Create a Negotiation Strategy to Reduce Cost, Risk and Drive Value
From the book “How Not to Get Screwed by Your Suppliers and Save Millions”, by Jill Button, President & CEO ProcurePro Consulting.
Why This Matters Now
Canadian businesses are facing rising costs, economic uncertainty, and increasing pressure to do more with less. Supplier contracts are becoming more complex, especially in technology and SaaS. Trade risks are growing, and supply chains are under pressure. The stakes are higher and the margin for error is smaller.
Negotiation is not something you leave until the end. It is a critical part of your strategy. This is where you reduce risk, protect your margins, and lock in long term value. Negotiations start the moment you engage with a supplier, literally at “Hello”. Every conversation, every meeting, and every signal you send shapes the outcome.
If you are not planning and positioning strategically from the beginning, you are already behind.
What Most Businesses Get Wrong
I have seen companies spend months selecting a supplier and then give up all their leverage when it matters most. Often they chase the lowest price and end up locked into inflexible contracts that carry more risk than value. Some rely on one negotiator with no plan, no support, and no authority to make the right deal.
Here are the most common mistakes I have seen over three decades of negotiation:
- Selecting one supplier too early and revealing it
- Sharing internal information like budgets or deadlines
- Focusing on price and ignoring quality, total cost or risk
- Entering negotiation with no plan, defined positions or escalation process
- Failing to document and validate the value created
These mistakes are avoidable and can be extremely expensive. A poor negotiation does not just cost you money. It creates risk, damages relationships, and makes it harder to recover later.
One of the biggest problems I see is internal misalignment on the priorities and desired outcomes. I have walked into negotiations where the Procurement team wanted one thing, the business unit wanted another, and Finance had completely different priorities. That lack of internal alignment leads to confusion, supplier manipulation and distrust. The supplier will always notice misalignment and will exploit it.
Five Strategies That Deliver Results
- Build a Negotiation Strategy Specific to the Supplier
This is not a one size fits all exercise. Your negotiation strategy should reflect the supplier’s position, pressures, and priorities. Do your homework.
You need to know:
- When their fiscal year ends
- Whether they are ahead or behind on sales targets
- Who has ultimate authority to make decisions
- What competitors they are up against and their competitive positioning
- Their priorities and what matters most to them right now
Then define what matters to YOU. Is it budget? Long term price certainty? Service levels? Contract term flexibility? Risk? Security? Liability? Exit clauses? Put it all in a one-page strategy document. Include your going in and bottom-line positions. List possible trade offs and escalation points.
From this, create a negotiation strategy document and get that document reviewed and approved internally before you begin. This gives you authority, consistency, and confidence.
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Pro Tip: If you are negotiating with an incumbent supplier, include an analysis of current contract and service gaps, SLA performance, and contract pain points. That history should shape your new terms. Do not ignore past problems. Use them to a drive better relationship and contract terms.
- Structure Your Team for Success
Negotiating alone is risky. It can get too personal and competitive. Emotions and “Deal Heat” can take over. Decisions can be made for the wrong reasons. I’ve been a victim of this where your competitive nature and ego can overshadow the real objective of the negotiation.
A structured team approach can help avoid that. It brings perspective, clarity and balance.
Here is how I build my negotiation teams:
- Lead negotiator: Drives the discussion and manages the process
- Silent observer: Watches body language, tone, and key signals and speaking only when it is necessary to reset the tone or break tension
- Finance lead: Calculates real time impacts including cost, value, and savings
Each team member is usually a subject matter expert and represents their functional area. Example from actual project I’ve worked on where, the lead negotiator was me, representing Procurement. Silent observer was the Chief Architect representing IT and the Finance lead was running the numbers. This structure works well but only if everyone is aligned and prepared.
A funny story from one negotiation worth nearly a billion dollars, was when I used a tactic to break a deadlock. We were making no progress and tension was high. I decided to walk out so slammed my notebook, gathered my things, stood up, and said, “We are done!” and walked out of the room. What I forgot to do was tell my team in advance. They sat there completely confused not knowing what just happened and what to do. Meanwhile, looking back, and seeing my team was not following me out of the room, I had to suppress my laughter and started to frantically text them to get up and leave. We still closed the deal, however, as hilarious as it was, I never made that mistake again. Always prepare your team in advance. If you are going to use negotiation tactics, make sure everyone is in on the plan.
It also helps to discuss, align and rehearse your negotiation strategy. What sequence you will negotiate the issues. Who will say what and when. Treat it like a dry run so everyone knows what to expect and what the priorities and sequencing is for the negotiation. Ex: anchor your position on Limitation of Liability up front but park it to finalize in the end once other issues have been agreed. Plan for potential supplier pushbacks, rehearse your response and trade offers, and make sure your team knows when to speak and when to stay silent. Poor preparation shows. It weakens your authority.
- Use Links and Trades to Build a Better Deal
Not all terms carry the same weight. What matters a lot to you might matter less to the supplier. And what they value could be something you are willing to trade.
This is where you create Win-Win outcomes.
For example:
- A supplier wants a longer contract term to lock in revenue recognition
- You asked for a termination for convenience clause but are willing to trade that in exchange for price certainty
- “Link and Trade” one for the other. Ex: Agree on locking in to a longer term, 5 year contract (if it makes sense, and it’s unlikely you will switch to a competitor such as ERP software) in exchange for fixed pricing over the entire term with no price increases and a cap on price increases at renewal in years, 6 through 8. Its Win-Win so long as they continue to deliver according to the contracted terms and SLAs.
Map these links and trades in your strategy document. This way, when something gets stuck, you already know how to unlock it without giving up value.
- Leverage Silence as a Tool
“Silence is golden” as they say but most people hate it and rush to fill the void. That is what makes it useful in negotiation.
In one example, negotiating with an incumbent supplier, we hit a point where the renewal terms were simply not acceptable despite attempts to link and trade. I had already prepared our executive team that we might need to go quiet for a bit to create tension. We all agreed and so we did. We said nothing and we’re unresponsive, signally we were united in our position the current terms were unacceptable. The supplier got really uncomfortable. The silence dragged on for a couple weeks and their quarter end was approaching. Feeling a need to break the silence and bridge the gap, they came back with a much stronger offer without us making a single concession.
Used correctly, silence resets power. But your team must be aligned and ready to use it intentionally.
You do not need to be aggressive. Silence, used with calm authority, can be more powerful than any pitch. But your team needs to hold their nerve and get comfortable with being uncomfortable. If one person breaks the silence too early, you lose the advantage.
- Aim for Fair and Balanced, Not the Lowest
Chasing the lowest price is folly and can lead to poor performance, higher risk, and long-term failure. I see it too often.
When you focus on grinding suppliers:
- You damage trust
- They cut corners
- You get what you paid for and less
Instead, aim for fair, market competitive pricing and terms where both sides can succeed. In my own practice, I have walked away from client work when I was asked to cut my fees below what would allow me to deliver quality. I would rather lose the deal than compromise my standards. You truly get what you pay for. In many cases, they come back after learning that lesson the hard way.
You are not buying the cheapest option. You are buying value and outcomes. That is where negotiation should take you. If you do negotiate strong pricing, make sure service levels and contract terms are appropriate. A cheap deal with an inferior solution is not a win. It is a recipe for disaster.
How to Prove the Value You Delivered
Negotiating well is not enough. You must prove the value you created. That means quantifying savings and documenting them clearly.
- Quantifiable and Non Quantifiable Savings
- Quantifiable: Price reductions, discounts, payment terms
- Non quantifiable: Stronger liability clauses, better exit terms, term flexibility and price certainty.
Both matter. Just because you cannot attach a hard dollar value does not mean there is no value.
- Set the Baseline Early
You need to agree on the baseline costs and terms before you start. This could be the budget, the incumbent cost, or an average of bids. Current contract terms etc. Whatever it is, confirm it in writing with your stakeholders. This is how you calculate savings and total value following contract execution and avoid disputes.
- Use a Consistent Methodology
Do not reinvent the wheel every time. Create a standard process.
Include:
- Baseline and final pricing
- Volumes and contract length
- Value of negotiated terms
- Impact on service, flexibility, and risk
Make it easy for Finance and your internal clients to validate your results. Go beyond just savings to budget. Mitigating and balancing risk, superior contract terms, capturing innovation is the real differentiator and how to negotiate like a Pro.
- Get It in Writing
In the early days of my business, I worked on a contingency based engagement. The client agreed I would be paid based on a percentage of savings. I documented everything including setting the baseline but, after they changed the scope of work and buying plan, they refused to validate the savings, and I was paid nothing. That was a hard lesson and cost me thousands of dollars in time and effort. It was a bitter pill to swallow.
I no longer do projects on contingency. I need to be paid appropriately for my worth, my time and effort. I always confirm the baseline, actions, and deliverables in writing before contract execution. I summarize the outcomes in a contract Term Sheet and I do a debriefing following every project. I never work without that alignment.
Regardless if you’re a consultant like me or an employee working on an internal team, in Procurement, IT or Finance, always set the baseline, agree on the priorities and outcomes then track and report on the total value of the initiate, never focus just on price.
What Is Changing and What to Watch
Procurement is evolving, becoming more sophisticated and complex. You need to be prepared.
Trends I am seeing:
- Suppliers pushing for longer terms, tighter payment conditions and higher annual price increases
- Contracts containing embedded contract links such as Data Protection, Privacy and SLA’s which create a maze of terms that can be changed without your knowledge or consent
- AI tools enabling identification of key terms, risks and help identify and calculate deal value
- Executives demanding dashboards that show Procurement value contribution
- Trade pressures forcing supplier diversification, resourcing and renegotiation of contracts
- Digital Services Tax being proposed by the Canadian Government causing uncertainty and volatility
If you do not have a clear strategy, aligned stakeholders, and a negotiation strategy, you will not be able to adapt quickly.
Final Thoughts
Negotiation is where value is created or lost. It is not about being clever or manipulative, it’s about being strategic, prepared, clear, and focused.
To recap:
- Know the supplier
- Build a strategy
- Use a team
- Document everything
- Prove your value
- Protect the relationship
That is how you negotiate like a pro.
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Check out our article on Mastering SaaS Contract Negotiations