How to Renegotiate After Your Deal Appears to Have Failed
Even if you think it’s a perfect deal, something can always go wrong. Your operating costs could change, COVID-19 might disrupt your ability to meet the requirements of your deal or you may not have considered all aspects that would make the deal unprofitable.
So, what do you do then?
Is it worth trying to cut your losses?
You don’t have to take the first deal offered. If you are not happy with it, there are some tips and tricks that can help you get a better deal.
When Should You Renegotiate?
Three main reasons for renegotiations are misrepresentation, substantial change, or it’s outdated.
Misrepresentation can happen when the numbers in a contract or offer are wrong. It may also be that one party learns new information and needs to renegotiate.
A substantial change can come from a sudden drop in revenue or an unexpected price increase. It usually changes the other party’s ability to deliver on their part of the deal.
If a deal was made long ago, you may need to renegotiate it if the circumstances have changed. For instance, one company might raise prices because of inflation or want to renegotiate after their solution is successful.
If you do need to renegotiate, make sure there is a valid reason. If not, it will harm your relationship with the customer and put them in an uncomfortable position.
If you’re going to renegotiate a deal, make sure it has merit and is worth the risk.
Best Practices When Doing Renegotiation
So, let’s talk about how to renegotiate. We can use these four steps to help you negotiate successfully.
To do well in a negotiation, you should know what your situation is.
To renegotiate a contract, you need to review the details of what you want to change and figure out how best to approach them.
For example, if you want to renegotiate a deadline on an agreement, look for any penalties. If there are none and the original deadlines were agreed upon by both parties then it is more likely that they can be changed.
In other cases, you may find that your employees are satisfied with the current agreement.
If you need to renegotiate, study and layout as many reasons as possible before asking for it. Make sure your numbers are up-to-date or that there has been a failed conversation.
The goal of renegotiation is to make both parties happy. You’ll likely have to give something extra in order for the other person to agree with what you’re asking them for. Figure out where they feel pain and see how upgrading your part of the deal will help alleviate that.
This process takes a lot of time, but it’s well worth the effort.
Building Good Rapport
If you can make the other party feel sorry for your situation, they’ll be more likely to give in.
To build a connection with them, you need to get to know who they are and what would benefit them from the deal. Figure out why they may oppose renegotiation and learn about their personality, likes dislikes, etc.
Your goal is to find something you both agree on during the renegotiation.
When you speak with them, try to help your salespeople see the process through your eyes. Don’t act like an enemy or someone who is attacking their position.
Avoiding Legal Arguments
When you go into a renegotiation, it’s best to not bring your lawyer. Your lawyer may be helpful in preparing for the negotiation but should stay out of it.
If you bring in lawyers, they will find something wrong with your contract and make it more complicated. It could end up being a lot of money for nothing.
Instead, try to solve the problem with a person in charge.
The more you can avoid getting into a legal argument, the better your negotiation will be.
Having a strong backup plan
Negotiations can be successful, but we always have to think about the worst-case scenario.
What happens then?
Before you finish, make sure you leave the door open for future projects by finishing on good terms. Also, try to keep channels of communication open so that they can work with us in the future.
Prepare internally, and you’ll be less likely to fail.
Real-Life Renegotiation Examples
Let’s take a look at some examples of renegotiations for different companies and see why they succeeded or failed.
WGA renegotiates its agreements.
In 2007, The Writers Guild of America (WGA) and the Alliance of Motion Picture and Television Producers (AMPTP), representing more than 300 production companies, tried to renegotiate their contract.
The WGA wanted a share of the revenue that their work generated.
In 2007, there was a walkout of TV and movie writers. This strike cost the industry 3 billion dollars. The content production suffered tremendously as well.
The majority of TV shows shut down production and many movies were delayed.
After 100 days of strike, the writers accepted some residual payments for programs streamed online. The rise in streaming platforms has drastically increased those revenues.
Learn from it:
The WGA didn’t get what they were striking for, but in the end, it turned out to be a great deal. Be prepared to give up something you want right now in order to make this work.
The supplier of health insurance prepares their staff for renegotiation
In 2009, the company was forced to renegotiate with its health care provider because of cost pressures from a recession.
It’s less than two percent off the price.
The health plan provider thought the monthly cost was too low, so they started to work on a better renegotiation. They identified an opportunity for cheaper costs by moving from their own data center into one that is offshore and utilizes cloud storage. This new location would give them more complete service for less money.
After getting their card, they started to renegotiate. They looked at every detail of the job and how it was done in order to get a clear understanding of what value they provided.
After a long negotiation, they got the company to agree to charge 20% less and provide more services for that price.
Learn from it:
Don’t just blindly choose an option, but make sure you know the benefits of each one.
If you’re prepared, then a renegotiation will be less stressful. You can use the information from your proposal to help with this.
The telecommunications operator enlists the assistance of other bidders in order to secure a better bargain.
A telecommunications provider had to change cell phone providers because of regulatory requirements. They needed an updated contract for customer service, and they needed it quickly.
They were under pressure for time, so they accepted a bid from one provider to get started. They decided against that because it didn’t meet their needs.
The other bids and options they had helped them to negotiate a better deal.
With the renegotiation, my company found that they had substantial cost savings and better contract language.
Learn from it:
If you are shopping for a new tool or provider, make sure to get at least 3 bids. You will be able to pick the best one and use the others as leverage in order to negotiate with them better.
The company will often change its own policies to accommodate your needs.
If you have a good reason and do your research, then renegotiating will be easier.
When a deal gets tough, don’t give up. You have to get into the contract and find out what they want from you.
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