Thursday, March 13, 2008

Risk and Strategic Relationship Consideration Before Negotiation


Risk
Every deal has a certain amount of risk in it. If you are taking most of the risk, you deserve compensation against the occasional time when the risk becomes reality — when you have to fix something because you took the risk. For instance, if you are contracting a job and your client wants you to hire certain workers instead of him hiring those workers, you are taking a risk. You are taking the risk that they won’t show up or that they will do sloppy work or . . . or . . . or. You deserve — no, you need — to mark up the cost of those subcontractors because you are taking the risk that they won’t perform. Maybe not on this job, but someday you will have to make good for somebody else’s goof.

Strategic relationship
Watch out for this one. People will often try to get you to lower your price on the promise of more business in the future or because they are such an important customer. If none of the other factors that are listed above are present, don’t do it. It’s seldom worth it. These important clients can run you into the ground. More often than not, you want to take care of these customers with superior service. That will get them talking you up, and it will make it easier for you to hold your price with everyone else. After all, if Joe Big Shot is paying $X, surely everyone else will have to pay $X also

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