Tight Times Require a Fresh Look at Existing Contracts
As businesses are challenged to change how they operate and communicate during the COVID-19 crisis, one thing this crisis has taught us is that business will continue to evolve. To stay relevant and competitive, technology must be at the forefront of the changing business model as it supports all aspects of operations. With a focus on technology and adaptation, business leaders are being asked to review and evaluate existing expenses and secure new capabilities with a careful eye on cost.
One strategy for cost evaluation is to review existing service contracts with vendors and providers. Restructuring existing service agreements will help businesses immediately and prepare for the forever-changing environment of the future. Renegotiating can save money by optimizing investments during this shift in business strategies. Take heed, though, approaching a negotiation with a service provider requires a prudent, tactful, and educated approach. The road to success for business leaders approaching a renegotiation should be paved with clarity, knowledge, and care, which can be accomplished using the following guidelines.
Carefully Review All Agreements and Prioritize
Take time to inventory and outline all existing contracts. The review will be based on a myriad factors, but consider those such as the type of service(s) provided, scope of services, capital commitments, length of contract, and whether any adjustments will require an expansion of services either internally or externally. A three to five-year-old service agreement could leave quite a bit of room for renegotiation if terms have not been updated. Focus on the critical needs – cash flow or service scope – and which can be addressed by each agreement, then approach accordingly.
Assess Supplier Performance
If a supplier cannot fully perform or deliver during this time, it may be an opportunity to leverage the situation to assess what can be delivered or how the agreement can and should be amended. If there are opportunities where contract terms have the flexibility and a renegotiation could be mutually beneficial, consider taking that angle. Approach the renegotiation by offering altered terms and highlighting how the change would benefit both parties.
Approach with Care and Caution
Now is the time to leverage existing relationships while maintaining professionalism and a level of compassion. While having a great relationship with a provider may make negotiations easier, be aware that everyone is going through this crisis together. Play hardball if needed, but also remember that strategic relationships need to be handled with care to be successful long term. Importantly, be straightforward and honest. Use the philosophy of, “Don’t expose a problem without also having a solution.” Give the provider an idea of what you want and offer a solution with some room for additional negotiations. Avoid being indecisive by not knowing what you want to get out of the conversation before going into it.
Use the Collaborative Approach
In the end, success will hinge on detailed reviews of existing commitments, an understanding of go-forward options, and a collaborative approach to renegotiations keeping sight of strategic relationships.
Reach out to Helm Partners to learn how we can help your business assess current services, contracts and drive expense management strategies.
Contact Our Advisory Services Experts. 484-567-1100 or email@example.com