Negotiations Training

Getting the Right Deal for Your Company: Negotiating for the Right Supplier

Whenever we talk to individuals tasked with the buying or purchasing duties in a company, we stress that purchasing department should focus on not necessarily the cheapest deal they can get but the right deal. As anyone can tell you, not all products, services or companies are the same. Even companies who sell the same exact product or service can provide completely different results.

Picture the following scenario:

Bid #1 - Waltham TechWorx promises to deploy one-hundred copies of a software product (that they wrote as the OEM) in four weeks via three consultants at a cost of $1,200.00/day per consultant.

Bid #2 - Silver Technical Consulting promises to deploy one-hundred copies of the same software product (that they support as a reseller) in two weeks via four consultants at only $800.00/day.

One's immediate reaction may be to go with Bid #2 - not only is the deployment time cut in half, the company will have to pay for less time at a significantly lower rate. With tight budgets often receiving top priority, it may make sense. Yet, are you getting the same thing? Will you receive equally competent consultants? Do they have the same training? Do they have access to the same resources should something go wrong? It may not be worth it if the Silver's consultants are less experienced and have to spend time flipping through manuals and release notes to figure out what they're doing?

Ultimately, you have to make sure that the deal you are after is the right deal, not the lowest deal. This requires you to ask questions and to carefully weigh every bid before immediately choosing the lowest cost. You've heard all the clichés... you get what you pay for... there's no such thing as a free lunch. Well, those clichés exist for a reason.

As you are at the negotiating table with a supplier, you may soon find out why some companies are cheaper than others. Their payment terms may be outrageous or their warranties are virtually non-existent. They may be willing to provide you a great deal on your first order but may then raise the cost of subsequent orders to rates that are far from favorable.

The smart move is to ask questions and read the fine print. When it comes to questions, prepare a list before-hand. Try to come up with all those terms and conditions that can make or break the success of a vendor relationship. You should also know which terms are negotiable and by how much. For example, if your vendor's contract requires invoices to be payable upon receipt but you prefer net 45, know beforehand if you're willing to accept net 30 in order to come up with a happy medium.

By taking care of all the details during the selection process and the negotiation, you can save yourself a great deal of heartache and future trouble.