How often do you read a Software Agreement before accepting the terms and conditions? I bet few of us stop to read any Terms of Service before we download a new AP and agree to the terms and conditions, without ever wondering what they say. We are an impatient world and we want what we want, when we want it, which is NOW!
I’m talking about the software to operate any free or paid online service or piece of technology equipment. There are even software agreements and/or Terms of Service Agreement with common communication tools as Facebook, LinkedIn, a mobile device or for cloud software services.
With Facebook, I didn’t read the Statement of Rights and Responsibilities before I set up my Facebook account. Today, I found that I’d agreed to allow the following Contract Terms:
- “Permit a business or other entity to pay us (Facebook) to display your name and/or profile picture with your content or information, without any compensation to you.”
- “You understand that we may not always identify paid services and communications as such.”
Mary’s translation (MT): I agreed to become a spokesperson for a product or service that I mention on Facebook. In addition, the product’s manufacturer or distributor may pay Facebook for turning over my name, photo and comment. I’ve agreed to do this free. One more surprise is that Facebook does not have to identify their site content as a paid advertisement.
Six (6) Contract Examples
Recently I was prepared to download some “Free Software” for my Android phone. I decided to heed my own advice,
“Always Read before You Sign on the Dotted Line or Be Prepared to Pay the Consequences.”
The following are a few statements I accepted in a single Software Terms of Service contract. The portions of the agreement are underlined. My translation follows.
The Terms of Service (TOS)
- Sometimes, our products have additional rules. You have to follow these too.
MT: (Even if you don’t know what those rules are and we don’t tell you about them, you have to follow our rules.)
- Sometimes, we have to change our products. For example, new legal or technological developments might force us to alter certain product features. If we do and if it’s important, we’ll let you know.
MT: (Trust us. We will take care of you. Furthermore, we will decide what you need to know.)
- Please don’t break our stuff or compromise our security.
MT: (We will get mad at you, if you mess with our stuff or us.)
- We make our living creating cool products. Please don’t steal or copy them.
MT: (If you steal, we will make you pay.)
- If you do things, like break the law or our rules, or don’t pay us, or never use your account, we might terminate or suspend your account. However, if we do, we’ll try to let you know first.
MT: (We know where you live and we can bill you, however, for some unknown reason, we might not be able to reach you to tell you we are upset and cutting off your service.)
- Some parts of these Terms of Service, like the parts that limit our responsibility in legal cases, are so important that they will remain binding even if this agreement is terminated.
MT: (You only think this contract is complete, we may not be done with you. You might have to die to get out of the deal.)
I am not saying we must read every software agreement for our phone aps. What I am saying is IF the dollars involved that can be made or lost are big, read the agreement. Your business success and survival depend upon it.
Read all Software Agreement or Terms of Service contracts. If You Don’t Be Prepared to Pay a Price.
RFP’s: Just a Waste of Time?
If you are like supply chain and purchasing professionals, the addition of new or used equipment begins with a telephone call to the usual suppliers. Whenever there is a plan to buy equipment, the process begins with a request for price quotes. The quotes arrive and you shove on your negotiation hard hat and prepare for the battle of wills. Who wins? Usually the victor is the one with the most patience and perseverance.
Why waste time writing out equipment specs and financing options for the next equipment addition? Everyone knows that writing a Request for Proposal (“RFP”) is something the billion dollar companies do when spending several million dollars. Why take the time to write a complicated RFP when a phone call will get you what you want? The price is all that you don’t know.
Procurement professionals begin the buying process full of optimism and then find themselves stuck in the beginning phases of negotiations far too long. How can you avoid the getting stuck?
When current equipment is broken or has become undependable, an immediate replacement seems like the best solution. However using the RFP process can save your operation money and time if you have the basic steps established.
Large and Small Companies: All Save Big Money with the Lease RFP
Kevin, a North Carolina Printer Tries It
Big and small manufacturers, accounting and law firms, distribution organizations and most county, state and local governments use the RFP method for acquiring goods and services. Using a modified RFP or Term Sheet is sufficient when buying equipment less than $100,000.
The owner of a small commercial printing company in North Carolina used, a Lease RFP when purchasing a $100,000 digital copier for his business. The owner, we’ll call Kevin, used the services of a lease review expert who helped him draft the RFP. When Kevin initially began to acquire the new equipment, he had one lease proposal from the equipment supplier’s primary resource. Kevin decided to invite four additional lease companies to present finance proposals in response to his RFP Term Sheet. He was surprised to find that the best pricing came from his bank’s leasing company. He reduced spending by 14% using the lease RFP process.
Do Law firms Ask for HELP?
One Midwestern based law firm in the top 100 law firms in the United States, used the Lease RFP process when they prepared to move into their new corporate headquarters. They chose to lease $25 million dollars of high-tech telephones, office furniture, computers including laptops, desktops, servers and technology infrastructure their video conferencing equipment.
The firm’s Chief Operating Officer, we’ll call Audrey, knew what managers and business owner everywhere know; leasing equipment makes good business sense. According to the U.S. Department of Commerce, 80% of U.S businesses, large and small, lease rather than pay cash when adding or upgrading equipment and needed assets.
Both Kevin, the business owner and Audrey, the chief operating officer, agreed that the best leasing deal does not always come from the equipment dealer. Thirteen leasing companies and financial institutions responded to the law firm RFP. After a full review of all proposals and lease contracts, four leasing companies were invited to advance to the next phase.
Leverage: Simultaneous Negotiations
The firm conducted negotiations with all four leasing companies simultaneously. During the negotiations, one leasing company resisted making changes that Audrey required. Because she had three other leasing companies to meet her terms, Audrey could shift lease volume to any one of the other three leasing companies up until final equipment funding was required.
Using the RFP process leveled the playing field. It was easier for Audrey and her operations team to spot the differences in various financial solutions and the equipment benefits. Dealer presentations changed from glitzy sales sizzle into firm offers and contracts. Once the selling price and lease terms are on paper in a proposal, negotiation can begin.
Could You Save a Million Dollars?
The result of following the process shaved more than a million off the total lease cost for the law firm. For big or small companies, the process worked for both. In times of financial restraint, consider investing time in creating and managing a lease RFP.
It all starts as sweet as a honeymoon escape to an exotic island. They walk into the sunset, in love, for the next five years.
What Margaret (the buyer) Remembers
Charlie, the sales guy, introduced us. It was love at first sight.
My old one was just not working out anymore: too slow, always in need of repair and unpredictable. Or maybe “IT” had become technologically obsolete. “IT” could be a copier, phone system, fork lift, over-the-road tractor and trailer or printing press.
Margaret thinks….this new, shiny, fabulous creature will fit in perfectly. There’s enough room in our operation for it. “IT” is affordable, sleek, flashy and flexible. This will help us attract new customers, will always work perfectly and be more productive than my best employee.
Charlie showed Margaret how easy the lease would be to get in and out of. All “you’ll have to do is write the check for the first payment and sign the four-page contract.” Margaret thinks…what could possibly go wrong? Margaret thinks this is a marriage made in heaven.
Unlike a real marriage, this one is for 5-years. At the end of the 5-year lease, the options are to return the old one and trade up to a new unit, no fuss, no hassle. In a perfect world, that is how it is supposed to go.
Divorce Court: It’s Your Fault, Right?
Unfortunately, this is how many business owners and managers remember the simplicity of starting a lease. Cost justification logic may disappear. The love affair between a business owner and their equipment is complicated. I’ve seen “Yellow Iron Romance” in all industries. It matters little whether the fascination is for a dozer, an 18-wheeler, a big name digital copier or a high-tech software solution.
3 Pieces of Matchmaker Advice
If you are acting as the “Matchmaker” either in a role of recommending the solution or selling the solution, you have a big responsibility. The job does not end when the commission check arrives. The relationship may not be a happily ever after thing. What can go wrong?
- Equipment does not work as promised. Who is to blame? Stay connected to your customer and intercedes with the service people when necessary.
- If the lease renews automatically, an Evergreen Lease, remind your customer in plenty of time before the end of lease notice is due. You’ll help them avoid an automatic lease renewal.
- If the fair market value purchase price is ridiculous and the customer feels lied to, you are the one who introduced the leasing company. Mediate for your customer.
7 Tips to a Happy “Marriage”
- Keep your long range plans in mind. New and shiny may not be what you need. Idle equipment does not pay lease payments.
- Evaluate financial options carefully. Leases are easy to get into and have low up-front payments. Is a lease the right financial tool for this specific machine, solution or situation?
- Call your bank for their financing options. Their financing options may surprise you.
- Read and understand the lease contract BEFORE signing. Negotiation is more difficult after the lease commences.
- Know and understand the definitions of all your end of lease options. That means talk to the leasing company, not just the equipment sales person. Equipment sales people are not leasing experts. Their job is to know their equipment, service or solution.
- If your lease does not have 3 options at the end: Buy, Renew or Return, negotiate these in.
- Negotiate! Negotiate! “Everything is negotiable is only you ask.”
There’s much more to an equipment sale than the sizzle. It’s hard work. And just like a real marriage, when it works, it’s a beautiful thing.
If you lease equipment of any kind in your business, you know how important it is for the lease to be fair and affordable.
You don’t need new equipment financing to stress company cash flow. Financial surprises are preventable and unwelcome. New headaches are unnecessary.
You call the leasing company or your banker and hope they put together a leasing contract that protects your interests. Negotiation time draws near.
How do you really know if the lease is fair to both parties? How do you prepare for the negotiation so the final lease is a win-win for everyone?
Before the Negotiation Begins
1. Understand how the leasing company thinks and what is important to it. The lease contract negotiation is much more than a single focus issue of the monthly payment. The negotiation must include the maintenance contract, equipment purchase price and future contract price increases.
2. Know how leasing companies define critical contract terms. Because the lease negotiation is not a daily occurrence, most financial professionals cannot translate “lease-speak.” In some ways it is a foreign language. You may need a “translator.”
3. Determine your non-negotiable issues. Write down your bottom line before the negotiation begins. Have another colleague hold you accountable.
4. Do your homework! Research the party with whom you will be negotiating. Use social networking tools such as LinkedIn and Facebook. Check out the leasing company or equipment dealer’s blogs and user online chat groups. Call your peer group members and ask for their opinions and experiences.
During the Negotiation
1. Ask for more than you need or expect to receive. Aim high. Why not? If you start low, you have nowhere to go.
2. Understand that you have to give to get. Make concessions slowly.
3. In a lease negotiation, the lessee usually starts the negotiation ball rolling. Write down all your lease contract changes, concerns and questions.
4. Present all contract changes at one time. Never send one change followed by another change the next day. That doesn’t work in equipment leasing. One compromise affects another; therefore, all changes need to be considered together as they relate to the entire document.
Counter-Offer and Documentation
1. Use the red line editing function in the electronic document. This provides a historical perspective. Change the file name to avoid confusion in tracking the most current contract version.
2. Check all final draft documents. It is amazing how sometimes-negotiated changes “disappear” in the final draft. When not all negotiated modifications are included, the customer is the one hurt the most.
Be prepared. Follow the steps and commit the time necessary for proper evaluation and negotiation.
The result will be:
- A lease agreement that achieves your company financial and cash flow goals.
- A lease that is “gotcha” free.
- Equipment that fits your needs, is technologically up-to-date and a pricing plan that fits your company budget.
“Russell is a risk taker,” Alex exclaimed! “Russell, the answer for $200 is ‘About 10%.’ What is the question?”
In case you are not a television aficionado, Alex Trebek is the host of Jeopardy, one of the longest running television game shows.
Our “competitor” Russell, a printing equipment sales professional, thinks he’s on solid ground selecting the Leasing category. Russell has been selling equipment for 10+ years. He uses leasing to close sales when buyers say, “Your price is too high.”
Russell responds confidently, “Alex, the question is ‘What is Fair Market Value?’”
No, I’m sorry Russell, you are only half-right.
Fair Market Value is seldom “about 10%.” Although many leasing salespeople tell customers that 10% is their best estimate of what they’ll pay at end of lease.
Here are four Fair Market Value definitions. You should understand all of them if leasing is a one of the ways you finance equipment additions.
- Fair Market Value. No process defined. No parameters. Buyers beware. Read the contract and see what other options you have. Negotiate whatever the leasing company tells you.
- Mutually Agreed to Fair Market Value. The leasing company determines the purchase price, not the customer. The lease agreement doesn’t contain a process to determine the price. Some lessors may feel that “I am the leasing company and you’re not. It’s my way, the highway or worse.” Worse may be a 12-month lease renewal followed by another Fair Market Value purchase option.
- In-Place, In-Use Fair Market Value. This is tricky. Lessors may add extra costs not financed in the lease. If equipment requires added expense to install and de-install, such as rigging, site preparation, special electrical wiring, then these expenditures may be added into the now “not-so-fair market value” option.
- Greater of Fair Market or 20%. The Fair Market Value may be more than 20%. If no process is defined, the price is usually higher than customers expect.
These four definitions are not the entire list of purchase options. If you find others in your leases, please share them with me. I will give you proper credit for your findings in the next blog.
Remember my motto: Everything is negotiable, if only you ask!
It’s best if you negotiate before you sign the lease. However, if you’re facing the end of lease Final Jeopardy Round, call us. We can help you renegotiate and save money.
Read more about Fair Market Value in this article.
Life is filled with negotiation opportunities. For some people, their livelihoods are tied to every negotiation attempt.
As a business owner or manager, you are constantly negotiating with customers, salespeople, suppliers, employees, board of directors, boss, manager or colleagues.
Add to that list the banker, leasing company, healthcare insurance provider, building landlord or facility management company, IRS, US Postal Service and maybe a local or state legislator.
Negotiation for some is a natural habit. Their motto, like mine, is “Everything is negotiable if only you ask.” Or maybe it’s like my friend, Greg Williams, The Master Negotiator (http://TheMasterNegotiator.com), who believes that “You are always negotiating.”
Now is a great time to think about the negotiation opportunities that lie ahead this year. Here are a few “do’s and don’ts” I have found helpful.
- Do your homework. Research the party with whom you are to negotiate long before you meet.
- Study the science of body language. Learn how to read people. The mouth lies, the body does not.
- Write down your negotiation goals. Share them with someone who will hold you accountable. No fibbing. You cheat yourself if you do.
- Dress powerfully for you and your profession. Feel strong and you will be strong.
- Remove time pressures. Many a negotiation outcome was blown due to an untimely departure for the airport.
- Don’t assume you know who the decision maker is. Get confirmation from reliable sources.
- Don’t overlook your team’s important roles. Prior to the first meeting, confirm the roles of your team negotiators.
- Lead negotiator
- Note taker
- Back-up negotiator who may step in when the lead sends the signal for assistance, a breather or a switch of roles.
- Mediator, if things get heated, who can step in and restore balance and order.
- Don’t let someone from the other side take the negotiation minutes. Each side needs its own record.
- Don’t leave a negotiation meeting without assigning responsibilities in preparation for the next meeting. Review the assignments before departure.
- Don’t assume everyone will remember the assigned responsibilities. Confirm the assignments in writing with all negotiation participants within 48 hours following each meeting completion.
May this year open up more opportunities for negotiations for you. Invest in yourself and learn more about negotiation. Your happiness and success are in your hands.
“Everything is Negotiable if Only You Ask.”
Want more information? Click here for helpful negotiation resources.
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