They Want to Renegotiate…Now What? (Part 1 of 3)

It occurs in just about every business and it’s happening a lot now: the dreaded call from a buyer who says they need to renegotiate the terms of an agreement you have with them.

Usually, it comes down to a matter of money: they say they want better terms and lower prices. When this happens, it can feel like it puts you, the seller, in a tight squeeze.

But it doesn’t have to be that way!

Think prevention. The first thing you must do—to borrow a vintage line from the author Douglas Adams—is “don’t panic.” Recognize there are preventative steps you must take that will avoid everyone from having to go back to the negotiating table in the first place. Being preventative means looking at what you’re not currently doing—or not doing enough of. Here’s how to do that skillfully.

Always be networking. Far too many people wait far too long to network inside their client’s company. A solid internal network is your set of eyes and ears that build your knowledge base about a customer. The more you network effectively within their organization, the more you’ll understand all the facts in play with respect to a request for a new deal. A client of mine learned that lesson the hard way. When their buyer in the purchasing department insisted on a new deal with better terms, they had no network they could turn to in other departments (who could otherwise have helped them tackle the request pre-emptively). Without any internal support, they were left with no choice and had to renegotiate. As a starting goal, aim to have at least four solid relationships with internal stakeholders: people you can trust to help you understand what’s really going on in that company.

Find what’s behind. You must gain an understanding of what’s behind a customer’s renegotiation request. Is this just coming from one department (as with the above example)? Have they drawn a line in the sand, signaling that unless they get a new deal they’ll walk? Find out what the money represents to them in the new deal they’re seeking (i.e., are they facing a specific reduction target that must be met, or are they just shopping for a vaguely defined “better bargain?”) Asking questions to help you understand the true meaning of the request will allow you to see the bigger picture and present different ideas to the customer that could help them meet their savings targets without reducing the fees they pay to you.

That’s what Will (a client of mine) did—masterfully—just last month. After being asked to reduce the price of his product by 5%, he asked why they had that specific amount in mind. The purchasing department responded that the company was now directed to reduce overall budgets by 5%. All vendors were expected to comply. But Will realized he could help the company save even more than that. He proposed a product switch that increased the cost of his product but reduced the company’s reliance on expensive additional products. Now they could save over 7% annually. He convinced them to pay a little more…to save a lot more!

If your customer wants to renegotiate, you’re already too late to start taking preventive steps! That’s why you must get started now.

In the next article in this three-part series, we’ll look at what you need to do next when your customer is still pushing hard for a new deal.

10 responses to “They Want to Renegotiate…Now What? (Part 1 of 3)

  1. Such a timely topic, thank you. I’m currently renegotiating an agreement with a client who postponed a tentative agreement last fall 2020. This year, they want to resurrect that project and proceed, however, it’s a different world. I would be hiring 5 colleagues to assist and their prices have increased. What I originally cautioned about online only sessions I now support (we presenters are waaaay more qualified, skilled, and effective now than a year ago), and the scope of the project has increased a bit from previous terms. Therefore, my prices have increased significantly from the quote I gave last year (about a 50% increase). I’m prepared to wiggle a little bit as I have an option that will require less people-power and lower costs without compromising the end product … and I prepared that expecting them to SCREAM at the increased fees. I’m not prepared to work for free or not pay my colleagues properly.

    And yes, I’ve worked the network and stay in touch with several colleagues from this company via posts and comments on LI. This is a long-time client (over a decade) and I want to work with them again. I think I’ve ticked all the boxes. And I’m prepared to walk away (though that would break my heart … this is a 5-digit deal)

    Suggestions to nail the deal?

  2. if buyer ready for renegotiate means that he already compare the price with other competitor. if buyer is more concern about price(price sensitive) of the product and if he did not get the another deal. what should seller do to grab the deal without make loss during the deal.?

  3. Not always. In this market a company can be under cost containment pressure but still want to stay with you as their supplier. It’s a mistake to assume they have a price from another vendor this early in the process.

  4. This would be easy if it is a long term client. Our previous connection with them will help us to have a smooth renegotiation. What if it is a new client and if he is not willing to open up?

  5. Find a contact who will. Ask a different question. Teach them something new. Show them an example. There are lot’s of ways to encourage a new customer to open up. We just need to be creative in our approach.

  6. Does establishing the authority early on during negotiation sets back people from the deal or will it lead to renegotiation?

  7. This is such an amazing article mam. Iam having a clarification here. Mam as you have mentioned the point “find what’s behind”
    Some customers will go for a re-negotiation inorder to exploit the seller for getting products in cheaper rates. So in that case of we go behind those customers it will be a loss for us. In case of these customers how can we apply the point what’s behind?Is it applicable in case of that customers?

  8. […] far in this three-part series on deal renegotiations, we’ve talked about the importance of pre-emptive steps that you must take to avoid these kinds of requests from happening in the first place. I recognize, […]

  9. They Want to Renegotiate…Now What? (Part 2 of 3) - The Society for the Advancement of Consulting® : The Society for the Advancement of Consulting® says:

    […] far in this three-part series on deal renegotiations, we’ve talked about the importance of pre-emptive steps that you must take to avoid these kinds of requests from happening in the first place. I […]

  10. […] the first part of this series, I showed you how to think pre-emptively about this common business problem. I identified the steps […]

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