A recent call from a good friend reminded me of Hamlet’s Dillema: “To be or not to be?” But this time the context was less phyosophycal and more “down to earth”: a business negotiation. And it is excellent example of winning negotiations with little power!
In brief, here is the background of the situation: the Romanian subsidiary of my friend’s company (let’s call it “THE Service Provider”) has been struggling for some time getting into a “green P/L” and his local team was (understandably so!) very stressed. When a high-budget
client (let’s call them “The White Knight”) approached THE Service Provider looking for a 1-year collaboration contract, the team was very excited and quickly negotiated a pretty good deal. So far, all was well and there was no reason for my friend to be concerned. But, he told me that when his team sent the collaboration agreement to The White Knight, they got it back with a concerning clause inserted by supplier’s legal department. Basically the clause allowed The White Knight to have a veto right on any other clients working with THE Service Provider on common projects. This means that The White Knight might get the power to severly limit the development of my friend’s business by using this veto right. My friend quickly realized the danger of this clause and promptly called me to ask for my advice. I immediatly asked him my “litmus test” question, warning him that I want a 200% honest answer:
Do you WANT the client or do you NEED the client?
He started mumbling something about wanting AND needing the client, but when I pushed him hard, he admitted that he NEEDED the client to get the business into green, in other words to make a (small) profit, rather than the loss that was forecasted before The White Knight came into picture. I also told him that if I were him, I would NOT sign the agreement with the abusive clause, even if this means a “bleeding” 2023 year. A healthy relationshing is, as I see it, much more important than a potentially dangerous deal. I could hear his sigh at the other end of the line. I also told him that if he wants to go ahead with this client (because he NEEDED them), he has his hands tight and he might have to accept the (abusive, in my point of view) clause that the client inserted in the contract. Still, before ending the call, I asked him again my “litmus test” question, this time for “The White Knight”:
Does “The White Knight” WANT you ar does he NEED you?
My friend looked surprised by the question and told me he is not sure. “Let’s find out” I told him. In the next 10 minutes, by asking him several questions about The White Knight, I made him realize that the client NEEDED my friend’s services BADLY because apparently he was the best in his field. So, “the score of the match” was a draw: both parties needed each other, but, as per my assessment, the client was more needy than my friend. With this new insight, I told him to send a reply to the client saying that the inserted clause is a dealbreaker for him, but he is more than happy to sign a both-win deal, if the client is serious about it. I knew that my friend would accept my advice as a patient who takes a very bitter medicine, yet he did it. It took The White Knight 3 weeks to reply to my friend’s email (time in which my friend was tossing like crazy) and said they are dropping the clause.
The learnings of this story?
1. Assess HONESTLY both your level of need of the deal as well as the other party’s
2. Make sure that what you offer/sell has some unique characteristics that your competitors cannot match and that your potential buyer NEEDS (which means you must do your due diligence on your counterpart very well!)
3. NEVER, EVER, get in a position of NEEDING a deal – always create yourself ALTERNATIVES, in case the current deal goes south.