As a long-time professional contract negotiator, I often hear the same concerns among decision-makers when it comes to reviewing contracts: We’re just a small financial institution … We aren’t the top priority for our vendors … We have all of our major services bundled with one vendor … We don’t have any negotiating leverage … They’re only going to cut deals for “the big guys” … I might as well save my energy and just let contracts auto-renew … After all, we’re pretty happy with how things are going.
On top of that, in the past several weeks as the coronavirus crisis has hit the nation, I’m also hearing these additional musings: Now is not a good time to negotiate … I’m swamped, my people are swamped … Besides, vendors aren’t going to be making deals right now … They’re probably not even taking those types of calls.
Based on my years of experience and what I’ve seen lately, here are some truths about vendor contract negotiations. These tips could make a difference in securing five-, six-, or seven-digit savings over the terms of your contracts and help you offset economic hardships during this crisis.
TRUTH #1: Yes, you ALWAYS have leverage to negotiate a contract.
Please don’t let your asset size, number of branches, number of accounts or any other perceived shortcoming sway you from the fact that a vendor does not want to lose you. As in most industries, it’s much less costly to retain a customer than to go out and secure a new one.
We recently negotiated several contracts with one vendor on behalf of Washington Savings Bank. The CEO had many of the same thoughts mentioned above and figured they were getting the same deal on services that all others of a similar size were. When we showed them the initial projected savings—$255,000 per year—they couldn’t believe they’d waited so long to negotiate. When all was said and done, the bank recouped $2.4 million in savings over the life of the contracts, which included signing bonuses and retroactive savings. Not bad for having “no leverage,” right?
If a vendor can cut you a deal to keep you on board for another several years, you can bet they’re going to—it’s even better when you know what to ask for.
TRUTH #2: It’s in your best interest to be represented by a third-party negotiator.
Knowing what to ask for during negotiations with vendors is key to getting the most favorable results. That is why I don’t recommend going it alone. When an expert negotiates on your behalf, you get the benefit of specialized experience and strategic insight—everything from what others are paying for specific services, to how far down a vendor went on a particular contract line item, to what type of signing bonuses are currently being given to others. Even if you’re the best negotiator in other areas of life, there’s just no way to know exactly what to ask for or how far to push when dealing with financial services vendors on your own.
Another critical factor is the time it takes to stay on top of vendors and keep the process moving. Vendors may drag their feet or play hardball. Plus, if you’re busier with other aspects of your job like most everyone is today as we are dealing with the current crisis, you may not be able to give vendor contract negotiations the time and energy needed to finish strong.
A third-party expert has both the knowledge and the time to help you reduce your costs and the workload it takes to do so.
TRUTH #3: Despite the COVID-19 crisis, now is actually a great time to negotiate.
If your contracts are set to expire in 12 to 24 months, don’t let the current situation with COVID-19 stop you from moving forward. Right now, it’s still “business as usual” for vendors, and because the process normally takes place over the phone and via email anyway, nothing has changed as far as contract negotiations.
Look at this as a chance to flex your negotiation leverage and secure an amazing deal that will help reduce operating costs for the next five to seven years. Those who act now—while others may be on the sidelines, thinking it’s “not the right time”—will catch vendors at the right time, while the best deals are available.
Working with a contract negotiating expert allows you to take hold of the available opportunities without adding more to your plate. Next time you start doubting your negotiating leverage, remember these three truths and resolve to take action. Your account holders, your organization, and your bottom line will be the beneficiaries for years to come.
For more information or additional client success stories, please contact Kelly Flynn or call 800-809-2307.
JMFA is one of the most trusted names in the industry. Whether it’s recovering lost revenue, uncovering new savings with vendor contract negotiations, creating more value, serving account holders better or delivering a 100% compliant overdraft service—JMFA can help you deliver measurable results with proven solutions. To learn more, please contact your local representative or call us at (800) 809-2307.