Because time waits for no one!
At the end of financial year – motivation definitely drives decisions, and there is no shortage of motivation from stakeholders to purchase nor suppliers to sell. This is a match made in heaven and an opportunity for you to really shine. Whilst the current fiscal year comes to an end, there are deals to be made for the savvy buyer.
EOFY negotiation and bargaining is a guaranteed winning card to play and successful procurement professionals know it. So, to play at the table with the shiny procurement people apply these 7 tips below.
1. Give them what they want
As procurement custodians you are possibly at times known as the “rules police”.
Now is the time to show your internal customers that you are genuinely listening to what they want. Be prepared to take them seriously and help them to deliver!
First, let’s be clear on the differences between a “need” and a “want”. A customer (or stakeholder) need and a customer want can be inextricably linked in “their minds”. But these terms possess inherently different drivers.
A customer need describes what a specific customer requires in order to support the business.
A procurement pro understands this to be a functional requirement. “Boooooring…!”
A customer want is simply the driving motive that prompts them to buy a product or service.
The “want” is usually for the ‘shiny stuff’ – with perceived benefits. “Brilliant…!”
At the end of financial year, why not get your negotiation on to get your stakeholders more of what they want? The cool stuff, the additional stuff, the valuable stuff! And it’s at the EOFY so many suppliers want to offload stock or lock in last minute sales.
When you are clear on stakeholders’ wants and needs and understand the perceived benefits for them – it makes you a lot clearer and smarter when justifying delivering a want with perceived benefits. It’s up to you, the procurement professional, to understand what “problem” they are trying to resolve – and what “great value” delivered looks like in their mind. That starts the NFY year on a brilliant, shiny note.
2. Use it or Lose it!
Everyone working in this space knows the Use-It-or-Lose-It phenomenon. Sure, it doesn’t apply to all workplaces all of the time, and perhaps for some, it can seem a bit of an urban myth.
In recent research into government spend – on average, spending occurs with a 5x multiple during the last week of the budget year:
“8.7 % of Government Agencies’ spending occurs in the last week of the budget year, nearly five times the normal weekly level of 1.9 percent.”
This is not because everyone is poor at planning or delivering, it’s because budgetary process is cumbersome and difficult to get right. The planned budget most often never equals the amount needed. Some projects need more money, some projects need less. However, the overall amount that a business function plans to spend is somewhat fixed making the chances of getting more
budget very slim indeed!
Capitalize on spending end-of-year money
Our successful procurement counterparts take this opportunity very seriously and so should you.
First identify if there is cash in your stakeholder’s budget that needs to be used. If so, great!
Instead of releasing your bundle of cash in front of a huge oscillating fan, head straight to your preferred supplier and announce the following:
“We’ve got cash to spend, and we want to spend it now!”
Let them know that you need deals done. Either you can pay before the EOFY (preferred for negotiation influence) or you will book the service now and pay later (in the NFY).
3. First comes specifications, then comes the wish list
We are big fans and advocates of following a standard sourcing process. It’s tried, tested and it works. We know that having sound specification documents optimises competition drivers, can deliver ‘outcome focussed’ benefits and promote innovation. Let’s assume that you have already done this across your categories and now you are having a discussion with one of your key preferred suppliers.
Use those spec evaluation documents as a source of reference together with your stakeholder’s
- What are you not getting from your supplier that you wish you had?
- What did you not include in your original documentation that you know is now available,
and that you want?
- What are others’ getting from your supplier, that you are not?
- What can the supplier offer you that they think you would like, want or need?
Be brazen with this approach. This is the time to drive hard-nosed brilliant value and shine.
4. Aim high and expect the best
You know the “Something for Something” negotiation tactic – right? Because your supplier knows that there is a real deadline in place, this is the time for you to “up the ante”.
For your supplier, having your sale by the EOFY can be really valuable. So it’s the perfect opportunity for you to negotiate “Something for Everything”! So here’s the trick … because they too are getting value in exchange for your quick sale, you can just keep asking for more until they say “no”. You have nothing to lose and may end up with more than anticipated.
“It is possible that I could pay you in advance … $xxx before the end of the week and if I did, would you provide X, Y and also Z?
Don’t forget to thank them for every concession – “thank and bank!”
Remember as the old saying goes, “if you shoot for the moon, you may hit the stars”. There is no reason to moderate your aim when entering EOFY negotiations.
It won’t just be the stars that are shining!
5. For goodness sake – listen and shuddup!
You’ll be more effective (and more likable) with more listening because chances are you’ll gain a better understand of the other person (this applies to everyone including suppliers and stakeholders). In the absence of listening, there is a natural absence of empathy and knowledge – this can be costly.
Listening is an active process – asking curiosity-based questions with undivided focus, summarising to confirm clarity – demonstrating openness and respectfulness.
Part of listening is to know what to say, how to say it and when. Procurement superstars know that to actively listen to what is being said and what is not being said can significantly increase their chances of gaining valuable information.
What if there is that uncomfortable silence?
Good! If during a negotiation, a period of silence does occur don’t be tempted to fill the silence with words. A polished procurement pro knows that quiet moments do not need to be filled.
Substitute any filler chat with “taking pause to think”. You may find that your supplier starts to fill the silence with a new bit of value! You can even actively create the silent moments, for example, immediately following something they have offered to you … just wait.
Long pauses can be awkward and it’s human nature to want to fill the void … often without thinking.
You can ask all the right questions, but if you don’t listen and observe, you will miss opportunities and definitely leave value on the table. Aim to wipe the table clean and leave it shining!
6. The ‘bargain’ or ‘blow-out’ of the details!
You’ve negotiated a great deal. Now what? It needs to be delivered and you need to pay for it. How will that happen? There is a process – and every step / term of that process has value attached to it … either for you or for your supplier. The best deals are equitable for all parties – win:win!
What do you have that you can trade that is of lesser value to you and of higher value to the other side? If they are a small supplier, could you offer a favourable payment term for the upcoming year in exchange for something awesome? If they are a large supplier, can you negotiate preferred delivery times for the new financial year?
One of the pitfalls in negotiation can be that while the overall deal ‘looks’ good, the “devil can be hidden in the details”. So that which seemed a great deal on the surface actually has a lot of fine print that makes it ‘not so great’. Sometimes the detail oversight can end up costly and inefficient.
Conversely if you get into the finer details, you will find heaps of opportunity for more value.
Procurement professionals who shine always approach the deal already understanding that there is true value to be gained in the detail, immediately enabling them to strike a really effective and air-tight outcome.
When negotiating deals, make sure to look into the nth detail before high-fiving your stakeholders.
7. Avoid supplier NFY price hikes
Once a year, usually at the beginning of the fiscal year or the calendar year, procurement professionals face the challenge of responding to supplier price increases. The worst part is when you had no idea it was coming. Suddenly your supplier rings you with the bad news … and it really doesn’t reflect well on you.
“Prices are going up, in line with inflation.”
“We must raise your price by X% because Y costs went up by Z% last year.”
“The cost to serve your business is higher than anticipated, prices will go up to cover this in NFY”
The lower the risk, the easier it is to just say no. But with higher risk categories and suppliers, it’s important to understand the total cost of ownership.
These points are tough to argue if you’re not prepared. McKinsey reports that a 1% increase in price translates directly to a 10% increase in profit (all other things being equal). It may well be the case that suppliers are only pushing up their prices because they are under pressure to deliver shareholder value. This is where the procurement pro thinks ahead.
It is a great idea to get on the front foot way before you get that call. Pre-empt the price hike conversation and sow your seeds over time with content like:
“… how have your productivity gains been this year?”
They may take this opportunity to tell you about how they are “making their production environment more efficient …” – this is a golden nugget you pop into your back pocket for when the ‘price hike’ conversation starts.
“… In our previous conversation you mentioned that productivity has increased because of the new tech you have installed, so why then is the price increasing by x?”
You don’t have to accept price increases. You can uncover this early and by working smarter with your suppliers, your costs will reduce “and” your suppliers’ margins will grow.
By implementing these 7 strategies not only will you find yourself making great deals, gaining greater outcomes, locking in excellent services and impressing your stakeholders along the way, you’ll be able to sit at the table and call yourself a “procurement pro” knowing that this EOFY you shined!
Here is our final challenge …
Challenge us to parcel a value-packed program for you!
As a procurement services provider, with multiple services, platforms and solutions on offer – let us know your budget and what you want to achieve and let’s see if we can make that a reality for you. You have nothing to lose but everything to gain.
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