It's "Standard Practice"
Hello Good Negotiators How often are we limited or bracketed by the claim of 'standard practice'? In reality, it's more often than it should be. Challenging the 'standard practice' or 'our policy' position is always a good strategy.
It's "Standard Practice"
A contractor quotes a price that, at first glance, is somewhat acceptable to the customer. Upon reviewing the terms of service delivery the customer notices that payment terms call for 20% at signing, 30% when the work begins, 40% at the half complete stage and 10% at completion.
While many customers accept this payment schedule without question - after all it is standard wording in the contract - others take issue with the payment schedule.
Our customer here voices concern that, according to the terms of the contract, half of the price is paid before any work is completed. The contractor passes off the customer concern by the old familiar, "That's standard practice. Virtually all contractors use that payment schedule."
In actuality, the payment terms, standard or not, are always negotiable.
If the contractor wants the job and wants protection to receive payments, he'll probably agree to something more acceptable to the customer. Creativity needs to kick in so the concerns of each party can be addressed.
The concerns of the customer are two. One, that the contractor get on the job quickly and, two, that the job be completed quickly and as agreed. By reducing contract signing deposit and increasing the 'start of work' payment, the customer's initial concern can be addressed. Holding a larger percentage for the 'job complete' payment can also give some assurance to the customer that the job won't drag on too long.
Don't forget the 'trade off'. If the contractor wants a bigger upfront payment, only grant that if the size of the job completion payment is increased. Conversely, if the contractor holds out for a very modest job completion payment, then consider agreeing to that only if prior payments are appropriately distributed through the completion of the work. Be sure and clearly identify the amount of work to be done and materials to be purchased at each stage where a payment would be due.
Whatever you do, don't get boxed in by any vendor or service provider who demands a specific payment schedule because it's 'standard practice'.
Have your response prepared in advance. "I understand that this payment schedule is standard practice, but let me assure you that it's totally unacceptable to me." Adopting that firm posture will quickly determine if the vendor/provider really wants the deal.
Be prepared for the question, "What did you have in mind?" Ask for more than you really want so you can make a gracious concession later and still arrive at a 'good deal' result for everyone.
Good negotiators don't let the 'standard practice' bracket limit their ability to get a better deal.
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