Are you managing the Negotiation Budget?

Every negotiation has a budget.  Not the price, but the time, effort, thinking and energy both parties are willing to expend to get the transaction done.   Usually the seller is willing to expend a lot more than the buyer.

“We’ll do whatever it takes to get this done by the 31st.”  said NO procurement person ever!

There are three factors to consider.

• First, the Negotiation Budget is the number of meetings multiplied by the number of people plus the time required to read, revise, and do internal approvals on the paper.   You will only get so much time, especially if multiple departments and approvers are involved.

• Second, there is a limited amount of flexibility available.  There is always a deal to be had, but at what amount of compromise?  You may have to concede to their asks, especially if your deal is small, or has higher than usual amount of risk.

• Third, be realistic about the importance of your transaction, not to your champion but to the overall business.  You likely are not in the top 3, or 10, or even 50 contracts with 12/31 expiration dates.  (Hopefully, you set the expiration earlier than that :) ).

For some sellers, all of this is equally true for their internal process - and managing that negotiation budget is as important as the customer’s.

So, bear this in mind as you set your negotiation strategy.   Plan the size and timing of your asks to keep things moving, and signal when you’re close to your bottom line. (Do this with smaller and smaller concessions.)  And pre-plan and pre-agree items that may have to be conceded to shortcut the process.   (The pre-agreeing is critical and often the most challenging part.)

Sometimes you can get more negotiation budget with a more significant discount - trading time for money.  (Ideally, you have already done this as well.)  But not always, and often it’s a physics problem - there isn’t enough available time on the clock to cram in the required conversations.

As I write this on December 15th, with 10 business days and 16 total days left in the month, you will not get as much time and access as you want.   Build a worst-case scenario negotiation plan now and get approval.  But drive a mutual action plan with your buyer for the best case. Then, when the process and timeline go sideways, you will have room to manage.  Good selling!