Situation: A company has secured a significant new contract with a new, large customer. The customer sent over their standard, non-negotiable contract which includes the right to cancel orders anytime, even if the company has invested significant funds preparing product against those orders. How does the company respond? How do you negotiate contract terms?
Advice from the CEOs:
Before you sign the contract talk to the customer about restocking or cancellation fees in cases where you have already invested irrecoverable funds against the customer’s orders. See if they will adjust their purchase order clause or offer language to cover unrecoverable costs.
If the customer says that they cannot change the contract, ask for an addendum or side letter of understanding that will protect you from loss of sunk costs against cancelled orders.
If the customer will not bend on any contract language, you can go ahead and sign the contract and then take care of your needs as they submit purchase orders. Create a stamp that you can stamp on their purchase orders defining your protections. Each PO is a new contract that supersedes the general contract.
Situation: A company performs service that is primarily locally-based. A competitor is establishing a new site less than two miles from the company’s location, offers a broader array of services and is larger than the company. How can the company protect its business by responding to this new competition?
Advice from the CEOs:
Your most important asset is understanding what you are doing right, and what is most important to your customers. Remember that business is more than just a product or service. It’s a relationship. Your customers depend upon your for more than just what you offer for sale. Reach out to your customers for these answers. Make sure that you respond to their needs. As a benefit you may also find new growth opportunities.
Ask current customers whether you need to expand your service offering, or whether your current offering and lead time is acceptable to them. Ask how their needs are changing and how you can better serve them.
Reestablish the connection to your customer and listen. Preempt new competition by contacting your customer base before the competitor gains a stronghold.
Study your options and avoid knee-jerk reactions. You may be in better shape that you think.
Major retailers and service companies have moved into many locations. Local businesses who survive their presence do so because they are focused on their customers’ needs and are better at serving the customers that the big companies are.
Invest in key components of your business relationships: services, payment terms, responsiveness, your facilities, and so forth.
Situation: A company that has been in business for several generations has been approached by a government official with an unexpected regulatory requirement and a stringent timeline for compliance. This was completely unexpected and it will be disruptive to comply. How do you respond to a regulatory wild card?
Approach the agency and negotiate an extension of the deadline, or a series of steps that will bring you into compliance but under conditions so that compliance does not disrupt your business and workload.
Dig to determine the ultimate reason behind this development. Is it a neighborhood evolution issue where new neighbors want you or your business out of the way? If so, is there a win-win alternative that gives you a new or better location in exchange for moving.
Seek legal assistance – local lawyers may be knowledgeable of the officials involved or their superiors, and will know the language to use to ask for the leeway that you require.
Circle the problem from every angle – look for other city contacts that can assist.
Trade a tax concession for compliance – particularly if the issue is a long-standing situation that has just now been brought forward.
Look for a way to turn the problem into an opportunity by solving the problem uniquely in a way that favors you.
Consider asking them to help solve the problem.
Do NOT respond with an attack. Local officials can be in place for a long time and may hold a grudge.