You know the saying, “What you don’t know can’t hurt you?” This misguided sentiment often leads credit unions and community banks into DIY negotiations in which they believe they are well prepared to negotiate with vendors.
In reality, however, the institutions are setting themselves up to be robbed blind and get poor vendor performance for their efforts. If you don’t know what you don’t know, you will make the same mistakes over and over.
This spooky season, we at Maple Street are sharing three mistakes in negotiation that should scare credit unions and community banks—because the results will cost you.
Negotiation mistake that should scare you #1—You think you know the latest fair pricing and terms
Knowing current fair market prices is more than asking around as to what other institutions paid for similar services or products. Those institutions may have actually paid more, depending on when the contract was signed and the skills of their negotiators. Having your finger on the pulse of what is the true fair market price for what you are getting is essential to knowing if you’re getting a good deal or not.
Most credit unions and community banks don’t have the time, the resources, or the knowledge to know what fair market pricing is at the time they are negotiating—or what term will give them the best rate. You might think locking the vendor into a long-term 10-year contract will get you the best price, because prices are bound to increase and you want to lock in the best deal now. But that’s not always true. Suppose you offer a shorter term, say 3 or 5 years. This gives you the opportunity to renegotiate more frequently to get both the best deals and better performance. If you are not aware of these alternatives, you will lock yourself into a higher rate for a longer amount of time, often with technology that is outdated before the term is up.
Negotiation mistake that should scare you #2—You think you know how to read a contract
There are three ways you should read a vendor contract—look at what’s in the contract, look for what’s not in the contract, and look to uncover what’s hidden in the contract.
DIY negotiators usually do a pretty good job of reading what’s in the contract. If it looks straightforward and the terms and conditions are correct, the contract is usually agreed to. What most in-house negotiators don’t do is look for deliberate omissions. For example, your online or mobile banking might go down, and your vendor might take its time fixing the problem and charge you to fix their mistake. If there’s nothing in your contract that prohibits such behavior, the vendor can treat you that way and there is nothing you can do about it. What’s not in your contract is just as important as what’s in it and makes all the difference in whether you are in control or your vendor is in control. The more that’s left to interpretation, the worse off you are.
DIY negotiators also don’t read contracts with a magnifying glass—in other words, read every single word in the fine print. Here is where you’ll find vendors’ hidden fees and “legal weasels” that allow them to suck money from your institution.
Negotiation mistake that should scare you #3—You think you can outsmart the vendor
Negotiators must have confidence in their abilities, so it’s no surprise DIY negotiators come to the table thinking they can beat the vendor at their own game. That’s exactly what the vendor wants you to think. However, here are six reasons why DIY will most likely lead to a poor contract written in the vendor’s favor, including lack of accountability, hidden fees, poor performance requirements and thousands to millions of dollars in wasted money.
- It’s not your full-time job.
- You don’t really have the time to do it well.
- You don’t have comparative price data.
- You don’t know what terms are available.
- You don’t know how to plan and stage a negotiation project like the pros do.
- Your time and expertise are better used elsewhere.
The Vendor Advantage System®
If you want to avoid these scary mistakes, Maple Street is here to help.
Our professional negotiators do this 24/7. We know everything about the intricacies of negotiation and when and how to play hardball. We have the time to start early and wait until the vendor is most vulnerable. We know how to stage a negotiation project, including convincing the vendor you have a replacement in the wings if you don’t get the contract you want. We know the comparative price data and terms that let us squeeze the vendor for every nickel. We know where the hidden fees and traps are in the contract. And only Maple Street has the Vendor Advantage System®, a proven advantage in vendor negotiations that ensures you get the contract you want at a price that leaves nothing on the table.
The Vendor Advantage System® reduces your expenses, manages risk, and improves vendor performance. In addition, we guarantee you a positive ROI and that you’ll pass your vendor management exam with flying colors. No one else can make that promise. To date, Maple Street has saved our clients more than $350 million and counting.
Let’s have a conversation about how much we can save you. Give us a call at 800-513-6839 or email at mssales@maplestreetinc.com.