Let’s Make a Deal!

When I entered the consulting world I was exposed to a whole new way of thinking. I was no longer part of the administrative overhead, I was a revenue producing line manager. Out of nowhere, my role required me to make deals that had contracts with a significant amount of money exchanging hands. I wasn’t in Kansas anymore.

Over the years I have experienced good deals and some bad deals (fortunately mostly good). Whether you are a buyer or a seller, here are four tips for making good deals:

1:  VALUE EXCHANGE

The first adjustment I had to make was the fact that the same services I performed as a corporate HR guy were now being billed to a client for a premium. It seemed strange that literally over night that my services were now worth 4-5X what my previous employer paid for them. After a while I saw the tangible benefits that could be delivered through consulting. Very deep and specific knowledge and expertise for a short period of time is worth the premium. The best deals to make are when the value exchange is clear and obvious. If it’s not, don’t do the deal.

2: START SMALL AND GROW

I really struggled at first figuring out how to convince a client to spend a bunch of money with me. I could see their pain, I could see that it might be a year long effort, and I could easily see the value. But how could I get them to buy the whole tract of land, when all they wanted was a single lot? I decided to start small, propose a short term engagement to demonstrate the value. Sort of a proof of concept. This is a great approach for both sides, because you get to decide if you like doing business with each other before a long term commitment.

3: PRICING

Inevitably the price will always be subject to negotiation. If you already have an established rate that is aligned with a fair exchange of value, it is wise to hold firm on price and negotiate on scope instead. If you do a good job they will most likely ask for more services, and if you have already reduced your price, it won’t be going back up. If you are buyer of services and you work the price down, eventually your provider will move their resources to engagements that pay better.

4: CONTRACT NEGOTIATION

My least favorite part of deal making. Contracts are really only in place as a fail safe. After you do a deal, pretty much the only time a contract is used is when someone screws up. But there can be some very “one-sided” terms in contracts. One time I had a client say “you don’t really even need to read it, we won’t accept any changes. Just sign here.”  You need to be thorough and make sure your interests are covered. But the most important thing of all, is you need to be willing and ready to walk away from a deal, no matter how much time was spent getting there.

Deal making is a two way street and it is important to find the win/win. What are some other factors that will make or break a deal?