Jim Thompson

Email Jim at jim.thompson@ipulpmedia.com

We are talking about capital projects this month. I also talk about capital projects every month in the newsletter, "Capital Arguments." If you would like to sign up for it (it is free), send me an email to jim.thompson@ipulpmedia.com with "Capital Arguments" in the subject line.

This week, I want to talk about buying equipment and services.

The first thing I want to talk about is keeping your relationship with the sellers at arm's length. This means no dinners, ballgames, hunting trips, fishing trips and so forth paid for by the sellers.

What?!

You can go on these adventures as long as you fully pay your own way, with one exception. Playoff tickets for sporting events are the exception because they are not available at their face price. If you want to pay the street price and go, have at it, but it is a favor for you to get them for the face price.

Every salesperson, including me, wants to give you favors because we know favors create a sense of obligation in the buyer. Don't fall for it.

Now that we have this issue behind us, let's talk about negotiations. I had a boss over four decades ago that taught me everything I know about negotiations. He was cheap. Not just cheap, he was really cheap. I once told him he likely didn't pay retail for a loaf of bread.

We were buying loads of expensive paper mill equipment. Suppliers were coming into our very remote mill by the busload. My boss led our team. One way or another, but not with direct words, he opened every negotiation with "Why don't you give us (your product or service) for free?

Now, as I said, he did not exactly use these words, but everything started from here.

Phrases like "our budget is very limited, and we have not yet decided where to descope" or "we have to convince operations that (your equipment or service) is really necessary for this project, so you need to help us on price." If the seller bit on these lines, then there was an hour or two of trying to drive their lower. Every single item and supplier went through this wringer.

I have told this story many, many times. We had one supplier come through who had a piece of equipment that we were mandated by headquarters to buy, and it cost $4MM. My boss got this guy to negotiate with himself and he brought the price down to $2MM. We would have had to buy it had he raised the price to $6MM!

Don't be afraid to "poor mouth." Remember also, the one who loses in negotiations is the one who is in a hurry.

Be safe and we will talk next week.

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