5 Tips to Close Contracts Faster
A major challenge of any contract management process is shifting from negotiation to execution. Decision makers often delay reaching a final move because they want to make sure that they are not missing out on any better alternatives.
While it is understandable that anybody wants to cross its t’s and dot their i’s, this constant push-back can wreak havoc on your company’s projections and budgets. To address this issue, here are 5 tips to make that extra push and close contracts faster.
1. Present Three Alternatives
A common mistake from account managers is to present a single option. The most common request from clients is “what can you do for cheaper?”. By predicting this scenario and preparing three alternatives, not only do you come as better prepared to handle the job, but also you increase your chances of closing a deal faster.
In your pitch, you should include three options: a baseline, a suggested, and an “all bells-and-whistles” option. You’re aiming for the suggested, which should match your client’s budget. However, you present two additional options, just in case they “suddenly” have a major budget cut or windfall.
2. Phase a Project into Two or More Stages
Another useful tactic to show flexibility for your client is to break down a major project into two or more stages. The main objective is to commit the client to a project for several periods and secure incoming cashflow during those periods.
You could combine this tactic with the previous one. In your “all bells-and-whistles” option, you could present a stage one and a stage two. This is way to prevent the client from saying that he doesn’t have the budget. He does now and he will have it later, it is just a matter of timing.
3. Quantify the Cost of a Delay in Reaching a Decision
When doing a presentation to a client, you are eager to show the benefits and advantages of working with you. However, you are not the only one. In this game of promises, the client will most likely go with the one that makes the most grandiose ones.
To stand out, try this trick from reverse psychology. Outline the disadvantages and opportunities costs of not working with you. First demonstrated by Amos Tversky and Daniel Kahneman, the theory of loss aversion shows that people tend to strongly prefer avoiding losses to acquiring gains. Some studies in loss aversion show that people prefer twice to avoid a loss over make a gain.
You should be ready to quantify the cost of a delay in reaching a decision for your contract and put in front and center in your proposal.
4. Automate Your Contract Process
Goldman Sachs estimates that contract automation could accelerate negotiation cycles by 50%, reduce erroneous payments by 75 to 90%, and cut operating and processing costs associated with managing contracts by 10-30%.
When dealing with large corporations or government agencies, it is a good idea to review the list requirements for submitting bids. Often, you will notice that they have clauses stipulating requirements for busy periods. By investing in a scalable contract management software to automate contract processes, you are able not only to meet technical requirements for those periods of high demand, but also have proof that you can guarantee lower costs and more efficiencies.
5. Get Certified
Be proactive and take advantage of certifications that make you stand out from the competition in a positive way. For example, a team that has project managers with PMP certifications is better qualified than a similar team that has members without those certifications. Another example, is that you can get exclusive access to certain contracts by becoming certified by a state or national entity, such as the National Association of Women Business Owners or the National Minority Supplier Council.
Certifications take time and money and, having them in advance, makes your organization more desirable over another that has to complete a certification as part of the project.
Five key ways to close contracts faster are to present three project alternatives, phase a project into two or more stages, quantify the cost of delaying a decision, automate your contract process to lower costs, and find relevant certifications from state or national entities.
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