In an interview with Inc magazine the other day, I was discussing the effects of the current economic situation on contract negotiation potential. More specifically, everyone seems to believe that the current downswing is cause for not only some great deals, but also for the potential to create some re-negotiation possibilities. In other words, the various authors of these pieces are looking for confirmation that now is a great time to buy. Well, my advice on that issue is pretty simple and I’ll point you all towards the article when it comes out. 😉
I’m more concerned at the moment with the opportunity for re-negotiation because this opportunity does actually exist. But it’s an opportunity that ALWAYS exists. The current economic situation is merely bubbling the issue to the surface.
Now, I’ve literally just spent the last half-hour writing and re-writing an attempt to eloqently and gently explain how negotiations are supposed to work and how they’ve not really worked over the last few years due to bullies (both on the vendor and customer sides of the transactions). The truth, however, is that there isn’t a nice way to explain it. The negotiation situation has been bad and it continues to be bad – even after the current downturn has made everyone more acutely aware that bad deals are worse when the economy turns sour. So I’m just going to be really blunt.
Folks: do good deals. Work well with each other to make sure that each party’s true needs (and a few of each party’s wants) are met during the deal. Look deeply into the financials of the deal, as well as how they’re calculated. Don’t guess, don’t assume, don’t overestimate. Use real numbers, actual counts and a solid basis for each transaction. Get rid of puffery, boasting, bloating and non-essentials. If you only THINK or BELIEVE something is going to come to pass, don’t base the deal on it. Rather, find a way to add it in as a POTENTIAL opportunity – a possible future transaction. But don’t commit to an uncertain future.
In more Plain English™, buy what you need, sell what you have. If you don’t need it or don’t have it, don’t do the deal. Don’t use pretend numbers to support the transaction or the promise of potential to entice you into something that won’t work for you in the current state. And don’t expect either party to return to the table when the economy goes bad or things don’t work out as planned for you. Your problem isn’t THEIR problem. (Perhaps you’ve heard this as “Poor planning on your part doesn’t constitute an emergency on my part.”) And, for the people who are thinking it, this is not a situation for force majeure. Economic fluctuations are understood and always possible.
Again, do good deals. Apply the Five Fundamental Skills for Effective Negotiation. If you need/want help, get it. Oh, and contrary to what is happening with certain large industry players at the moment, don’t expect someone else to bail you out because you didn’t plan. If you haven’t learned the lesson so far, let’s put it in Plain English™, too: The economy swings both ways. Unexpectedly. More often than we’d like. Regardless of your political leanings, fiscal and risk conservativism is always appropriate.