As your Core contract approaches its expiration date, there are many things to consider in the negotiation with the provider. However, did you ever think the time of the year could impact the negotiation? We are approaching end of calendar year and fiscal year for most. Wrapping up the end of the year sales renewals are priority for a lot of organizations and sales personnel. Banking software solutions are not different, as the time of the year you negotiate can be a gamechanger.
For example, if you are in the market for a new car, you may want to hold off to October – December timeframe as the dealers will be motivated to reduce inventory to make room for the new models. When it comes to banking software, the vendors are not making room for new inventory, but they are motivated by accountants, salespeople, or Wall Street.
No matter the size of your vendor, they have sales forecasts and revenue targets. The salespeople have quotas and commissions on their minds. If your contract stands a chance of being signed and included in those targets in Q4 of this year or Q1 of next year, that is leverage that can be used to getting better pricing or terms.
The same hold true for the sales team at said core providers, if they need your sale they will likely fight harder and get more of your requests approved than they would in the beginning or middle of a sales cycle. If your vendor is a publicly traded company the timing of revenue recognition can be a major influencer to getting a contract signed prior to a “deadline” like the end of Q4/fiscal year/by Holidays in December. Whether the goal is to get the dollars to fall into a particular fiscal period or to boost quarterly revenue, you can be certain timing will play a role to some degree in the process.
When you are racing against the clock to the end of the calendar and/or fiscal year negotiating a core system (renewal or new sale) contract, below are three things to keep in mind:
- Financial companies are motivated to close deals by the end of calendar year to surpass sales forecasts.
- Sales teams are eager to maintain or surpass their sales quota and/or get their commission money. Always ask for more concessions.
- If you are looking for a third-party consultant to review your contract negotiations and keep more money at your community bank, contact Remedy Consulting at (630) 294-9566.