Small Vendors Are Not at a Negotiation Disadvantage

Small vendors are NOT at a negotiation disadvantage opposite large enterprise customers. Let me explain.

By the time the contract gets to the lawyers to negotiate, the customer has usually put a lot of effort into searching, testing, and selecting the vendor. They’ve already made a purchase decision (unless this is an RFP or competitive bid situation). Changing course at this point would be hard and they don’t want to find reasons to start over. As long as both parties’ lawyers are reasonable and cooperative, the vendor should be able to close the deal on favorable terms. In my experience, in over 99% of cases, standing firm on well-reasoned risk limits and contract terms will not cause a vendor to lose a deal, even opposite a much larger and deep-pocketed customer.

Vendors lose the contract negotiation advantage when:

a. They start from contract terms that are sloppy or vastly inappropriate to the industry they serve;

b. Sales reps misrepresent the product and commercial terms during the sales process; or

c. They rush the negotiation and signal to the customer that the company will bend over backwards to win the deal at all costs (this happens especially when coming up against customers who wait until the last week of the quarter to negotiate).

The best sales reps know to preserve negotiating power by making it clear to customers’ buyers that the discounts and timing commitments are contingent on the contract closing on time with minimal and reasonable edits and that using customer templates or aggressive negotiation will jeopardize those commitments.

In-house counsel: make the sales team your ally in the legal negotiation, not another negotiating adversary.