Renegotiating contracts in times of crisis: 3 steps to long-term success
Corona and the related shutdown of many sectors of the economy present entrepreneurs with new challenges: What to do if a supplier is no longer able to deliver? What to do if a customer is no longer able to pay the bill? What to do if a tenant of business premises does not pay the lease? How does “negotiating in a crisis” work?
In “normal” life, entrepreneurs always used to have a choice or an option: If an agreement was not kept, they were able to terminate the agreement and look for a new contractual partner (legal action aside). A new supplier, a new tenant of business premises, a new customer…
What to do if you no longer have alternatives?
Things are different now. In the crisis, as it presents itself today, these options are not available! The landlord is unable to find a new tenant, entrepreneurs are unable find new suppliers or new customers for their products.
So, what to do now? What is the best way for entrepreneurs to deal with this situation ?
A mindshift is needed: Pulling together in the value chain rather than struggling to prevail
First off, rethinking is needed: We are now coming to understand that we are all part of the same value chain and that we can only move forward together. Fighting one another would lead to disaster. Cooperation is key when it comes to negotiating in a crisis.
Now is the right time to strengthen cooperation with reliable business partners. You may need to make concessions that would otherwise have been inconceivable! But that may be exactly what it takes to save your partner’s business. Try to shift your perspective: Consider these concessions as an investment into the future. Helping now and tying business partners to you in this fashion may prove beneficial in the long run.
Thinking in economic terms and acting human: 3 steps to a new agreement
What is the best way to negotiate in a crisis, what specific steps should you take?
1. Preparation: Analyse your situation . Ask yourself:
- Who needs my money most urgently now?
- Which of my needs can be met by state subsidies?
- What resources can I share with my customers? Information, network, services that do not cost me much but are important to my customer?
2. Get in touch with your business partners. Ask your business partners:
- How are you doing?
- How can I help to ensure that we continue to work together?
- What points of reference can we use for our cooperation going forward?
- If the business partner’s prospects seem hopeless, try to find out together how that partner’s business was going before the crisis. What should be different once the crisis is over? How could the crisis contribute to putting the customer’s business on a new footing?
3. Make specific agreements for the bridging period.
How long this phase will last may be difficult to estimate from today’s perspective. It is important that you do not simply let the situation play out and wait to “see what happens” but that you take an active part in shaping it together with your business partners and put any agreements down in writing. With an end date – be this a fixed date or for as long as government restrictions as they present themselves today remain in place. If necessary, you can still extend the agreement later on or amend it to accommodate new developments.
The important thing is: Stay in touch!
The value chain must be kept running.
Now it is essential to keep the value chain runningas best we can. The time for loners is over. To move ahead, you must get everyone else on board with you.This is the only way each and every one will be able to recover and we as a society will be able to win. Together we will all emerge from this crisis stronger and perhaps wiser.
Do you need assistance in your negotiations in the present situation? I would be happy to discuss your specific situation with you or support you at the negotiating table.You can reach me at: email@example.com or +436602400135.
Your Raluca Ionescu