Turning the screws to your vendors
It rarely works
When I became an FP&A leader for the first time, I built our entire operating model from scratch. I had no context and no templates. And that blank workbook staring back at me was DAUNTING!
That’s why I’m excited to introduce our sponsor, Mercury.
Their VP of Finance, Dan Kang is sharing his personal template for building a financial forecast model.
Whether you’re preparing to fundraise, updating investors, or charting a new course for the company, you’ll likely reach a point where you’ll need to build a forecast model. It can help you align on clear business goals and understand why those goals matter.
A poem for all the CFOs and sales reps still negotiating those final deals….
‘Twas the close of the year, and all through the Zoom,
Not a seller was smiling—just tension and gloom.
The CFO sat with his spreadsheet in hand,
Waiting for discounts exactly as planned.
The vendors were nestled in slack channel threads,
While visions of quotas danced over their heads.
With end-of-year bonuses hanging in doubt,
They scrambled for margins to figure it out.
Then up on the call, there arose such a clatter,
“This pricing is too high —let’s tackle this matter!”
Away went the pitch decks, the charts, and the fluff,
The CFO’s tone was now steely and tough.
“We’ll need better terms—let me spell it out clear:
Knock off 30%, or we’ll circle next year.
And throw in those add-ons you’ve tried to upsell,
Or this deal, my friend, goes straight back to hell.”
The vendors regrouped, they crunched and they slashed,
For losing this deal meant more than just cash.
And after much haggling, a final pact struck—
The CFO grinned, “Well, that’s just my luck.”
The Docusign landed at 11:59,
The quarter now closed—signed just in time.
And as the CFO logged off with delight,
“Happy discounts to all, and to all a good night!”
As CFOs, we occupy a unique position, negotiating on behalf of our firms both as buyers and sellers. This dual role offers a rare perspective on the intricacies of pushing hard in negotiations, especially when the power dynamics are skewed in our favor.
We often see media portrayals of negotiators with a "take it or leave it" approach, glorifying their bravado and inflexibility. But I’ve found that hardball tactics rarely yield long-term success. When you squeeze a counterpart too hard, it often backfires, especially when future negotiations are inevitable.
Consider a recent experience I had. I aggressively negotiated a significant contract that had auto-renewed in our favor. I essentially told the other party, "Tough shit; we're not budging."
This saved my company a hundred thousand dollars. But, it turned out to be a Pyrrhic victory. The next year, the sales rep, clearly pissed off, was ready to retaliate. It felt like being a marked target; the rep approached the next negotiation with a vengeance, much like a Belichick circled the Jets each year in New England.
We got crushed. Like absolutely painted against the wall. And they were the only game in town if we wanted to avoid rewriting half our infrastructure.
That day I learned that there’s a difference between winning, and obliterating your opponent. Sooner or later, you end up on the other side.
In hindsight, the short-term gain wasn't worth the long-term cost. There's always a temptation to adopt a "Deal or No Deal" mindset, but we often forget the implications of being on the other side of the table. Not to mention, it was a super awkward call, one that I’d have to keep doing for years to come for this same tool.
As Rob Goldberg, CFO at 6Sense, said to me:
"I think it's with vendors where we fall into the trap, we all sort of like to put the screws to our vendors. You can put the screws to your vendors while being nice about it and actually working with them. Folks talk about partnership, but when you're buying, let's say, a software tool, there's a tendency not to act like a partner and instead act like you're putting the screws to your vendor. I would suggest not necessarily doing that.”
He’s right. We always throw around the term “partnership” and “go deeper” when we want a discount out of someone. But it’s all lip service. And we rarely walk the walk.
You have to remember that the people on the other side of the table have to eat too. You can have a deal that's still good—maybe it's not home run great, but it's still good for both sides. And it allows you to have the door open upon renewal. And that’s the nice thing about SaaS—every year, we have this built-in competition period. And you don’t want both parties gearing up for an annual knife fight.
Not only that—when you act like an asshole, or try to take a position 'bigger' than you really are, people just don’t take you seriously. It’s like they tune you out because you’ve become a caricature of yourself.
As a CFO, you also negotiate with your own customers who ask you for concessions, which can be frustrating.
Like, obviously, no, I don’t want to change that. I wrote the contract this way on purpose. Duh.
Rob explained:
“When that happens, you can react a couple of ways. You can say, 'Absolutely not, why are you even asking me this?' I mean, you can snap at them. I think most of us don’t snap at our customers, but maybe we're thinking that in our heads. Instead, I suggest you should sit there, listen, have your internal negative reaction, and then start asking questions of the customer until you really understand what they're looking for. Ultimately, you're probably going to say no, but the nature of that conversation goes better."
More tactically, how can it go better? If you really get into it and listen to your customer instead of blowing up, you may discover there’s something valuable to them that is relatively costless for you to concede, or vice versa.
Rob added,
“What I have always tried to do is put myself in the other person's shoes and understand where they are coming from and what they want to get out of it. If I can do that, then I can approach it in a way where I give them something and I get something. Hopefully, what I give them is not as important as what I'm getting from them. That’s my strategy in negotiation.”
Maybe they are measured a certain way in their role where if this deal closes at this time they get paid more personally. Or if you can wipe a professional services cost that’s one time, it helps them actually put more recurring revenue into the larger deal.
In my first year as CFO, I never thought about non pricing terms. All I could see was the sticker price. Since then, I’ve shifted my view to the areas around the margin, like payment terms—“Instead of net 30, can you give me net 60, or can I pay you quarterly rather than annually upfront?”
A few more examples of non pricing terms (which we’ll expand upon in a future post):
Cancellation terms
Dispute resolution venue
Support and training
SLAs
Until then, be nice this Holiday season.
Run the Numbers
Apple | Spotify | YouTube
On this episode we cover:
How finance and accounting are internal and external service orgs at their cores
Ways to politely negotiate with your vendors
Why tool consolidation is overrated, yes a CFO thinks this
Frameworks for managing spend during tough times
How your greatest strengths can become your greatest weaknesses
What it means to catch the falling knife
And The difference between one way and two way doors
Vendr has been a game changer for me #notanad