story is a great example of a win-win negotiation, and it contains some valuable lessons and insight that can inform your next negotiation.

CREATE Strategy

We like to use the word CREATE as an acronym and mnemonic that helps business owners, business development professionals and other leaders successfully negotiate contracts.

Here’s how it works in Monica’s story:

  • Clarity. Monica clearly understood what was asked of her. She also had clarity around what her company was bringing to the table and how it affected the bottom line of the client’s client. Very often, we forget to bring in the client’s client as part of the negotiation.
  • Research. Monica’s first reaction was to inform the client’s representatives that she “would get back to them.” This allowed her to do some very important research, crunch the numbers and come back with an emphasis on the client’s client.
  • Extra. It is a well-known fact that women are better negotiators when they are negotiating on behalf of someone else. In this case, Monica had her employees in mind, knowing how a 25% cut would affect them, as she was preparing for the negotiation.
  • Alternatives. The best negotiators always have an alternative scenario that they can present as a negotiating tool. Monica’s alternative was to still offer a reduction, but a smaller one than the amount the client was requesting. She accompanied this offer with an explanation that the full amount requested would be detrimental to the client’s bottom line — instead of focusing on the effects it would have on her own company, which would not be a selling point for persuading the client to change course.
  • Timeframe. Monica did not panic. She did not accuse the clients of being in breach of the current contract by asking for the reduction. She also did not immediately accept the reduction request. She gave herself some time by saying “I understand. I’ll get back to you by the end of the week.”
  • Energy. Monica kept her cool. She went in with one expectation, and when it became clear that her assumptions were wrong, she did not react. Maintaining her composure showed respect to the client and also showed the client that she was not a pushover who would accept without a counteroffer.

Lessons Learned

There are several take-aways business leaders can learn from Monica’s example. These are important in any business negotiation scenario. They are:

  1. Know your client and know your client’s client.
  2. Present alternatives in terms of how it will affect the client, not you.
  3. Rely on your team to help you come up with alternative solutions.
  4. Be professional and respectful, even if it doesn’t seem that the other side is reciprocating.
  5. Know what you bring to the table and use that to your advantage.

The key is to keep your composure and give yourself the time and space to think through all of the various scenarios during a potential negotiation. Bring in your team or some of your trusted advisors to help if necessary. Look at the issue from all angles. Keep Monica’s story in mind, and you’ll know the best way to negotiate when it’s time for you to stand up for what you want, need and deserve.

Nancy Allen is the CEO of the Women’s Business Development Council of Florida, a nonprofit that operates the Women’s Business Enterprise Council of Florida, which certifies companies as women-owned for the Women’s Business Enterprise National Council. She also serves as the CEO of The Growth Shift and Nancy G brands. Allen speaks to business groups all over the world about management, leadership, certification and transitions. She can be reached at nancyallen@womensbusiness.info. 

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