In February 2019, a midwestern chain of convenience stores was approached by their ERP provider regarding phase II of the rollout of the vendor’s ERP product. The Client, however, was not ready to begin phase II and would not be for over a year. However, the vendor’s fiscal year was ending in May so the negotiating team saw an opportunity to get significant savings from negotiating the deal early.
Objective
Leverage the vendor’s quickly approaching fiscal year-end in order to achieve the best price and terms possible for the next phase in their ERP solution.
Approach
The vendor’s fiscal year ending served as leverage on two fronts: cost and timing. The vendor was more willing to make concessions and they made those concessions quicker in order to get the deal finalized before the end of their fiscal year. This was a real win-win for the parties because the vendor was able to book the business prior to year-end, but the Client incurred no fees until their desired rollout date over one-year later. The Client trusted the process and allowed the deal to move forward much quicker than they needed it to because they knew that accelerating the purchase in a way that benefited the vendor, while not imposing anything new on the Client, was a great way to protect its priorities (namely saving money, protecting against future price increases, and ensuring greater flexibility in terminating the service).
Results
The Client ended up saving $6.6MM on the 5-year contract. Additionally, the final order document includes a variety of early termination options for the Client; including a “convenience” termination which they can exercise for any reason after the first 12 months and a one-time right to cancel any of the products and apply the remaining financial commitment to another set of products. The Client got a great deal on what is likely to be a great product and, if it’s not, they can terminate the deal with relative ease. Meanwhile, the vendor was able to make a sell within their current fiscal year. In the end, it was a definite Win-Win for both parties.
