IT’S OKAY TO CHANGE YOUR MIND. REALLY.

When I come in to consult with a business, it is often because the company has been bleeding money in expenses, even if they are good at making sales. One of the first things I look at when I come in is the state of existing business contracts. There are sometimes occasions when a business has poorly executed sales contracts, but that seems to be much less frequent than what I see with expense-side contracts.

Whether long-term leases, internet service contracts, outsourced employee contracts, or other expense contracts, there is a tendency by most of my clients to just renew the contracts with the terms they were initially drawn up under, without doing a business need review or a competitive bid solicitation for these contracts. Of course, you may have contracts that are favorable to the business, and it is a good idea to keep them at current terms. But quite often what you are getting out of a contractual relationship is not what you expected. In situations like these, it’s important not to forget that you can not only ask for better terms during renewal but that you can generally cancel the contract and renegotiate to a better one. In fact, if you want to save money but have no problem with the quality of service, you can often propose a longer-term contract with lower rates or a discount, like several months free.

Another business consultant I know had a project from a client to find unused phone/frame relay/leased lines across 3000 locations. His project cut over $1.3 million in annual telecom spending by negotiating out of contracts that were not being used.

Most contracts will include termination clauses with and without a cause. Termination before the end date without cause will generally incur a penalty. Termination with a cause will usually have no penalty but does require the other party to be able to fix the issue within some number of days first. Keep in mind though that the legal language in the contract is there in case you go to court to settle a dispute. There is nothing that says that you can not renegotiate a contract midstream without ever going to court. As long as both parties are in agreement, you can make whatever changes you both agree to even if they drastically alter the contract.

So how do I get both parties to agree? Well beyond enforcing a contract, most companies have other priorities like keeping you as a customer or getting positive testimonials from you so they can get more customers. They also often recognize their own problems, and while they prefer that you keep paying the same amount as before these problems became evident, they are generally reasonable in providing discounts or fully renegotiating a contract to remedy the situation.

But what if there are no difficulties and you just don’t need the service any longer? Well, in that case, presenting the vendor with good insight as to why you are no longer a good fit will often result in a reduction of terms. Ultimately most companies prefer to change their contract and receive some money from you while providing you fewer services than to spend money on having a wholly canceled contract go to court – with no guarantee of ever being able to enforce it. The buyer always has an advantage in this arena because an unhappy buyer who makes a ruckus on social media is almost always seen as a victim, while the vendor is the villain.

While I’m not recommending that you abuse this, it is incredible to see how many of my clients unhappily pay bills for services they do not fully use and yet never consider renegotiating. Lastly, keep in mind that there may be deals from other vendors that help you get out of a current contract. I’ve seen internet providers as well as cell phone companies offer to pay cancellation fees if you move to them and cancel on their competitor. If you have enough lines, they may even provide you free or reduced-price equipment which is not offered to the general public. If your COO is too busy to do contract reviews and renegotiations regularly, consider having a consultant come in to help you do this at least once a year.

 

Excerpted From The Original

Beyond Sales: 50 Business Problems Every CEO Needs to Solve

Foreword by Roy H. Williams

Gene isn’t a journalist, but he is most definitely an investigator.
I was talking to a friend who employs about 250 people in 3 different companies when he mentioned that he had hired a specialist to figure out what was wrong with a company that was underperforming.
“Who did you hire?”
“A fellow named Gene Naftulyev.”
“He’s going to figure out what’s holding you back?”
“Yeah. He’s famous for it.”
“How famous?”
“Procter & Gamble. American Express. Kraft Foods. Target. They’re all clients of Gene’s.”
“What does he do, exactly?”
“He improves profits without spending money.”
“But how?”
“Process re-engineering, operational optimization, making business units autonomous, negotiating employee and consultant contracts and a hundred other things like that. It just depends on what you need. He refines the core of your business so that you become more efficient, have fewer frustrations and make more money. Naftulyev can always spot the problems and his fixes are famously quick and easy.”

Latest posts by Gene Naftulyev (see all)