Thursday, May 31, 2012

Establishing the relationship between value and  negotiation   

“Where Do We Need to Be?” Any variation of that theme will suffice. Thinking about it makes me squeamish because we’ve just queued-up unnecessary concessions. Our willingness to do so indicates that we’ve raised the white flag of surrender. We’ve subjugated our negotiating position and acknowledged a willingness to forego some of our margin, and perhaps some of our dignity.

All of us have fallen on our swords at one time or another. The important thing is to learn from our mistakes. Once those words have been uttered to anyone within the buying organization by a seller, the buyer has been given carte blanche to have their way with you. Your engagement rules are now out the window - abandoned.

By acknowledging willingness towards unilateral concession, the selling entity has effectively commoditized itself. The buyer can then begin the vendor dance, playing the price point game.

This is why early in the buy/sell life cycle, the seller must negotiate some form of a Business Value Analysis (BVA) event. This is the forum that a potential buyer can use to determine the economic, and/or operational changes likely to occur from the usage of your offering. Think of this as a great qualification /disqualification tool. Why wouldn’t they want to explore the projected value of their investment?

The key to a successful BVA is that the output must be the buyers’ projection. The seller should negotiate a value event early in the buy/sell life cycle, before agreeing to commit resources. It’s an often successful tactic, because structuring a value event makes good business sense to an objective buyer - unless you’re being positioned as column fodder

Establishing value recognized by both sides is one of the most important early negotiating steps in the buy/sell life cycle. The buyer has a much better understanding of the impact of the sellers’ offering and is now able to justify the investment. The seller is empowered from the BVA. When it comes time for the negotiation, it is much easier for a salesperson to resist costly concessions if both sides understand value.

No comments:

Post a Comment