Deal making is like a tug of war. The savvy supplier is pulling from one end, to squeeze the best deal out of you, and the procurement team is on the other side pulling harder to save your company every dollar possible. Being that there are seven stages in a procurement deal making process: preparation, opening, testing, proposal, negotiation, agreement, and closure, it can be difficult to have full control over the deal making process and swaying the outcome to your advantage.
Deal making is a craft that when done well, you can successfully negotiate deals in which all trading partners involved walk away with a win and you build a strategic relationship. When it comes to the complex world of rebates, not everyone is as successful as they could be. Here are seven tips for successful deal making:
- Don’t promise what you cannot deliver
A key requirement to successful deal making, is to know what you are promising, be certain that you can deliver on that promise and ensure that you do. Over promising could happen at any stage of the deal making process. It could be at the pre-sales stage during your pitch, at the final negotiation, or anywhere in between. However, non-delivery on that promise will quickly loose suppliers hard earned trust and could even affect your bottom line.
- Have a strong collaborative team
Your greatest strength and your greatest weakness in the whole deal making process is your own procurement team. a team is only as strong as its weakest link No amount of preparation or information will work well if the team does not work well together. So, what does one do to create a strong procurement team?
Identify the different areas of the deal and the parts of the trading agreement that relate to these different teams and get the stakeholders involved in the discussions. Do an internal discussion on the entire agreement, identify your main areas of concern, identify the owner for those terms, and plan your strategy. Get their buy-in, as well as their approvals and alternative options in case the deal comes to a dead end.
- Know what the other party wants from the deal
Preparing a deal negotiation and obtaining information about the other party is the best leverage in successful deal making, although a long process that will require effort on your part. Especially, when it relates to knowing what the other party wants from the deal. Understanding the ‘why’ can provide context for decisions or requests. It may also provide an opportunity to offer something of value to the other party without adding to your own costs. Knowing this is just as crucial as knowing your own needs and leverages. Once you have a good understanding as to what the other party expects from the deal, you can successfully position yourself as the best option.
- Keep in mind that time is the enemy in deal making
Understand that the longer a deal takes to get completed, the more likely that something will occur to derail it. So be prompt at responding and getting trading agreements turned around quickly, so you can keep the deal making momentum moving. However, that doesn’t mean you should rush through deal negotiations and make adjustments that you don’t need to make. Understand when time is on your side and when time could be your real enemy.
- Ask all the right questions
Asking questions is a skill that will give you a lot of value to steer deal making in the right direction. You speak, supplier understands and responds, and the wheel keeps rolling. If either of you does not listen, or understand, the deal making will stall. Plan the questions ahead of time and focus on structuring them in an open-ended format so you can extract more information.
- Identify potential issues & risks before they become a problem
Before jumping into an agreement or deal negotiation, highlight parts of the agreement you find important. Take notes on areas of concern, parts that you are unclear about, and sections that you wish to negotiate. By understanding and identifying risks, you can streamline the deal making process to manage and reduce them. Failure to manage any risks leaves your organization vulnerable to reputational damage, disputes, threatened performance, and diminishing profit margins.
- Leverage technology to gain visibility
In procurement, digital transformation is particularly important to provide better visibility as organizations grapple with supply chain issues and managing supplier relationships. In the procurement space, analyzing rebate data to find areas for improvement used to be a manual task, but now it can be automated with the help of rebate management software. Being able to centralize all of their supplier’s data has never been more central to delivering profitable deals and driving continuous cost improvements now and in the future.